Dedication across the board
Annual Report 2012

Consolidated Financial Statements

23. Income tax expenses

The provision for income taxes consisted of the following:

In thousands of US dollar 2012 2011
     
- Current income tax expense 118,105 21,497
- Deferred income tax expense 2,258 45,851
Total income tax expense 120,363 67,348

As at December 31, 2012, the Group's profits were assessed for income taxes only in the Republic of Kazakhstan. A reconciliation between tax expense and the product of accounting profit multiplied by the Kazakhstani tax rate applicable to the license for the year ended December 31 is as follows:

In thousands of US dollar 2012 2011
     
Profit before income tax 282,372 148,972
Statutory tax rate 30% 30%
Expected tax provision 84,712 44,692
Non-deductible interest expense on borrowings 26,579 22,385
Non-assessable income (4,223) (4,755)
Non-deductible other tax expenses 5,243 -
Change of the tax base 2,312 704
Non-deductible social expenditures 1,589 -
Non-deductible cost of gas 1,226 -
Non-deductible training expenditures 552 697
Foreign exchange loss 491 30
Adjustment in respect of current income tax of prior periods - 1,663
Other non-deductible expenses 1,882 1,932
Income tax expense reported in the financial statements 120,363 67,348

Deferred tax balances are calculated by applying the Kazakhstani statutory tax rates in effect at the respective reporting dates to the temporary differences between the tax amounts and the amounts reported in the financial statements and are comprised of the following at December 31:

In thousands of US dollar 2012 2011
     
Deferred tax asset:    
Accounts payable and provisions 2,690 2,289
  2,690 2,289
Deferred tax liability:    
Property, plant and equipment (151,622) (148,963)
  (151,622) (148,963)
Net deferred tax liability (148,932) (146,674)

The movements in the deferred tax liability were as follows:

In thousands of US dollar 2012 2011
     
Balance at January 1 (146,674) (100,823)
Current period charge to profit or loss (2,258) (45,851)
Balance at December 31 (148,932) (146,674)