The income tax expense on the total result was €136 million (2006: €180 million) and can be broken down as follows:

The effective income tax rate on the result from continuing operations was 24.5% in 2007 (2006: 26.4%). The relationship between the income tax rate in the Netherlands and the effective tax rate on the result from continuing operations is as follows:

The balance of deferred tax assets and deferred tax liabilities decreased by €111 million owing to the changes presented in the table below:

The group companies that DSM has in various countries conduct a large variety of transactions among themselves. In various countries DSM has taken standpoints regarding its tax position which may at any time be challenged, or have already been challenged, by the tax authorities because the authorities in question interpret the law differently. In determining the probability of realization of deferred tax assets and liabilities these uncertainties are taken into account.

The deferred tax assets and liabilities relate to the following balance sheet items:

No deferred tax assets were recognized for losses carried forward amounting to €48 million (2006: €70 million).

DSM has to assess the likelihood that deferred tax assets will be recovered from future taxable income. Deferred tax assets are reduced if, and to the extent that, it is not probable that all or some portion of the deferred tax assets will be realized. In the event that actual results differ from estimates in future periods, and depending on tax strategies that DSM may be able to implement, changes to the measurement of deferred taxes could be required, which could impact on the company’s financial position and net profit.