F.26. Income taxes
| (CZK million) | 2016 | 2015 |
|---|---|---|
| Current income taxes | 1,277 | 1,099 |
| Czech Republic | 1,231 | 1,064 |
| Other countries | 46 | 35 |
| Income taxes related to previous period | (230) | (68) |
| Czech Republic | (230) | (68) |
| Deferred income taxes | (260) | (164) |
| Czech Republic | (277) | (166) |
| Other countries | 17 | 2 |
| Total | 787 | 867 |
The table below shows the reconciliation between the expected and effective tax rate, which is based on the 19% tax rate applicable in the Czech Republic.
| (CZK million) | 2016 | 2015 restated |
|---|---|---|
| Expected income tax rate | 19% | 19% |
| Earnings before taxes | 6,043 | 6,302 |
| Expected income tax expense (benefit) | 1,148 | 1,197 |
| Effect of foreign tax rate differential | 21 | 18 |
| Effect of special (lower) tax rate | (184) | (189) |
| Tax exempt income and other tax decreasing items | (148) | (343) |
| Tax non-deductible expenses and other tax increasing items | 119 | 223 |
| Effect of tax losses | (104) | (68) |
| Foreign income taxes | 8 | 4 |
| Income taxes for prior years | (126) | (1) |
| Other | 53 | 26 |
| Tax expense | 787 | 867 |
| Effective tax rate | 13% | 14% |
The tax authorities of the territories in which group entities operate may at any time inspect the books and records of group entities within a maximum period of 3 to 10 years depending on the tax jurisdiction subsequent to the reported tax year, and may impose additional tax assessments and penalties. The Group’s management is not aware of any circumstances which may give rise to a potential material liability in this respect.
F.26.1. Deferred tax
| Deferred tax assets | Deferred tax liabilities | |||
|---|---|---|---|---|
| (CZK million) | 31.12.2016 | 31.12.2015 | 31.12.2016 | 31.12.2015 |
| Intangible assets | – | – | (144) | (141) |
| Land and buildings | 25 | 24 | (84) | (39) |
| Financial assets available for sale | 1,376 | 1,187 | (14) | (11) |
| Financial assets at fair value through profit and loss | – | – | – | (2) |
| Deferred acquisition costs | 16 | 15 | – | – |
| Insurance provisions | 18 | 15 | – | – |
| Fiscal losses carried forward | 111 | 1 | – | – |
| Accrued income and prepayments | – | – | (3) | – |
| Deferred tax asset / liability with impact on equity | 20 | 16 | (1,374) | (1,179) |
| Other | 66 | 32 | (4) | (15) |
| Total deferred tax asset/liability before set-off | 1,632 | 1,290 | (1,623) | (1,387) |
| Set-off of tax | (1,433) | (1,243) | 1,433 | 1,243 |
| Net deferred tax asset/liability | 199 | 47 | (190) | (144) |
Of which relates to the Transformed fund:
In accordance with the accounting method, the amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantially enacted as at the end of the reporting period which, for the year 2016 and the following years, is 19% (2015 – 19%).
| Net deferred tax asset/(liability) | ||
|---|---|---|
| (CZK million) | 2016 | 2015 |
| Balance as at beginning of reporting period | (97) | 16 |
| Deferred income tax for the period | 260 | 141 |
| Deferred tax recognised directly in equity | (150) | (256) |
| Total deferred tax income/(expense) for the period | 110 | (115) |
| Net foreign currency translation effects | (4) | 2 |
| Balance as at end of reporting period | 9 | (97) |
The Group did not recognise a deferred tax asset of CZK 311 million (2014: CZK 452 million) from deductible temporary differences (unused tax losses) since their realisation is not considered probable.
Tax losses and tax credits, for which no deferred tax was recognised, are presented in the following table:
| Not recognised temporary differences | ||
|---|---|---|
| (CZK million) | 31.12.2016 | 31.12.2015 |
| Expire in 1 year | – | 1,072 |
| Expire between 1 and 3 years | – | 561 |
| Expire between 3 and 5 years | – | – |
| Expire in more than 5 years | 3 | 2 |
| Total | 3 | 1,635 |