27 Income Taxes

Income tax expense comprises the following:

In millions of Russian Roubles 2010 2009
Current tax 50,622 17,559
Deferred tax 4,062 (8,207)
Less: Deferred tax recognised in other comprehensive income (6,197) (3,884)
Income tax expense for the year 48,487 5,468

The income tax rate applicable to the major part of the Group’s income for 2010 is 20% (2009: 20%).

Reconciliation between the expected and the actual taxation charge is provided below:

In millions of Russian Roubles 2010 2009
IFRS profit before tax 230,135 29,864
Theoretical tax charge at statutory rate (2010: 20%; 2009: 20%) 46,027 5,973
Tax effect on income on government securities taxed at different rates (2,367) (1,497)
Tax effect of items which are not deductible or assessable for taxation purposes:    
- Non-deductible staff costs 790 235
- Unrecognised tax asset of subsidiaries 1,300 -
- Non-deductible losses on cessions 1,184 -
- Other non-temporary differences 1,553 757
Income tax expense for the year 48,487 5,468

Differences between IFRS and Russian statutory taxation regulations give rise to temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and their tax bases. The tax effect of the movements in these temporary differences is detailed below and is recorded at the rate of 20% (2009: 20%), except for income on state, municipal and certain other types of securities that is taxed at 15%, 9% and 0% (2009:15%, 9% and 0%) and on dividends that is taxed at a standard rate of 9% (2009: 9%).

In millions of Russian Roubles 31 December 2009 Business combinations Credited/ (charged) to profit or loss Recognised in other comprehensive income 31 December 2010
Tax effect of deductible temporary differences          
Deferred fees and commissions income 6,298 - (547) - 5,751
Accrued employee benefit costs 2,446   (2,406) - 40
Low value items write-off 1,163 - 167 - 1,330
Accrued interest on loans 3,978 - 2,660 - 6,638
Fair valuation of trading securities and securities designated at fair value through profit or loss (2,980) - 7,143 - 4,163
Gross deferred tax asset 10,905 - 7,017 - 17,922
Tax effect of taxable temporary differences          
Loan impairment provision 3,361 - (464) - 2,897
Premises and equipment 15,611 335 1,943 (39) 17,850
Fair valuation of investment securities available for sale (1,869)   1,154 6,236 5,521
Other (1,600) (592) 2,249 - 57
Gross deferred tax liability 15,503 (257) 4,882 6,197 26,325
Total net deferred tax asset/(liability) (4,598) 257 2,135 (6,197) (8,403)
In millions of Russian Roubles 31 December 2008 Business combinations Credited/ (charged) to profit or loss Recognised in other comprehensive income 31 December 2009
Tax effect of deductible temporary differences          
Deferred fees and commissions income 5,782 - 516 - 6,298
Accrued employee benefit costs 2,164   282 - 2,446
Low value items write-off 1,131 - 32 - 1,163
Accrued interest on loans - - 3,978 - 3,978
Fair valuation of investment securities available for sale 9,550   460 (8,141) 1,869
Other 397 (316) 1,519 - 1,600
Gross deferred tax asset 19,024 (316) 6,787 (8,141) 17,354
Tax effect of taxable temporary differences          
Loan impairment provision 6,493 - (3,132) - 3,361
Premises and equipment 20,277 1,973 (2,382) (4,257) 15,611
Fair valuation of trading securities and securities designated at fair value through profit or loss 2,770 - 210 - 2,980
Gross deferred tax liability 29,540 1,973 (5,304) (4,257) 21,952
Total net deferred tax asset/(liability) (10,516) (2,289) 12,091 (3,884) (4,598)

As at 31 December 2010, the temporary difference associated with investments in subsidiaries in the statement of financial position of the parent company amounted to RR 27 037 million (2009: RR 8 602 million). In accordance with IAS 12 Income taxesrespective deferred tax asset of RR 5 407 million (2009: respective deferred tax liability of RR 1 720 million) was not recognized in the financial statements.

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