BANK OF BAKU AUDITORS REPORT AND
FINANCIAL STATEMENTS AT
31 DECEMBER 2001
Note 21 - Taxation
2001
2000
Current tax expense
(36,698)
(288,762)
Proposed and paid
(192,330)
231,705
Income tax charge
(229,028)
(57,057)
Reconciliation between the expected and the actual taxation charge is as follows:
2001
2000
Income before taxation
646,987
340,152
Taxation rate
27%
27%
Expected tax charge
(174,686)
(91,841)
Adjustments for items which are not deductible from profits
or assessable for profits for taxation purposes:
Income exempt from taxation
2,511
-
Non-deductible expenses
(37,285)
(20,958)
Amounts not assessable for profit taxation purposes
(20,891)
55,732
Contribution to the Disability Fund
1,323
10
Income tax expense for the year
(229,028)
(57,057)
Effective since 1 January 2000 the profit tax rate in Azerbaijan is 27%. In Azerbaijan, there is no conclusive procedure for the final agreement of tax assessments. Tax returns are filed by 1 April of the following year and the tax authorities may examine records and/or revise assessments over an indefinite future period.
Deferred taxes
Differences between IAS and the Azerbaijani statutory taxation rules give rise to certain temporary differences between the carrying value of certain assets and liabilities for purposes of both financial reporting and profit tax. The tax effect of these differences is recorded using a tax rate of 27%.
The movement on the deferred tax account is as follows:
2001
2000
Deferred tax asset at 1 January 2001
303,717
72,012
Movement
in deferred taxation
(192,330)
231,705
Deferred tax asset at 31 December 2001 net
111,387
303,717
The deferred tax asset and liability represent the tax effect of temporary differences arising from the different treatment of certain items of income and expenses included in the financial statements compared to the local tax return, in accordance with the applicable tax law.
At 31 December 2001 and 2000, the temporary differences giving rise to the deferred tax assets and liabilities are as follows:
Cumulative temporary differences
Deferred tax assets/liabilities
2001
2000
2001
2000
Deferred tax asset
Provision for loan impairment net of statutory provision
