Income tax expense
In 2007 and 2006, pre-tax income was SEK 25,251 million and SEK 25,226 million, respectively. Income tax expense was distributed as follows.


January-December
SEK in millions

20072006
Tax expense brought to income



Current taxes

5,7814,901
Deferred taxes

-8281,042
Total tax expense brought to income

4,9535,943
Tax expense recognized directly in shareholders' equity



Current taxes

-44-
Deferred taxes

14-37
Total tax expense recognized directly in shareholders' equity

30-37
Certain components included in tax expense brought to income were as follows.


January-December
SEK in millions

20072006
Effect of changes in tax rates

10570
Current year losses for which no deferred tax asset was recognized

557232
Underprovided or overprovided taxes in prior years

158122
Recognition of previously unrecognized deferred taxes

-84584




Amounts stated above related either to not recognized or to recognized deferred taxes are commented on in section "Tax loss carry-forwards" below.
The difference between the nominal Swedish income tax rate and the effective tax rate comprises the following components.


January-December
Percent

20072006
Swedish income tax rate

28.028.0
Effect of higher or lower tax rates in subsidiaries

-2.6-2.3
Withholding tax on dividends from subsidiaries, associate companies and joint ventures

3.12.3
Underprovided or overprovided taxes in prior years

0.60.5
Recognition of previously unrecognized tax losses

-3.40.3
Effect of changes in tax rates

0.40.3
Income from associated companies and joint ventures

-8.5-6.2
Current year losses for which no deferred tax asset was recognized

2.20.9
Non-deductible expenses

0.10.2
Tax-exempt income

-0.3-0.4
Tax rate as per the income statement

19.623.6
Tax recognized directly in shareholders' equity

-0.1-0.1
Effective tax rate

19.523.5
On June 1, 2007, the Danish parliament enacted changes to the Corporate Income Tax Act, including a reduction of the Danish corporate income tax rate from 28 percent to 25 percent retroactively effective January 1, 2007. In 2006, the Spanish parliament decided to reduce the Spanish corporate income tax rate from 35 percent to 32.5 percent and 30 percent effective January 1, 2007 and January 1, 2008, respectively.
Income tax assets and liabilities
Deferred tax assets and liabilities changed as follows.


December 31,
SEK in millions

20072006
Deferred tax assets



Opening balance

12,05412,305
Operations acquired

661,491
Income statement period change

-950-1,086
Recognized in equity

-14-5
Reclassifications

334-162
Exchange rate differences

527-489
Deferred tax assets, closing balance

12,01712,054
Deferred tax liabilities



Opening balance

10,1219,578
Operations acquired

774714
Income statement period change

-1,778-44
Recognized in equity

--42
Reclassifications

43157
Exchange rate differences

29-142
Deferred tax liabilities, closing balance

9,57710,121
For changes in deferred tax assets and liabilities related to operations acquired in 2007, see Note 34 "Business Combinations, etc."
Temporary differences in deferred tax assets and liabilities were as follows.


December 31,
SEK in millions

20072006
Gross deferred tax assets



Unrealized gain, associated companies

4848
Delayed depreciation, impairment losses and fair value adjustments, other non-current assets

5,7825,403
Delayed expenses for provisions

255549
Doubtful current receivables

19131
Tax loss carry-forwards

9,48112,717
Subtotal

15,75718,748
Valuation allowances



Delayed depreciation, other non-current assets

-132-129
Tax loss carry-forwards

-2,918-2,973
Subtotal

-3,050-3,102
Off-set deferred tax liabilities/assets

-690-3,592
Total deferred tax assets

12,01712,054
Deferred tax liabilities



Withholding taxes and impairment losses, associated companies

1,3223,399
Accelerated depreciation and fair value adjustments, other non-current assets

6,0947,607
Fair value adjustments, provisions

6531,228
Delayed revenue recognition, current receivables

52159
Profit equalization reserves

2,1461,320
Subtotal

10,26713,713
Off-set deferred tax assets/liabilities

-690-3,592
Total deferred tax liabilities

9,57710,121
Net deferred tax assets

2,4401,933
Net increase (+)/decrease (-) in valuation allowance

-52873
The expected maturities for unrecognized deferred tax assets related to tax loss carry-forwards, as reflected by the valuation allowance as of December 31, 2007, are SEK 444 million in 2011 and SEK 1,811 million in 2024, while SEK 536 million is unlimited. Unrecognized deferred tax liabilities for undistributed earnings in subsidiaries, including estimated such income tax that is levied on dividends paid, totaled SEK 552 million in 2007 and SEK 496 million in 2006.
Tax loss carry-forwards
Deferred tax assets originating from tax loss carry-forwards mainly relate to Finland and Spain.
Tax losses in Finland refer mainly to impairment losses on the European 3G investments recognized by TeliaSonera Finland Oyj (formerly Sonera Oyj) in 2002. In 2007, deferred tax assets increased by approximately SEK 0.7 billion following an approval by the Finnish tax authorities to utilize previously restricted tax losses, emanating chiefly from 2003 and relating to capital losses on shares divested by another subsidiary within the Finnish tax group. Some minor tax losses in other Finnish subsidiaries have been reduced to zero by a full valuation allowance as incurred, since management estimates that it is probable that the tax losses will not be utilized before their expiry.
Tax losses in Spain refer to the Spanish 3G mobile network operator Xfera that was acquired in June 2006 and that subsequently launched its services in December 2006. Xfera is a start-up operation that has reported tax losses since its incorporation in 2000, due to annual spectrum fees invoiced by the Spanish government authorities, depreciation and write-downs of earlier investments, and other pre-operating losses. As of December 31, 2007, Xfera had tax losses and taxable temporary differences totaling SEK 7.9 billion. As is the normal case for start-up operations, management projects tax losses also during the next few years.
At the current stage of the 3G market and due to the decreases in equipment prices in the past few years, management is, however, confident that Xfera will be able to generate taxable profits, and has prepared a robust business plan based on a sound business model with detailed and benchmarked data, and has also convinced other parties to invest alongside TeliaSonera. As a result, management believes that the current tax losses will be utilized before they expire after 15 years from the first profitable year. However, management acknowledges that the threshold for recognizing deferred tax assets in a situation of recurring historical losses is higher than for other assets, and has therefore reduced its projections to a level which it is convinced that Xfera will reach. As of December 31, 2007, based on these projections, management has recognized a deferred tax asset of SEK 675 million after valuation allowance.
TeliaSonera's accumulated tax loss carry-forwards were SEK 35,277million in 2007 and SEK
46,991 million in 2006. Tax loss carry-forwards as of December 31, 2007 expire as follows.
Expected expiry, SEK in millions


Tax loss carry-forwards
2008


38
2009


13
2010


58
2011


1,778
2012


18,247
2013-2024


11,482
Unlimited


3,661
Total


35,277
Most of the Finnish tax loss carry-forwards expire in 2012. The decrease in accumulated tax loss carry-forwards compared to 2006 is mainly related to a temporary deduction that a Dutch subsidiary recorded on one of its equity investments in 2005, in accordance with article13ca of the Dutch Corporate Income Tax Act. The temporary deduction led to a tax loss carry-forward in 2005, which was fully reversed in 2007 as a consequence of divesting the equity investment.