Maxis Berhad | Annual Report 2012

Maxis Berhad // Annual Report 2012 130 12 TAX EXPENSES Group Company Note 2012 2011 2012 2011 RM’000 RM’000 RM’000 RM’000 Current tax (Malaysian): - current year 787,231 707,157 1,570 830 - over accrual in prior years (68,059) (139,707) (14) (3) 719,172 567,450 1,556 827 Deferred tax: - origination and reversal of temporary differences (79,645) (10,657) – – - recognition and reversal of prior years temporary differences 76,514 (83,556) – – 23 (3,131) (94,213) – – Tax expenses 716,041 473,237 1,556 827 The Malaysian income tax is calculated at the statutory tax rate of 25% (2011: 25%) on the estimated chargeable profit for the financial year. Taxes in foreign jurisdictions are calculated at the rates prevailing in the respective jurisdictions. The explanation of the relationship between the tax expenses and profit before tax is as follows: Group Company 2012 2011 2012 2011 % % % % Numerical reconciliation between the Malaysian tax rate and average effective tax rate Malaysian tax rate 25 25 25 25 Tax effects of: - expenses not deductible for tax purposes 4 2 3 3 - income not subject to tax – – (28) (28) - effect of tax incentive (1) (4) – – - recognition and reversal of prior years temporary differences 3 (3) – – - over accrual in prior years (3) (4) – – Average effective tax rate 28 16 – – In the prior year, one of the subsidiaries of the Group was granted Investment Allowance under the Last Mile Broadband Tax Incentive by the Ministry of Finance. This has resulted in the recognition of tax credits amounting to RM352,347,000 in respect of prior financial years. During the financial year, the Group recognised additional tax credits of RM31,378,000 arising from the tax incentive. The gazetted Finance Act 2007 introduced a single-tier company income tax system with effect from year of assessment 2008. Under the single-tier system, companies are not required to have tax credits under Section 108 of the Income Tax Act 1967 for dividend payment purposes. Dividends paid under this system are tax-exempt in the hands of the shareholder. The Section 108 tax credit as at 31 December 2007 will be available to the companies until such time that the credit is fully utilised or upon expiry of the six years transitional period on 31 December 2013, whichever is earlier, unless the company opts to disregard the Section 108 credits to pay single-tier dividends under the special transitional provisions of the Finance Act 2007. Subject to agreement by the tax authorities, a subsidiary of the Group has sufficient Section 108 tax credits to frank approximately RM7,239,000 (2011: RM7,239,000) of its retained earnings if paid out as dividends. NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2012 Continued