annual report - FIAT SpA

A reconciliation between theoretical income taxes determined on the basis of tax rates applicable in Italy and income
taxes reported in the financial statements is as follows:
(€ thousand) 2010 2009
Theoretical income taxes 112,250 95,172
Tax effect of permanent differences (148,589) (90,928)
Taxes relating to prior periods (1,159) (2)
Tax loss carryforwards utilized (3,280) (4,244)
Current and deferred income tax recognized in the financial statements, excluding IRAP (40,778) (2)
IRAP (current and deferred) 7,000 6,117
Income taxes reported in the income statement (current and deferred income taxes) (33,778) 6,115
Theoretical income taxes are calculated by applying the IRES tax rate (27.5% for 2009 and 2010) to the result before
taxes. IRAP tax is excluded to facilitate an understanding of the reconciliation between theoretical and reported income
taxes; since it is calculated on a tax basis that differs from profit before taxes, it would otherwise generate distortions
between one year and another.
The permanent differences referred to above include, among other things, the tax effect of non-taxable income
amounting to €183,506 thousand in 2010 (€329,236 thousand in 2009) and of non-deductible costs amounting to
€34,917 thousand in 2010 (€238,308 thousand in 2009). In particular, for 2010 the tax effect of non-taxable income
was principally attributable to dividends (€112,004 thousand vs. €329,131 thousand in 2009) and impairment reversals
on investments (€71,500 thousand). Non-deductible costs principally included impairment losses on investments
whose tax effect was €28,682 thousand (€235,950 thousand in 2009).
A breakdown of deferred tax liabilities, net of deferred tax assets, is provided in the following table.
31 December
Recognized in
income Charged 31 December
(€ thousand)
Deferred tax assets arising from:
2009 statement to equity 2010
Taxed provisions and other minor differences 8,300 (515) - 7,785
Total deferred tax assets
Deferred tax liabilities arising from:
8,300 (515) - 7,785
Measurement of construction contracts by the percentage completion method - (47,010) - (47,010)
Others (422) 37 - (385)
Total deferred tax liabilities (422) (46,973) - (47,395)
Theoretical tax benefit arising from tax loss carryforwards 378,397 (318,555) - 59,842
Adjustments for assets whose recoverability is not probable (386,275) 359,043 - (27,232)
Total deferred tax liabilities, net of deferred tax assets - (7,000) - (7,000)
Deferred tax assets were determined through a critical analysis of the existence of the conditions for their future
realization, using updated strategic plans and the related tax plans. As a consequence, the total theoretical future tax
benefit arising from deductible temporary differences (€7,785 thousand at 31 December 2010 and €8,300 thousand at
31 December 2009) and tax loss carryforwards (€59,842 thousand at 31 December 2010 and €378,397 thousand at 31
December 2009) was reduced by €27,232 thousand at 31 December 2010 (€386,275 thousand at 31 December 2009).
Fiat S.p.A. – Statutory Financial Statements at 31 December 2010 277