INCOME TAXES

As our investments are predominantly owned by Dutch holding companies, the components of the provision for income taxes and of the income from continuing operations before provision for income taxes have been analyzed between their Netherlands and non-Netherlands components. Similarly the Dutch corporate income tax rates have been used in the reconciliation of income taxes.

Loss from continuing operations before income taxes:

The Netherlands and non-Netherlands components of loss from continuing operations before income taxes are:



	For the Years Ending December 31,
	2011			2010			2009
Domestic	$	(6,470	)	$	(77,267	)	$	130,185
Foreign	(169,284		)	(34,632		)	(196,431		)
Total	$	(175,754	)	$	(111,899	)	$	(66,246	)

Included in domestic income during 2011, 2010 and 2009 is intercompany dividend income of US$ 63.7 million, US$11.2 million and US $89.7 million, respectively, with an equivalent expense included within foreign income. These dividends are neither taxable in the Netherlands nor deductible in the foreign entity.

Total tax charge for the years ended December 31, 2011, 2010 and 2009 was allocated as follows:



	For the Years Ending December 31,
	2011		2010		2009
Income tax expense from continuing operations	$	3,850	$	5,025	$	4,737
Income tax expense / (credit) from discontinued operations	—		30		(7,938		)
Total tax expense	$	3,850	$	5,055	$	(3,201	)

Income Tax Provision:

The Netherlands and non-Netherlands components of the provision for income taxes from continuing operations consist of:



	For the Years Ending December 31,
	2011			2010			2009
Current income tax expense:
Domestic	$	321		$	549		$	371
Foreign	10,377			12,310			18,276
	10,698			12,859			18,647
Deferred tax benefit:
Domestic	(5		)	—			(2		)
Foreign	(6,843		)	(7,834		)	(13,908		)
	(6,848		)	(7,834		)	(13,910		)

Provision for income taxes	$	3,850		$	5,025		$	4,737

In 2011, the net tax provision reflects valuation allowances in respect of the tax benefit of tax losses.

Reconciliation of Effective Income Tax Rate:

The following is a reconciliation of income taxes, calculated at statutory Netherlands rates, to the income tax provision included in the accompanying Consolidated Statements of Operations for the years ended December 31, 2011, 2010 and 2009:



	For the Years Ending December 31,
	2011			2010			2009
Income taxes at Netherlands rates (2011 - 25%, 2010 and 2009 - 25.5%)	$	(43,927	)	$	(28,521	)	$	(16,877	)
Jurisdictional differences in tax rates	22,092			416			25,064
Tax effect of goodwill impairment	7,105			—			—
Unrecognized tax benefits	4,490			2,444			12,343
Losses expired	2,344			672			296
Tax charge from internal restructuring	9,229			—			—
Change in valuation allowance	2,637			30,427			(16,349		)
Other	(120		)	(413		)	260
Provision for income taxes	$	3,850		$	5,025		$	4,737

In 2011, the Company realized a US$ 8.2 million tax benefit on utilization of tax loss carry-forwards in Bulgaria against a tax charge created by internal restructuring which, together with the utilization of current period tax losses, resulted in no net impact on total tax expense.

The jurisdictional rate difference in 2011 mainly arises as a result of the difference between the Bulgarian and the Netherland's tax rates.

Components of Deferred Tax Assets and Liabilities

The following table shows the significant components included in deferred income taxes as at December 31, 2011 and 2010:



	December 31, 2011			December 31, 2010
Assets:
Tax benefit of loss carry-forwards and other tax credits	$	96,691		$	90,532
Programming rights	8,161			10,322
Property, plant and equipment	2,557			3,132
Accrued expenses	5,485			4,975
Other	11,038			9,864
Gross deferred tax assets	123,932			118,825
Valuation allowance	(92,738		)	(90,553		)
Net deferred tax assets	31,194			28,272

Liabilities:
Broadcast licenses, trademarks and customer relationships	$	(71,459	)	$	(78,751	)
Property, plant and equipment	(8,571		)	(11,304		)
Programming rights	(10,370		)	(8,742		)
Temporary difference due to timing	(8,435		)	(7,558		)
Total deferred tax liabilities	(98,835		)	(106,355		)
Net deferred income tax liability	$	(67,641	)	$	(78,083	)

Deferred tax is recognized on the Consolidated Balance Sheet as follows:



	December 31, 2011			December 31, 2010
Net current deferred tax assets	$	3,893		$	3,835
Net non-current deferred tax assets	4,232			1,378
	8,125			5,213

Net current deferred tax liabilities	(1,094		)	(672		)
Net non-current deferred tax liabilities	(74,672		)	(82,624		)
	(75,766		)	(83,296		)

Net deferred income tax liability	$	(67,641	)	$	(78,083	)

We provided a valuation allowance against potential deferred tax assets of US$ 92.7 million and US$ 90.6 million as at December 31, 2011 and 2010, respectively, since it has been determined by management, based on the weight of all available evidence, that it is more likely than not that the benefits associated with these assets will not be realized.

During 2011, we had the following movements on valuation allowances:



Balance at December 31, 2010	$	90,553
Created during the period	15,042
Utilized	(12,405		)
Foreign exchange	(452		)
Balance at December 31,2011	$	92,738

As of December 31, 2011 we have operating loss carry-forwards that will expire in the following periods:



Year:	2012		2013		2014		2015		2016 - 27		Indefinite

Austria	$	—	$	—	$	—	$	—	$	—	$	9,931
Bulgaria	19		19		3,297		31,100		1,420		—
Croatia	23,027		13,036		11,177		7,507		3,389		—
Czech Republic	737		673		—		2,489		1,228		—
Hungary	—		—		—		—		—		308
Moldova	—		32		1		—		—		—
Netherlands	—		5,411		10,743		3,940		238,133		—
Romania	—		410		7,117		8,037		39,840		—
Slovakia	—		—		—		—		12,110		—
Slovenia	—		—		—		—		—		11,267
United Kingdom	—		—		—		—		—		3,134
United States	—		—		—		—		5,288		—
Total	$	23,783	$	19,581	$	32,335	$	53,073	$	301,408	$	24,640

The losses are subject to examination by the tax authorities and to restriction on their utilization. In particular, the losses can only be utilized against profits arising in the legal entity in which they arose.

We have provided valuation allowances against most of the above loss carry-forwards. However, valuation allowances have not been provided against the loss carry-forwards in Slovakia and part of the loss carry-forwards in Romania on the basis of future reversals of existing taxable temporary differences. The tax benefits associated with the losses in the United Kingdom and the United States are only recognized in the financial statements as they are utilized.

We have not provided income taxes or withholding taxes on US$ 494.0 million (2010: US$ 504.6 million) of cumulative undistributed earnings of our subsidiaries and affiliates as these earnings are either permanently reinvested in the companies concerned or can be recovered tax-free. It is not practicable to estimate the amount of taxes that might be payable on the distribution of these earnings.

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:



Balance at December 31,2008	$	4,270
Increases for tax positions taken during a prior period	95
Increases for tax positions taken during the current period	12,843
Decreases resulting form the expiry of the statute of limitations	(595		)
Other	23
Balance at December 31,2009	16,636
Increases for tax positions taken during a prior period	(428		)
Increases for tax positions taken during the current period	2,872
Settlements with tax authorities	(252		)
Other	(170		)
Balance at December 31,2010	18,658
Increases for tax positions taken during a prior period	88
Increases for tax positions taken during the current period	4,402
Other	(18		)
Balance at December 31,2011	$	23,130

The total amount of unrecognized benefits that, if recognized, would affect the effective tax rate amounts to US$ 0.1 million. It is reasonably possible that the total amount of unrecognized tax benefits will not decrease within 12 months of the reporting date as a result of tax audits closing and statutes of limitations expiring.

Our subsidiaries file income tax returns in The Netherlands and various other tax jurisdictions including the United States. As at December 31, 2011, analyzed by major tax jurisdictions, our subsidiaries are generally no longer subject to income tax examinations for years before:



Country	Year
Bulgaria	2008
Croatia	2007
Czech Republic	2008
Netherlands	2007
Romania	2006
Slovak Republic	2006
Slovenia	2006
United Kingdom	2010
United States	2009

We recognize, when applicable, both accrued interest and penalties related to unrecognized benefits in income tax expense in the accompanying Consolidated Statements of Operations.

The liability for accrued interest and penalties was US$ 0.3 million and US$ nil at December 31, 2011 and 2010, respectively.