12. Income Tax
12a. Income tax reported in income statement
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| 01.01.2016 – 31.12.2016 | 01.01.2015 – 31.12.2015 | |
|---|---|---|
| Current tax | (253 384) | (216 307) |
| Current year | (253 384) | (217 740) |
| Adjustment of previous years | 0 | 1 433 |
| Deferred tax | 1 380 | 76 699 |
| Appearance and reversal of temporary differences | 4 168 | 76 510 |
| Appearance and utilisation of tax loss | (2 788) | 189 |
| Adjustment resulted from Article 38a of CIT | 0 | (1 374) |
| Total income tax reported in income statement | (252 004) | (140 982) |
12b. Effective tax rate
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| 01.01.2016 – 31.12.2016 | 01.01.2015 – 31.12.2015 | |
|---|---|---|
| Gross profit / (loss) | 953 256 | 687 507 |
| Statutory tax rate | 19% | 19% |
| Income tax according to obligatory income tax rate of 19% | (181 119) | (130 626) |
| Impact of permanent differences on tax charges: | (70 509) | (15 802) |
| – Non-taxable income | 1 392 | 1 194 |
| Dividend income | 331 | 430 |
| Release of other provisions | 1 061 | 477 |
| Other | 0 | 287 |
| – Cost which is not a tax cost | (71 901) | (16 996) |
| Loss on sale of receivables | (12 459) | (1 625) |
| PFRON fee | (913) | (951) |
| Prudential fee for Banking Guarantee Fund | (5 476) | (3 290) |
| Banking tax | (33 073) | 0 |
| Receivables written off | (3 885) | (877) |
| Costs of litigations | (6 641) | (4 085) |
| Write-off for disputed receivables from tax settlements | (5 117) | 0 |
| Depreciation and insurance costs of cars (in excess of EUR 20,000) | (1 307) | (1 334) |
| Cost of provisions for factoring receivables | (2 616) | (2 121) |
| Other | (414) | (2 713) |
| Amendments in declaration CIT 8 for previous years | 0 | 1 433 |
| Adjustment resulted from Article 38a of CIT | (376) | (1 374) |
| The amount of deductible temporary differences for which deferred income tax asset has not been recognized in the balance sheet | 0 | 5 387 |
| Total income tax reported in income statement | (252 004) | (140 982) |
12c. Deferred tax reported in equity
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| 31.12.2016 | 31.12.2015 | |
|---|---|---|
| Valuation of available for sale securities | 8 985 | (47 370) |
| Valuation of cash flow hedging instruments | 34 319 | 42 732 |
| Actuarial gains (losses) | 81 | 356 |
| Deferred tax reported directly in equity | 43 385 | (4 282) |
Changes in deferred tax recognized directly in equity are presented in Note (35b).
On 1 January 2011 the Bank created with a subsidiary – Millennium Service Sp. z o.o., Tax Capital Group (TCG). TCG is a vehicle, described in and subject to the provisions of the Polish Corporate Income Tax law. The essence of TCG is to concentrate two or more related entities as one taxpayer for the corporate income tax purposes. The creation of TCG does not lead to the creation of a new entity, and consolidation is done only at the level of corporate income tax settlements.
TCG formation is aimed at increasing the efficiency of tax management within the Group and reducing risks resulting from the corporate income tax settlements through centralization of expertise of tax calculations and payments obligations to one chosen entity of the Group (the Bank).
Bank Millennium S.A. tax control procedure
As a result of the tax inspection carried out in the Bank in 2011, the Tax Inspection Office questioned the correctness of income tax calculation for 2005, having its consequences for subsequent tax years. The Bank fully supported the correctness of its tax calculation, nonetheless several procedural steps have been undertaken, such as: (i) adjusting tax settlements for the period 2005-2010; (ii) paying (in November 2011) the tax arrears of PLN 69 million (to avoid the risk of penalty interest burden); and (iii) raising a claim against the Tax Office for the above mentioned amount.
On 26 January 2016 the Supreme Administrative Court issued six judgments on the cassations proceedings filed by the Bank regarding the determination of the loss or income tax in the corporate income tax. In five judgments the Court dismissed the Bank’s claims. In one, regarding 2006 tax year, it annulled the judgments of Regional Administrative Court (RAC) and passed the case back to RAC for reconsideration. On the 10th of May 2016 RAC issued the judgement in which it cancelled the decision of the Tax Chamber and preceding it decision of the II Mazovian Tax Office and dismissed the case regarding CIT for 2006 tax year. The written justification of the verdict mentioned above was received on 19 July 2016.