BANK OF BAKU AUDITORS REPORT AND
FINANCIAL STATEMENTS AT
31 DECEMBER 1999
Note 18 -
Taxation
1999
1998
Current tax expense
117,674
361,139
Movement in deferred taxes
(13,762)
(58,250)
Income tax charge
103,912
302,889
According to a Presidential Decree dated 28 December 1998,
the profit tax rate was reduced from 32% to 30% effective from 1 January 1999.
According to another Presidential Decree dated 27 October 1999, the rate was
further reduced to 27% effective from 1 January 2000. For the year ended 31
December 1999, the Bank accrued profit taxes at a rate of 30%, computed in
accordance with Azeri tax and accounting legislation. In addition, 1% on
statutory profits is paid to the Disability Fund.
Reconciliation between the expected and the actual taxation
charge is as follows:
1999
1998
Profit before taxation
617,479
867,714
Taxation rate
27%
32%
Expected taxation charge
166,719
277,668
Adjustments:
Contribution to the Disability Fund
4,133
11,051
Income from treasury bills which is exempt from taxation
-
(3,488)
Non-deductible expenses net of amounts not assessable for profit
taxation purposes
(66,940)
17,658
Income tax charge for the year
103,912
302,889
In Azerbaijan, there is no conclusive procedure for the final
agreement of tax assessments. Tax returns are filed by 15March 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 Azeri statutory taxation
rules give rise to certain temporary differences between the carrying value of
certain assets and liabilities for financial reporting purposes and for profits
tax purposes. The tax effect of these differences is recorded using a tax rate
of 27%.
Movements on the deferred tax account are as follows:
1999
1998
Deferred tax asset at 1 January
58,250
-
Movement in deferred taxation
13,762
58,250
Deferred tax asset at 31 December, net
72,012
58,250
The deferred tax asset represents 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 1999 and 1998, the temporary differences
giving rise to the deferred tax assets and liabilities are as follows:
Cumulative temporary differences
Deferred tax assets/liabilities
1999
1998
1999
1998
Deferred tax asset
Provision for impairment on loans to banks and customers net of
statutory provision
