Notes to the Company annual financial statements | Note 20

20. Income tax
  Accounting policy
 

The income tax expense or credit for the period is the tax payable on the current period's taxable income based on the applicable income tax rate adjusted by changes in deferred tax assets and liabilities attributable to temporary differences and to unused tax losses.

Current and deferred taxes are recognised as income or an expense and included in profit or loss for the period, except to the extent that the tax arises from:

  • a transaction or event which is recognised, in the same or different period, to other comprehensive income; or
  • a business combination.

Critical accounting estimates and assumptions

Deferred tax assets are recognised to the extent that it is probable that taxable income will be available in the future against which these can be utilised. Future taxable income is estimated based on business plans which include estimates and assumptions regarding economic growth, interest rates, inflation and competitive forces. To the extent that future cash flows and taxable income differ significantly from estimates, the ability of the Company to realise net deferred tax assets recorded at the end of the reporting period could be impacted.

The Directors resolved at the end of the prior and current financial year not to recognise the deferred tax asset.

No income tax charge/(credit) was recognised in the current or prior year.

2022 
R'000 		 2021 
R'000 
Reconciliation between accounting profit/(loss) and tax charge/(credit)    
Accounting profit/(loss) 228 057  (138 771)
Tax at the applicable tax rate of 28% (2021: 28%) 63 856  (38 856)
Tax effect of adjustments on taxable income     
Dividends received not taxable  (28 131) (3 360)
Fair value adjustment on derivative liability  (12 930) (2 617)
Gain on receipt of contingent consideration  (12 831) — 
Reversal of impairment losses on financial assets and financial guarantees  (11 173) (21 977)
Loss on disposal of subsidiary and joint venture not deductible  —  14 436 
Expenditure not deductible for tax purposes  546  9 964 
Tax effect of losses not recognised1 663  42 410 
   —  — 
1 The prior year included material ECL movements on loans, as well as expenses incurred in relation to the sale of Blue Label Mexico S.A. de C.V.

No provision has been made for current tax as the Company has no taxable income. The estimated tax loss available for set off against future taxable income is R177 523 529 (2021: R175 155 214). In the current year, a new corporate tax rate of 27% was enacted (2021: 28%) which becomes effective for the financial year ending 31 May 2023. This change will have no impact on the Company.