Annual report 2014

Financial Report | Statutory Auditors’ Report on the Consolidated Financial Statements |

Consolidated

Financial Statements

| Statutory Auditors’ Report on the Financial Statements | Statutory Financial Statements

Note 6. Income taxes

Note 6.

Income taxes

6.1. French Tax Group and Consolidated Global Profit Tax Systems

Vivendi SA benefits from the French Tax Group System and considers that

it benefited, until December 31, 2011 inclusive, from the Consolidated

Global Profit Tax System, as authorized under Article 209

quinquies

of the

French Tax Code. Since January 1, 2012, Vivendi only benefits from the

French Tax Group System.

Under the French Tax Group System, Vivendi is entitled to consolidate

its own tax profits and losses with the tax profits and losses of

subsidiaries that are at least 95% owned directly or indirectly by

it, and that are located in France: for 2014, this mainly applied to

Universal Music in France and Canal+ Group. In 2014, SFR is no

longer part of Vivendi’s tax group following its sale to Numericable

Group at the end of November 2014.

Until December 31, 2011, the Consolidated Global Profit Tax System

entitled Vivendi to consolidate its own tax profits and losses with the

tax profits and losses of subsidiaries that were at least 50% owned

directly or indirectly by it, and located in France or abroad, i.e., other

than the French companies that were at least 95% owned directly

or indirectly by Vivendi: Activision Blizzard, Universal Music Group,

Maroc Telecom, GVT, Canal+ France and its subsidiaries, as well as

Société d’Édition de Canal Plus (SECP). As a reminder, on May 19,

2008, Vivendi lodged an appeal with the French Ministry of Finance

in relation to the renewal of its authorization to use the Consolidated

Global Profit Tax System and an authorization was granted by an

order dated March 13, 2009, for a three-year period beginning with

the taxable year 2009 and ending with the taxable year 2011.

In addition, as a reminder, on July 6, 2011, Vivendi lodged an appeal

with the French Ministry of Finance in relation to the renewal of its

authorization to use the Consolidated Global Profit Tax System for a

three-year period, from January 1, 2012 to December 31, 2014.

The changes in French Tax Law in 2011 terminated the Consolidated

Global Profit Tax System as of September 6, 2011 and capped the

deduction for tax losses carried forward at 60% of taxable income.

Since 2012, the deduction for tax losses carried forward is capped at

50% of taxable income and the deductibility of interest is limited to

85% of financial charges, net (75% as from January 1, 2014).

The impact of the French Tax Group and Consolidated Global Profit Tax

Systems on the valuation of Vivendi’s tax attributes (tax losses and tax

credits carried forward) are as follows:

as Vivendi considers that its entitlement to use the Consolidated

Global Profit Tax System was effective until the end of the

authorization granted by the French Ministry of Finance, including

fiscal year ending December 31, 2011, on November 30, 2012, Vivendi

filed for a refund of €366 million with respect to the tax saving for

the fiscal year ended December 31, 2011.As this request was denied

by the tax authorities, in its Financial Statements for the year ended

December 31, 2012, Vivendi accrued a €366 million provision for the

associated risk, unchanged as of December 31, 2013. On October 6,

2014, the Administrative Court of Montreuil ruled in favor of Vivendi.

Pursuant to this ruling, on December 23, 2014, Vivendi received a

€366 million refund and moratorium interests of €43 million which

were received on January 16, 2015. On December 2, 2014, the

tax authorities appealed this ruling. As a result, in its Financial

Statements for the year ended December 31, 2014, Vivendi

maintained the provision related to the €366 million principal refund

increased by €43 million with respect to moratorium interests (please

refer to Note 6.6);

moreover, considering that the Consolidated Global Profit Tax System

permitted tax credits to be carried forward upon the end of the

authorization on December 31, 2011, Vivendi requested a refund of

taxes due, under the French Tax Group System for the year ended

December 31, 2012, or €208 million, brought to €220 million, in

2013 when filing the tax return with respect to fiscal year ended

December 31, 2012. This position was challenged by the tax

authorities as part of an in-process control procedure and Vivendi

accrued the associated risk for a principal amount of €208 million in

provision in its Financial Statements for the year ended December 31,

2012, brought to €220 million as of December 31, 2013. In its

Financial Statements for the year ended December 31, 2014, Vivendi

maintained the €220 million principal refund, increased by an

additional default interest of €11 million (please refer to Note 6.6);

in the Financial Statements for the year ended December 31,

2014, the 2014 tax results of the subsidiaries within the scope of

Vivendi SA’s French Tax Group System were estimated, and as a

result, the amount of tax attributes as of December 31, 2014 could

not be reliably determined. Taking into account the impact of the

estimated 2014 tax results and before the effects of the ongoing

tax audits (please refer to Note 6.6) on the amount of tax attributes,

Vivendi SA may achieve €1,400 million in tax savings from tax

attributes (undiscounted value based on the current income tax rate

of 38.00%); and

as of December 31, 2014, Vivendi SA valued its tax attributes under

the French Tax Group System on the basis of one year’s forecasted

results, taken from the following year’s budget. On this basis, Vivendi

would achieve tax savings from the French Tax Group System in an

amount of €126 million (undiscounted value based on the current

income tax rate of 38.00%).

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Annual Report 2014