Income
tax expense

Income tax expense

2011 2010
Consolidated income statement
Current income tax expense (958 076) (1 064 174)
Deferred income tax related to temporary differences (18 039) 197 744
Tax expense in the consolidated income statement (976 115) (866 430)
Tax expense in other comprehensive income related to temporary differences (27 441) (20 390)
Total  (1 003 556) (886 820)
  2011 2010
Profit before income tax 4 780 860 4 079 236
Corporate income tax calculated using the enacted tax rate 19% in force in Poland (908 363) (775 055)
Effect of other tax rates of foreign entities (2 504) (340)
Permanent differences between accounting gross profit and taxable profit, of which: (73 996) (66 154)
Recognition/reversal of provisions and revaluation not constituting taxable expense/income (51 399) (36 487)
Other non-tax-deductible expenses (17 656) (19 480)
Dividend income 17 859 20 501
Other permanent differences (22 800) (30 688)
Other differences between gross financial result and taxable income, including donations 8 508 (25 064)
Tax loss settlement 240 183
Income tax in the consolidated income statement (976 115) (866 430)
Effective tax rate 20,42% 21,24%
Temporary difference due to the deferred tax presented in the consolidated income statement (18 039) 197 744
Current income tax expense in the consolidated income statement, of which: (958 076) (1 064 174)
Corporate income tax calculated using the enacted tax rate 19% in force in Poland (958 032) (1 064 171)
Effect of other tax rates of foreign entities (44) (3)

Current income tax liabilities/receivables

  31.12.2011 31.12.2010
Current income tax receivables 5 957 4 318
Current income tax liabilities 78 810 67 744

The Group entities are subject to corporate income tax. The amount of current tax liability is transferred to the appropriate tax authorities. The final settlement of the corporate income tax liabilities of the Group entities for the year 2011 is made within the statutory deadline of 31 March 2012.

According to regulations on considering tax liabilities as past due, tax authorities can verify the correctness of income tax settlements within 5 years from the end of the accounting year in which the tax declaration was submitted.

Deferred tax asset/liability

Consolidated statement of financial position Consolidated income statement
31.12.2011 31.12.2010 2011 2010
Deferred tax liability        
Interest accrued on receivables (loans) 176 076 111 398 (64 678) (22 944)
Capitalised interest on performing housing loans 190 844 211 576 20 732 26 870
Interest on securities 58 187 44 537 (13 650) (6 824)

Valuation of derivative financial instruments, of which:
94 471 98 859 - -
transferred to income statement 9 514 47 741 38 227 (34 784)
transferred to other comprehensive income 84 957 51 118 - -
Valuation of derivative financial instruments, of which: 16 414 - - -
transferred to income statement 15 443 - (15 443) -
transferred to other comprehensive income 971 - - -
Difference between book value and tax value of tangible fixed assets 293 318 256 004 (35 291) (22 488)
Temporary positive differences concerning Group’s entities, of which: 29 363 24 786 - -
transferred to income statement 29 307 24 535 (6 795) (1 595)
transferred to other comprehensive income 56 251 - -
Gross deferred tax liability, of which: 858 673 747 160 - -
transferred to income statement 772 689 695 791 (76 898) (61 765)
transferred to other comprehensive income 85 984 51 369 - -
Deferred tax asset
Interest accrued on liabilities 391 527 406 364 (14 837) 79 945
Valuation of derivative financial instruments, of which: 16 093 19 470 - -
transferred to income statement 16 093 19 470 (3 377) 2 060
Valuation of derivative financial instruments, of which: 24 550 57 394 - -
transferred to income statement 11 580 50 640 (39 060) 39 368
transferred to other comprehensive income 12 970 6 754 - -
Provision for employee benefits 126 714 118 613 8 101 8 442
Impairment allowances on credit exposure 414 558 335 477 79 081 98 983
Adjustment to straight-line basis and effective interest rate valuation 211 011 218 000 (6 989) 26 493
Other temporary negative differences 28 991 32 001 (3 010) -
Temporary negative differences concerning Group’s entities, of which: 159 787 119 879 - -
transferred to income statement 159 211 120 261 38 950 4 218
transferred to other comprehensive income 576 (382) - -
Gross deferred income tax asset, of which: 1 373 231 1 307 198 - -
transferred to income statement 1 359 685 1 300 826 58 859 259 509
transferred to other comprehensive income 13 546 6 372 - -
Total deferred tax impact, of which: 514 558 560 038 - -
transferred to income statement 586 996 605 035 (18 039) 197 744
transferred to other comprehensive income (72 438) (44 997) - -
Deferred income tax asset (presented in statement of financial position) 543 922 582 802 - -
Deferred tax liability (presented in statement of financial position) 29 364 22 764 - -
Net deferred tax impact on the income statement - - (18 039) 197 744

The item temporary negative differences concerning Group’s entities in respect of deferred tax as at 31 December 2011, in accordance with IAS 12, includes the tax effect of unsettled tax losses in the amount of PLN 52 436 thousand, including the tax loss of KREDOBANK SA in the amount of PLN 49 979 thousand. In accordance with the tax jurisdiction binding on the territory of Ukraine, the right to settling of the unsettled tax losses is not in principle restricted by any expiry date. Yet, the ability to settle tax losses which arose before 2011 has been questioned by the Ukrainian tax authorities as a result of a tax inspection carried out. At the same time the Group’s analysis of binding tax and judicial decisions and external opinions obtained indicate that there are no effective grounds for questioning the ability to settle those losses. In consequence, KREDOBANK SA appealed to the tax authorities against this decision and is waiting for the decision. The Management Board of the Bank is of the opinion that the appeal will be effective.