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,
	2012			2011			2010
Domestic	$	(21,623	)	$	(6,470	)	$	(77,267	)
Foreign	(538,909		)	(169,284		)	(34,632		)
Total	$	(560,532	)	$	(175,754	)	$	(111,899	)

Included in domestic income during 2012, 2011 and 2010 is intercompany dividend income of US$ 50.0 million, US$ 63.7 million and US$ 11.2 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, 2012, 2011 and 2010 was allocated as follows:



	For The Years Ending December 31,
	2012			2011		2010
Income tax (credit) / expense from continuing operations	$	(14,139	)	$	3,850	$	5,025
Income tax expense from discontinued operations	—			—		30
Total tax (credit) / expense	$	(14,139	)	$	3,850	$	5,055

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,
	2012			2011			2010
Current income tax expense:
Domestic	$	757		$	321		$	549
Foreign	8,842			10,377			12,310
	9,599			10,698			12,859
Deferred tax benefit:
Domestic	1,963			(5		)	—
Foreign	(25,701		)	(6,843		)	(7,834		)
	(23,738		)	(6,848		)	(7,834		)

Provision for income taxes	$	(14,139	)	$	3,850		$	5,025

In 2012, 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 and comprehensive income for the years ended December 31, 2012, 2011 and 2010:



	For The Years Ending December 31,
	2012			2011			2010
Income taxes at Netherlands rates (2012 and 2011 - 25%, 2010 - 25.5%)	$	(140,142	)	$	(43,927	)	$	(28,521	)
Jurisdictional differences in tax rates	30,436			22,092			416
Tax effect of goodwill impairment	55,671			7,105			—
Unrecognized tax benefits	11,089			4,490			2,444
Losses expired	5,597			2,344			672
Tax charge from internal restructuring	—			9,229			—
Change in valuation allowance	16,049			2,637			30,427
Other	7,161			(120		)	(413		)
(Credit) / provision for income taxes	$	(14,139	)	$	3,850		$	5,025

The jurisdictional rate difference in 2012 and 2011 mainly arises as a result of the difference between the Bulgarian and The Netherlands' 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, 2012 and 2011:



	December 31, 2012			December 31, 2011
Assets:
Tax benefit of loss carry-forwards and other tax credits	$	108,842		$	96,691
Programming rights	3,618			8,161
Property, plant and equipment	7,488			2,557
Accrued expenses	4,814			5,485
Other	5,820			11,038
Gross deferred tax assets	130,582			123,932
Valuation allowance	(108,971		)	(92,738		)
Net deferred tax assets	21,611			31,194

Liabilities:
Broadcast licenses, trademarks and customer relationships	$	(41,435	)	$	(71,459	)
Property, plant and equipment	(3,618		)	(8,571		)
Programming rights	(15,435		)	(10,370		)
Temporary difference due to timing	(6,814		)	(8,435		)
Total deferred tax liabilities	(67,302		)	(98,835		)
Net deferred income tax liability	$	(45,691	)	$	(67,641	)

Deferred tax is recognized on the consolidated balance sheet as follows:



	December 31, 2012			December 31, 2011
Net current deferred tax assets	$	2,204		$	3,893
Net non-current deferred tax assets	5,539			4,232
	7,743			8,125

Net current deferred tax liabilities	(1,366		)	(1,094		)
Net non-current deferred tax liabilities	(52,068		)	(74,672		)
	(53,434		)	(75,766		)

Net deferred income tax liability	$	(45,691	)	$	(67,641	)

We provided a valuation allowance against potential deferred tax assets of US$ 109.0 million and US$ 92.7 million as at December 31, 2012 and 2011, 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 2012, we had the following movements on valuation allowances:



Balance at December 31, 2011	$	92,738
Created during the period	25,622
Utilized	(9,573		)
Foreign exchange	184
Balance at December 31,2012	$	108,971

As of December 31, 2012 we have operating loss carry-forwards that will expire in the following periods:



Year:	2013		2014		2015		2016		2017-28		Indefinite

Austria	$	—	$	—	$	—	$	—	$	—	$	9,341
Bulgaria	19		65		217		1,446		9,200		—
Croatia	13,260		11,370		7,636		3,448		1,426		—
Czech Republic	4		—		—		256		1,894		—
Hungary	—		—		—		—		—		215
Moldova	55		2		250		—		—		—
The Netherlands	5,411		10,743		3,940		8,472		255,455		—
Romania	8,046		—		—		3,144		118,928		—
Slovak Republic	—		—		—		—		16,252		—
Slovenia	—		—		—		—		—		11,460
United Kingdom	—		—		—		—		—		2,769
United States	—		—		—		—		5,131		—
Total	$	26,795	$	22,180	$	12,043	$	16,766	$	408,286	$	23,785

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 part of the loss carry-forwards in Romania and the Slovak Republic 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$ 221.1 million (2011: US$ 494.0 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, 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
Settlements with tax authorities	—
Other	(18		)
Balance at December 31, 2011	23,130
Increases for tax positions taken during a prior period	8,283
Increases for tax positions taken during the current period	2,850
Decreases resulting from the expiry of the statute of limitations	(44		)
Settlements with tax authorities	(34,107		)
Other	—
Balance at December 31, 2012	$	112

During 2012, we agreed with the Dutch tax authorities as to the amount of tax losses available to the Company's main Netherlands holding company. As a result, US$ 34.0 million of the provision for unrecognized tax benefits was applied against the deferred tax asset attributable to these tax losses.

Our subsidiaries file income tax returns in The Netherlands and various other tax jurisdictions including the United States. As at December 31, 2012, analyzed by major tax jurisdictions, our subsidiaries are generally no longer subject to income tax examinations for years before:



Country	Year
Bulgaria	2009
Croatia	2008
Czech Republic	2008
The Netherlands	2009
Romania	2008
Slovak Republic	2007
Slovenia	2006
United Kingdom	2011
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 and comprehensive income.

The liability for accrued interest and penalties was US$ nil and US$ 0.3 million at December 31, 2012 and 2011, respectively.