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14 Income taxes

Current, deferred and prepaid taxes78,59732,63745,960
Total 78,59732,63745,960

The impact of income taxes on the pre-tax profit is 41,6%, compared to 22.9% in 2007.

This tax rate change is justified taking into account the extraordinary entry, positive for Euro 32,930 thousand, which affected 2007, in addition to the decreased IRES and IRAP rates applicable starting in 2008.

On implementation of Draft Law 10 of 15 February 2007, converted into Law 46 on 6 April 2007, which governs restitution of state aid declared illegal under decision 2003/193 of 5 July 2002 by the European Commission, Hera SpA was issued on 6 April 2007 with notices and injunctions by the competent regional Revenue Service, requesting a total payment of Euro 22,312,964 for the four periods of tax recovery. On 31 May 2007, Hera SpA filed an appeal against the aforementioned notices and injunctions with the provincial tax commission (Commissione Tributaria Provinciale di Bologna), requesting the suspension of the execution of these payment injunctions. On 6 July 2007, the Bologna provincial tax commission issued ordinances accepting the suspension requests made by the company, scheduling a hearing of the case for 13 December 2007. On 19 April 2008, notification was made that the appeals had been rejected, except for that relating to the tax period 1997. In this case, the commission recognised the legitimacy of the deduction of tax withheld and of the tax credit carried over from previous years.

Partial relief having been obtained on 2 May 2008 for the 2007 tax period, after recognition of the aforementioned retentions and credits, for Euro 3,738,074, a total payment of Euro 17,399,770 was made. Appeals were filed against the first-instance ruling, and we are waiting for the hearing to be scheduled.

Please also note that, under the terms of agreements made between shareholders at the time of the incorporation giving rise to the creation of Hera SpA and reported in the IPO prospectus, local authorities undertook “to compensate Hera SpA for any cost, loss or damage sustained by the same in relation to mandatory regulatory measures revoking tax benefits that the company and the companies taking part in the incorporation have enjoyed”.

Consequently no cost has been booked in this regard. With regard to the above, please note that on 31 December 2007 some of the shareholder municipalities gave appropriate guarantees to the company by making advance payments on the amounts owed by Hera SpA; following the negative outcome of the first instance hearing and the consequent payment, the respective credit/debit positions vis-à-vis each municipality were defined. At 31 December 2008, outstanding receivables for collection came to Euro 2,174,291.

Regarding the former Meta Modena, the Modena revenue agency issued to Hera SpA on 11 May 2007, pursuant to and in accordance with the Legislative Decree of 15 February 2007, notices and injunctions for the recovery of state aid relating to the tax periods 1998 and 1999. On 6 June 2007, Hera SpA filed autoprotection instances requesting the amendment of the notices and injunctions.

On 11 June 2007, the Modena revenue agency issued partial autoprotection measures relating to the notices and injunctions, requesting that the company pay an insubstantial sum in settlement of the entire matter, while withholding tax paid was disregarded.

Furthermore, in the period between June 2007 and February 2008, the collection agency made demands for payment to Hera SpA in order to recover alleged state aid in relation to mortgages granted by the Cassa Depositi e Prestiti to some companies/consortia then merged in Hera SpA. The demands for payment amounted to Euro 2,975,494 in total. Hera contested the demands with the Bologna provincial tax commission, which referred the matter to the ordinary judicial authority (Autorità Giudiziaria Ordinaria) where the legal procedures in question will be resumed. Hera also contested, with the Lazio regional court (Tribunale amministrativo regionale), a previous injunction issued by the Treasury, by means of which the ministry justified its request for restitution of funds in accordance with the European Community decision of 5 June 2002. This decision declared loans at favourable rates of interest granted by the Cassa Depositi e Prestiti to limited liability companies created pursuant to Law 142/90 to be incompatible with the common market. The above amount, which was paid in instalments in the period January-April 2008, was booked under financial charges.

It is then reported that art. 24 of Italian Legislative Decree 185 of 29 November 2008, converted with changes into Law 2 of 28 January 2009, put the revenue agency in charge of recovering aid equivalent to unpaid taxes and their interest due to the fiscal moratorium within 31 March 2009, “in order to totally implement” the 5 June 2002 decision of the Commission mentioned above. Presently, it would appear that the time available to the revenue agency to proceed with any recovery of taxes not yet paid with the procedure in force previously might be extended three months, and hence to the end of June 2009, because of the amendment to the de qua rule the government presented.

Currently, the Company is unable to calculate the liabilities that might derive from reopening the recovery procedure due to the many uncertainties surrounding interpretation of the regulations of the de qua procedure. It is however believed that said liabilities may be of a particularly insignificant amount, also in consideration of the amounts already paid by way of restitution of state aid declared illegal.

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