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Grupa LOTOS S.A. - Integrated Annual Report 2012
10. Corporate income tax
10.1 Tax expense
| PLN '000 |
Year ended Dec 31 2012 |
Year ended Dec 31 2011 |
|---|---|---|
| Current income tax | 53,593 | 110,795 |
| Deferred tax | (615,361) | (208,738) |
| Total income tax charged to consolidated profit or loss | (561,768) | (97,943) |
| Income tax expense recognised in other comprehensive income (net), including on: | 75,853 | (87,363) |
| - exchange differences on translating foreign operations | (13,864) | 10,987 |
| - cash flow hedges | 89,717 | (98,350) |
For entities operating in Poland, the current and deferred portion of income tax was calculated at the rate of 19% of the corporate income tax base.
In the case of Norwegian subsidiary LOTOS Exploration and Production Norge AS, the marginal tax rate is 78% of the tax base. LOTOS Exploration and Production Norge AS’s activities are subject to taxation under two parallel tax systems: the corporate income tax system (28% tax rate) and the petroleum tax system (additional tax rate of 50%).
In the case of Lithuanian subsidiaries of the AB LOTOS Geonafta Group, the current and deferred portion of income tax was calculated at the rate of 15%.
10.2 Corporate income tax calculated at effective tax rate and reconciliation of pre-tax profit to tax base
| PLN '000 |
Year ended Dec 31 2012 |
Year ended Dec 31 2011 |
|---|---|---|
| Pre-tax profit | 361,202 | 551,379 |
| Income tax at the rate of 19% | 68,628 | 104,762 |
| Permanent differences | 11,599 | 18,528 |
| Difference related to accounting for step acquisition of control (AB LOTOS Geonafta Group) (1) | (10,972) | (24,013) |
| Tax effect of tax losses incurred in period | 101 | 1,129 |
| Tax effect of tax losses deducted in period | (1,211) | (1,755) |
| Tax effect of share in profits of equity-accounted associates | - | (550) |
| Tax effect of the bio-component tax credit (2) | (5,518) | (6,905) |
| Tax effect of the special economic zone tax credit (2) | - | 4,755 |
| Adjustments disclosed in current year related to tax for previous years | (2,978) | 148 |
| Difference resulting from the application of tax rates other than 19% | (623,130) | (193,990) |
| - Norway | (618,301) | (186,569) |
| - Lithuania | (1,485) | (4,429) |
| - Cyprus | (3,341) | (2,681) |
| - Netherlands Antilles | (3) | (311) |
| Other differences | 1,713 | (52) |
| Corporate income tax | (561,768) | (97,943) |
(1) Data for 2012 refers to the initial accounting for the acquisition of control over UAB Manifoldas by AB LOTOS Geonafta. For more information on the transaction, see Note 2 . Data for 2011 refers to the accounting for the acquisition of control over AB Geonafta (currently AB LOTOS Geonafta). For more information on the transaction, see Note 2 to the consolidated financial statements for 2011.
(2) For more information on the tax credits, see Note 31.2 .
10.3 Deferred income tax
The net deferred tax assets (liabilities) before set-off comprise the following items:
| PLN '000 | Statement of financial position |
Statement of comprehensive income for the year ended |
|||
|---|---|---|---|---|---|
| Dec 31 2012 | Dec 31 2011 | Jan 1 2011 | Dec 31 2012 | Dec 31 2011 | |
| Deferred tax assets | |||||
| Provision for employee benefit obligations | 42,715 | 36,701 | 34,783 | 6,014 | 1,918 |
| Impairment losses on inventories | 448 | 1,877 | 1,473 | (1,429) | 404 |
| Impairment losses on property, plant and equipment and other intangible assets | 100,679 | 40,995 | 23,264 | 59,684 | 17,731 |
| Impairment losses on YME field assets | 806,962 | 165,741 | - | 641,221 | 165,741 |
| Negative valuation of derivatives | 28,905 | 35,671 | 52,036 | (6,766) | (16,365) |
| Exchange differences on revaluation of foreign-currency denominated items | 80 | 320 | 35,985 | (240) | (35,665) |
| Impairment losses on receivables | 15,693 | 17,767 | 18,011 | (2,074) | (244) |
| Finance lease | 32,032 | 33,765 | 14,415 | (1,733) | 19,350 |
| Oil and Gas Facility Decommissioning Fund and provisions for reclamation | 28,086 | 20,746 | 15,551 | 7,340 | 5,195 |
| Unrealised margin assets | 3,120 | 2,382 | 1,789 | 738 | 593 |
| Accrued tax loss carry-forward | 986,442 | 769,794 | 380,561 | 216,648 | 389,233 |
| Other provisions | 6,017 | 6,011 | 8,997 | 6 | (2,986) |
| Bio-component tax credit (2) | 10,934 | 15,752 | 19,964 | (4,818) | (4,212) |
| Special economic zone tax credit (2) | - | - | 4,755 | - | (4,755) |
| Cash flow hedge accounting | 8,633 | 98,350 | - | (89,717) | 98,350 |
| Other | 21,263 | 18,726 | 18,073 | 2,537 | 653 |
| Total | 2,092,009 | 1,264,598 | 629,657 | 827,411 | 634,941 |
| Deferred tax liabilities | |||||
| Difference between present tax value and carrying amount of property, plant and equipment and other intangible assets | 1,112,151 | 815,482 | 518,132 | 296,669 | 297,350 |
| Positive valuation of derivatives | 2,159 | 6,088 | 13,180 | (3,929) | (7,092) |
| Finance lease | 31,814 | 33,527 | 16,089 | (1,713) | 17,438 |
| Exchange differences on translating foreign operations recognised in equity | - | 13,864 | 2,877 | (13,864) | 10,987 |
| Exchange differences on revaluation of foreign-currency denominated items | 34,605 | 6,312 | 21,146 | 28,293 | (14,834) |
| Provision for Lithuanian exploration and production licences acquired | 64,032 | 54,296 | - | 9,736 | 54,296 |
| Interest accrued | 33,128 | 16,968 | 7,927 | 16,160 | 9,041 |
| Other | 14,975 | 23,159 | 13,548 | (8,184) | 9,611 |
| Total | 1,292,864 | 969,696 | 592,899 | 323,168 | 376,797 |
| Deferred tax expense | 504,243 | 258,144 | |||
| Exchange differences on translating foreign operations | 11,654 | (20,407) | |||
| Assets held for sale, other exchange differences | - | 1,599 | |||
| Deferred tax disclosed under effect of accounting for step acquisition of control (AB LOTOS Geonafta Group) (1) | 23,611 | 56,765 | |||
| Deferred tax disclosed under other comprehensive income (net) | 75,853 | (87,363) | |||
| Deferred tax expense recognised in the consolidated statement of comprehensive income | 615,361 | 208,738 | |||
| Net deferred tax assets/(liabilities) | 799,145 | 294,902 | 36,758 | ||
| including: | |||||
| Deferred tax assets | 2,092,009 | 1,264,598 | 629,657 | ||
| Deferred tax liabilities | (1,292,864) | (969,696) | (592,899) | ||
(1) Data for 2012 refers to the initial accounting for the acquisition of control over UAB Manifoldas by AB LOTOS Geonafta. For more information on the transaction, see Note 2 . Data for 2011 refers to the accounting for the acquisition of control over AB Geonafta (currently AB LOTOS Geonafta). For more information on the transaction, see Note 2 to the consolidated financial statements for 2011.
(2) For more information on the tax credits, see Note 31.2 .
As the Group companies are separate taxpayers, deferred tax (deferred tax assets and deferred tax liabilities) is calculated at each company individually. Deferred tax assets and deferred tax liabilities are offset by the Group companies. Below is presented recognition of the deferred tax assets and liabilities in the consolidated statement of financial position:
| PLN '000 | Dec 31 2012 | Dec 31 2011 | Jan 1 2011 |
|---|---|---|---|
| Deferred tax assets | 1,121,314 | 400,128 | 159,901 |
| Deferred tax liabilities | (322,169) | (105,226) | (123,143) |
| Net deferred tax assets/(liabilities) | 799,145 | 294,902 | 36,758 |
Taxable temporary differences are expected to expire in 2013–2085.
As at December 31st 2012, the amount of tax losses with respect to which no deferred tax assets were recognised in the statement of financial position was PLN 43,101 thousand (December 31st 2011: PLN 69,392 thousand).
