27. Income Taxes

Income tax expense comprises the following:

In mln of Russian Roubles 2011 2010
Current tax 75,734 50,622
Deferred tax 3,331 4,062
Less: Deferred tax recognised in other comprehensive income 674 (6,197)
Income tax expense for the year 79,739 48,487

The income tax rate applicable to the major part of the Group’s income for 2011 is 20% (2010: 20%).

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

In mln of Russian Roubles 2011 2010
IFRS profit before tax 395,681 230,135
Theoretical tax charge at statutory rate 79,136 46,027
Tax effect on income on government securities taxed at different rates (3,259) (2,367)
Tax effect of items which are not deductible or assessable for taxation purposes:    
- Non-deductible staff costs 2,578 790
- Unrecognised tax assets of subsidiaries 609 1,300
- Non-deductible losses on cessions 568 1,184
- Other non-temporary differences 107 1,553
Income tax expense for the year 79,739 48,487

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% (2010: 20%), except for income on state, municipal and certain other types of securities that is taxed at 15%, 9% and 0% (2010: 15%, 9% and 0%) and on dividends that is taxed at a standard rate of 9% (2010: 9%).

In mln of Russian Roubles 31 December 2010 Business combinations Credited/ (charged) to profit or loss Recognised in other comprehensive income 31 December 2011
Tax effect of deductible temporary differences
Deferred fees and commissions income 5,751 - (649) - 5,102
Accrued employee benefit costs 40 - 60 - 100
Low value items write-off 1,330 - 532 - 1,862
Accrued interest on loans 6,638 - (1,404) - 5,234
Fair valuation of trading securities and securities designated at fair value through profit or loss 4,163   5,160   9,323
Other - - (8,575) - (8,575)
Gross deferred tax asset 17,922 - (4,876) - 13,046
Tax effect of taxable temporary differences
Loan impairment provision (2,897) - (1,598) - (4,495)
Premises and equipment (17,850) - 2,773 (7,273) (22,350)
Fair valuation of investment securities available for sale (5,521)   10 7,947 2,436
Other (57) (1,650) (314) - (2,021)
Gross deferred tax liability (26,325) (1,650) 871 674 (26,430)
Total net deferred tax asset/ (liability) (8,403) (1,650) (4,005) 674 (13,384)
In mln of Russian Roubles 31 декабря 2009 года 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 investment securities available for sale (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 trading securities and securities designated at fair value through profit or loss (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)

As at 31 December 2011, the temporary difference associated with investments in subsidiaries in the statement of financial position of the parent company amounted to RR 20 509 mln (2010: RR 27 037 mln). In accordance with IAS 12 Income Taxes respective deferred tax asset of RR 4 102 mln (2010: respective deferred tax asset of RR 5 407 mln) was not recognised in the financial statements.

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