Notes to the financial statements
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| 10.1 Tax expense | | | |
| Note | 2017 | 2016 |
| Current tax | | 567.7 | 115.4 |
| Deferred tax | 10.3 | 208.2 | 448.8 |
| Total income tax charged to net profit or loss | 10.2 | 775.9 | 564.2 |
| Tax expense recognised in other comprehensive income (net), including: | | 136.5 | -26 |
| - cash flow hedging | 20 | 137.8 | -26.3 |
| - actuarial gain/(loss) relating to post-employment benefits | | -1.3 | 0.3 |
| | | |
| For the entities operating in Poland, the current and deferred portion of income tax was calculated at the rate of 19% of taxable income. | | | |
| In the case of Norwegian subsidiary LOTOS Exploration and Production Norge AS, the marginal tax rate is 78% of the tax base. LOTOS Exploration and Production Norge AS’s activities are subject to taxation under two parallel tax systems: the corporate income tax system (24% tax rate) and the petroleum tax system (additional tax rate of 54%). In 2018, the tax rates will be 23% under the corporate income tax regime and 55% under the petroleum tax regime, which affects the amount of deferred income tax recognised in the current reporting period. | | | |
| | | |
| In the case of Lithuanian subsidiaries (AB LOTOS Geonafta Group), the current and deferred portion of income tax was calculated at the rate of 15%. | | | |
| 10.2 Corporate income tax calculated at effective tax rate and reconciliation of pre-tax profit to taxable income | | | |
| 2017 | 2016 | |
| Profit before tax | 2447.7 | 1579.4 | |
| Income tax at 19% | 465.1 | 300.1 | |
| Permanent differences: | 43.8 | 15.1 | |
| - VAT expense | - | 7.5 | |
| - interest on past-due public charges | 1.3 | 1.2 | |
| - other permanent differences | 42.5 | 6.4 | |
| Tax effect of tax losses deducted in the period | - | -0.4 | |
| Tax effect of share in profit of equity-accounted entities | -0.6 | -0.6 | |
| Adjustments disclosed in current year related to tax for previous years | -0.5 | -1 | |
| Difference resulting from the application of tax rates other than 19%: | 267.9 | 252.9 | |
| - Norway | 266 | 249.1 | (1) |
| - Lithuania | 2.1 | 1.1 | |
| - Cyprus | -0.2 | 2.7 | |
| Other differences | 0.2 | -1.9 | |
| Income tax | 775.9 | 564.2 | |
| | | |
| (1) Including the tax effect of a PLN 80.9m reduction in deferred tax assets related to the tax investigation at LOTOS Exploration and Production Norge AS. | | | |
| 10.3 Deferred income tax | | | | |
| | Statement of financial position | | Change in |
| Note | December 31st 2017 | December 31st 2016 | |
| Deferred tax assets | | 415.4 | 596 | -180.6 |
| Deferred tax liabilities | | -277.7 | -57.4 | -220.3 |
| Net deferred tax assets/(liabilities) | 10.3.1 | 137.7 | 538.6 | -400.9 |
| Exchange differences on translating deferred tax of foreign operations | | | | 56.2 |
| Deferred tax disclosed under other comprehensive income/(loss), net | 10.1 | | | 136.5 |
| Deferred tax expense charged to net profit or loss | 10.1 | | | -208.2 |
| | | | |
| Taxable temporary differences are expected to expire in 2018–2083. | | | | |
| As at December 31st 2017, unrecognised tax assets on account of tax losses were PLN 0.2m (December 31st 2016: PLN 0.3m). | | | | |
| 10.3.1 Deferred tax assets and liabilities | | | | | | |
| | Note | December 31st 2016 | Deferred tax disclosed under other comprehensive income/(loss), net | Deferred tax disclosed under other comprehensive income/(loss), net | Exchange differences on translating deferred tax of foreign operations | December 31st 2017 |
| Deferred tax assets | | | | | | |
| Employee benefit obligations | | 56.7 | 1.6 | 1.3 | -0.5 | 59.1 |
| Inventory write-downs | | 0.5 | 0.4 | - | - | 0.9 |
| Impairment losses on property, plant and equipment and other intangible assets | | 344.5 | 6.1 | - | -48.9 | 301.7 |
| Negative fair value of derivative financial instruments | | 14.3 | -8.3 | - | - | 6 |
| Exchange differences on revaluation of foreign-currency items | | 2.6 | -2.6 | - | - | - |
| Impairment losses on receivables | | 16.4 | -8.5 | - | - | 7.9 |
| Finance lease liabilities | | 33.1 | -6.7 | - | - | 26.4 |
| Provisions for/assets related to decommissioning of oil and gas extraction facilities and site restoration | | 474.4 | 89 | - | -64 | 499.4 |
| Unrealised margin assets | | 5.6 | 1.1 | - | - | 6.7 |
| Tax losses carried forward | | 344.2 | -328.9 | - | -13 | 2.3 |
| Other provisions | | 11.1 | -1.9 | - | - | 9.2 |
| Cash flow hedge accounting | | 190.7 | - | -137.8 | - | 52.9 |
| Other | | 18.2 | -3.6 | - | 0.6 | 15.2 |
| | 1512.3 | -262.3 | -136.5 | -125.8 | 987.7 |
| Deferred tax liabilities | | | | | | |
| Difference between current tax base and carrying amount of property, plant and equipment and other intangible assets | | 767.2 | 7.9 | - | -61.1 | 714 |
| Difference between current tax value and carrying amount of settlements under joint operations (Norwegian fields) | | 53.9 | -33.6 | - | -4.8 | 15.5 |
| Positive fair value of derivative financial instruments | | 11.9 | -3.5 | - | - | 8.4 |
| Exchange differences on revaluation of foreign-currency items | | - | 2.3 | - | - | 2.3 |
| Tax liabilities associated with acquired exploration and production licences in Lithuania | | 17.9 | -1.5 | - | -1 | 15.4 |
| Accrued interest | | 84.3 | -37.7 | - | - | 46.6 |
| Other | | 38.5 | 12 | - | -2.7 | 47.8 |
| | 973.7 | -54.1 | - | -69.6 | 850 |
| Net deferred tax assets/(liabilities) | 10.3 | 538.6 | -208.2 | -136.5 | -56.2 | 137.7 |
