22nd Nov 2006 07:00
Banco Bilbao Vizcaya Argentaria SA21 November 2006 Banco Bilbao Vizcaya Argentaria, S.A. (BBVA), pursuant to the provisions ofarticle 82 of the Spanish Securities Market Act, proceeds by means of thepresent document to notify the following: RELEVANT EVENT Today, 21 November 2006, the Spanish Congress' definitive approval of the textof the Draft Bill on Personal Income Tax which also partially amends the laws onCorporation Tax and Taxes for Non-Resident Persons and Wealth Tax, was publishedin the Official Gazette of the Spanish Congress (BOCG). Paragraph 11 of thefinal provision number two stipulates, among other issues, the reduction of thegeneral Corporate Tax rate to 32.5% for the fiscal periods starting in 2007, andto 30% for the fiscal periods starting in 2008. According to currently prevailing accounting standards, the BBVA Group hasrecorded deferred tax assets and liabilities due to temporary differences, whichreflect the differences between the recorded value of the asset or liability andthe amount of their tax base. These temporary differences should be valued, asprovided in said standards, in accordance with the tax rate that would beexpected to apply in the year when the asset was realised or the liability wassettled; therefore the actual calculations are made with a tax rate of 35%. Under International Accounting Standards, the definitive approval of said DraftBill and its publication in the BOCG provides sufficient certainty on thereduction of the tax rate and makes it obligatory in 2006 to recalculate thetemporary differences using the new tax rate that will be applicable at the timeof its future recovery or materialization, ie, 32.5% for 2007 tax year and 30%for tax year 2008 or after. The BBVA Group has estimated the adverse effect that the above mentionedadjustment will have in the BBVA shareholders fund at about • 450 million of theGroup's balance sheet for 2006, of which • 360 million will be registered asexpenses in the Income Statement. Once the effect of such "valuationadjustments" has been discounted, the total impact on equity would be ofapproximately • 250 million. Obviously, the precise impact may not be determinedexactly until the end of the current tax year. This effect shall be offset with the positive impact that the reduction of thetax rate will have on an ongoing basis on the future Group income statements forthe tax years starting as of January 1, 2007. Therefore, the overall valuationof this legislative amendment must undoubtedly be considered positive forSpanish corporations despite the adverse effect on their 2006 income statements. Madrid, 21st November 2006 This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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