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Note 23. Income taxes

The components of earnings (loss) before income taxes and non-controlling interest consist of:

 Year ended December 31,
 20132014
The Netherlands(386,518)91,466
Other countries52,91466,071
Earnings (Loss) before income taxes and Non-controlling interest(333,604)157,537

The income tax expense consists of:

 Year ended December 31,
 20132014
Current
The Netherlands(1,938)(4,539)
Other countries(6,773)(9,988)
(8,711)(14,527)
Deferred
Other countries(199)(4,850)
Income tax expense(8,910)(19,377)

The provisions for income taxes as shown in the Consolidated statements of operations differ from the amounts computed by applying the Dutch statutory income tax rate to earnings before taxes. A reconciliation of the provisions for income taxes and the amounts that would be computed using the Dutch statutory income tax rate is set forth as follows:

 Year ended December 31,
 20132014
Earnings (loss) before income taxes from continuing operations(333,604)157,537
Dutch statutory income tax rate25.0%25.0%
Income tax provision at statutory rate83,401(39,384)
Non-deductible expenses(1,957)(4,727)
Foreign taxes at a rate other than the Netherlands statutory rate(422)(1,454)
Valuation allowance(3,347)15,322
Non-taxable income 1(88,492)11,888
Other 21,907(1,022)
Income tax expense(8,910)(19,377)
  1. Non-taxable income for 2014 mainly consist of revenues deriving from the share in income of investments and associates which are exempt under the Dutch participation exemption. For 2013 non-taxable income mainly consist of revenues deriving from the disposal of the 12% shareholding in ASMPT in March 2013 which are exempt under the Dutch participation exemption.
  2. Other in 2014 mainly consists of tax credits, adjustments to prior years, changes in (enacted) tax laws and revaluation of certain assets

Included in other for 2014 is €1,944 regarding the Company’s manufacturing operations in Singapore and other countries where income covering certain products is non-taxable or subject to concessional tax rates under tax incentive schemes granted by the local tax authority. The majority of these tax incentive schemes have terms ending by July 1, 2018.

On June 8, 2009 the Singapore Economic Development Board ('EDB') granted a Pioneer Certificate to ASM Front-end Manufacturing Singapore Pte Ltd ('FEMS'), a principal subsidiary of the Group, to the effect that profits arising from certain manufacturing activities by FEMS of Front-end equipment will in principle be exempted from tax for a period of 10 years effective from July 1, 2008, subject to fulfillment of certain criteria during the period.

In Korea a High Technology Tax Exemption has been granted to the effect that profits arising from certain equipment sales will in principle be partly exempted from tax in the period ending by 2016, subject to fulfillment of certain criteria during the period.

Since 2011 the Dutch statutory tax rate amounted to 25.0%. Taxation for other jurisdictions is calculated at the rates prevailing in the relevant jurisdictions. The Company’s deferred tax assets and liabilities have been determined in accordance with these statutory income tax rates.

Deferred income taxes consist of the following:

 January 1, 2013Deconsolidation ASMPTReclassi-ficationsChanges in tax ratesConsolidated statement of operationsEquityExchange differencesDecember 31, 2013
Deferred tax assets
Reserves and allowances18,384(13,276)(341)(258)(473)71(1,137)2,970
Net operating losses83,478(11,905)(1,664)5069,959
Depreciation2,260(2,121)1,336(88)266(319)1,334
Other769150(37)(146)(164)572
Gross deferred tax assets104,891(27,152)(669)(383)(353)71(1,570)74,835
Less: valuation allowance(83,250)11,6751,664(49)(69,960)
Net deferred tax assets21,641(15,477)995(383)(353)71(1,619)4,875
Deferred tax liabilities
Capitalized development expenses(10,850)792(218)2,221(8,055)
Other(1,085)92174(37)(6)(133)
Deferred tax liabilities(11,935)92174792(255)2,215(8,188)
Net deferred income taxes9,706(14,556)1,069409(608)71596(3,313)
 January 1, 2014RealizationChange in tax rateConsolidated statement of operationsEquityExchange differencesDecember 31, 2014
Deferred tax assets
Reserves and allowances2,970(134)(849)45772,109
Net operating losses69,959(15,322)76955,406
Depreciation1,334(87)(657)37627
Other5721,102(15)(1,338)161482
Gross deferred tax assets74,8351,102(236)(18,166)451,04458,624
Less: valuation allowance(69,960)15,322(769)(55,407)
Net deferred tax assets4,8751,102(236)(2,844)452753,217
Deferred tax liabilities
Capitalized development expenses(8,055)206(1,968)8(9,809)
Other(133)(8)(2)(143)
Deferred tax liabilities(8,188)206(1,976)6(9,952)
Net deferred income taxes(3,313)1,102(30)(4,820)45281(6,735)

Deferred tax assets and liabilities are classified in the consolidated balance sheet as follows:

 December 31,
 20132014
Deferred tax assets - non-current4,8753,217
Deferred tax liabilities - non-current(8,187)(9,952)
(3,313)(6,735)

Based on tax filings, ASMI and its individual subsidiaries have net operating losses available at December 31, 2014 of €210,461 for tax return purposes to reduce future income taxes, mainly in Europe. The Company believes that realization of its net deferred tax assets is dependent on the ability of the Company to generate taxable income in the future. Given the volatile nature of the semiconductor equipment industry, past experience, and the tax jurisdictions where the Company has net operating losses, the Company believes that there is currently insufficient evidence to substantiate recognition of substantially all net deferred tax assets with respect to net operating losses. Accordingly, a valuation allowance of €69,960 in 2013 and €55,407 in 2014 has been recorded.

The amounts and expiration dates of net operating losses for tax purposes are as follows:

Expiration yearTotal of net operating losses for tax purposes 1
201729,270
201844,664
201935,905
2020266
202160,198
202228,556
202316
20297,178
20304,293
Unlimited115
Total210,461
  1. -1- No deferred tax assets were recognized for these operating losses.

The Company has not provided for deferred foreign withholding taxes, if any, on undistributed earnings of its foreign subsidiaries. At December 31, 2014 the undistributed earnings of subsidiaries, subject to withholding taxes, were approximately €39,961. These earnings could become subject to foreign (withholding) taxes if they were remitted as dividends and / or if the Company should sell its interest in the subsidiaries.

The calculation of the Company's tax liabilities involves dealing with uncertainties in the application of complex tax laws. The Company's estimate for the potential outcome of any uncertain tax issue is highly judgmental. Tax contingencies mainly relate to transfer pricing positions, operational activities in countries where the Company is not tax registered and tax deductible costs. The Company provides for these tax contingencies for the duration of the statute of limitation period, which differs per tax jurisdiction. Per December 31, 2014 tax contingencies amounted to €1,875 (2013: nil) and are included in income taxes payable in the Consolidated Statement of Financial Position. Settlement of tax uncertainties in a manner inconsistent with the Company's expectations could have a material impact on the Company's financial position, net earnings and cash flows.

A summary of open tax years by major jurisdiction is as follows:

Jurisdiction 
Japan2009-2014
The Netherlands2010-2014
Singapore2010-2014
United States1997-2014
South Korea2009-2014

The calculation of the Company’s tax liabilities involves dealing with uncertainties in the application of complex tax laws. The Company’s estimate for the potential outcome of any unrecognized tax benefits is highly judgmental. Settlement of unrecognized tax benefits in a manner inconsistent with the Company’s expectations could have a material impact on the Company’s financial position, net earnings and cash flows. The Company is subject to tax audits in its major tax jurisdictions, local tax authorities may challenge the positions taken by the Company.

Welcome to our 2014 Corporate reporting site

ASMI has a dual listing on Nasdaq (North America) and Euronext (the Netherlands). Our full 2014 Annual report is prepared in accordance with International Financial Reporting Standards ('IFRS'), as endorsed by the European Union and can be viewed online conveniently. We also file the Annual report on Form 20-F with the US Securities and Exchange Commission, which is available as a PDF. All our 2014 reports can be downloaded quickly and easily.

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STATUTORY
ANNUAL REPORT 2014

Our Statutory annual report provides a comprehensive overview of company developments in 2014. It has been prepared in accordance with International Financial Reporting Standards ('IFRS') as endorsed by the European Union.

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ANNUAL REPORT ON
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Form 20-F 2014, which is compiled based on US GAAP, has been filed with the Securities and Exchange Commission. It may contain information additional to the Statutory annual report.

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CR REPORT
2014

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REMUNERATION
REPORT 2014

The Remuneration report 2014 provides a breakdown
of our Management Board and Supervisory Board remuneration.

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RECONCILIATION
US GAAP-IFRS 2014

With dual listing in North America and the Netherlands, we report in US GAAP and IFRS. This document outlines the main differences for ASMI relating to US GAAP and IFRS.

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