Annual report 2014

Note 5. Income Taxes

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

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

Statutory Financial Statements

Note 5.

Income Taxes

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;

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).

Taking these elements into account, at year-end 2014, Vivendi recorded a

consolidated income tax credit of €148.4 million, equal to the tax savings

of the year.

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.

On December 23, 2014, Vivendi received a €366 million refund

and moratorium interest of €43 million which was received on

January 16, 2015. On December 2, 2014, the tax authorities appealed

this decision. As a result, in its Financial Statements for the year

ended December 31, 2014, Vivendi recognized moratorium interest in

income tax and maintained the provision related to the €366 million

principal refund, increased by €43 million with respect to moratorium

interest (see Note 16, provisions);

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 €11 million

with respect to default interest (see Note 16, Provisions); and

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 determined with certainty. Taking into account the impact of

the estimated 2014 tax results and before the effects of the ongoing

tax audits (see below) on the amount of tax attributes, Vivendi SA

would be able to achieve €1,400 million in tax savings from tax

attributes (undiscounted value based on the current income tax rate

of 38.00%).

Audit by the French tax authorities

In respect of the Consolidated Global Profit Tax System, the consolidated

income reported by Vivendi SA for fiscal years 2006, 2007, and 2008

are under audit by the French tax authorities. This tax audit began in

January 2010. In addition, in January 2011, the French tax authorities

began a tax audit on the consolidated income reported for fiscal

year 2009 and in February 2013, the French tax authorities expanded the

audit to include the consolidated income reported for fiscal year 2010.

Finally, the audit of Vivendi SA’s tax group System for the years 2011 and

2012 group began in July 2013. As of December 31, 2014, all of these

audits were ongoing. Vivendi Management believes that it has solid

legal grounds to defend its positions for determining the taxable income

for the fiscal years under audit. In any event, a provision for the impact

of the Consolidated Global Profit Tax System in 2011 has been accrued

(€409 million), notwithstanding the decision of the Administrative Court

of Montreuil on October 6, 2014, and subject to the appeal filed by the

Tax Authorities (see above), as well as a provision for the impact in

relation to the use of tax credits in 2012 (€231 million).

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Annual Report 2014