International Flavors & Fragrances Inc. (NYSE: IFF) today announced that on August 1, 2012 it reached an overall settlement with the Spanish tax authorities regarding income tax deductions taken by its Spanish subsidiaries for the fiscal years 2004 through 2010. As part of the overall settlement, the Company and the Spanish tax authorities have also preliminarily agreed upon the key principles to be incorporated into an agreement that will establish the tax basis for the Company’s activities in Spain for 2012 and future years.
In accordance with the overall settlement, the Company and the Spanish tax authorities agreed to settle all disputes and claims arising from the Company’s Spanish subsidiaries’ tax returns for the fiscal years 2004 through 2010 in exchange for an agreed-upon aggregate payment of Euro 86.0 million, or $105.7 million (at today’s exchange rate) before year-end. As a result of the settlement, the Company will record an after-tax charge to net income of $58.5 million, or $0.71 per share, in the third quarter of 2012 covering the fiscal years 2004 through 2010, as well as an expected assessment for 2011, on a basis consistent with the settlement reached for the fiscal years 2004 through 2010.
The settlement agreement does not address the Spanish tax authorities’ challenges to similar tax deductions taken in the 2002 and 2003 fiscal years, which are further along in the Spanish judicial process. As a result of the settlement, the Company will record an additional accrual of $13.9 million, or $0.17 per share, in the third quarter of 2012, for uncertain tax positions related to those years.
Doug Tough, IFF Chairman and CEO, said, “This settlement was the result of a recent comprehensive and collaborative effort with the Spanish tax authorities, and we are pleased with the outcome. Not only does this agreement enable us to eliminate much of the uncertainty associated with our prior tax positions in Spain, but we’ve also gained alignment in principle with the Spanish tax authorities regarding our tax position going forward. In the end, we were able to effectively resolve these tax issues in an amicable manner, and we appreciate the efforts of everyone involved in bringing this to a mutually satisfactory conclusion.”
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