| 12 | Income tax |
| 2015 RMB’000 |
2016 RMB’000 |
2017 RMB’000 |
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| -Current income tax |
82,753 | 1,828,868 | 1,714,955 | |||||||||
| -Deferred taxation |
844,024 | (32,046 | ) | (16,216 | ) | |||||||
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| Income tax expense |
926,777 | 1,796,822 | 1,698,739 | |||||||||
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A reconciliation of the expected income tax calculated at the applicable tax rate and total profit with the actual income tax is as follows:
| 2015 RMB’000 |
2016 RMB’000 |
2017 RMB’000 |
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| Profit before taxation |
4,237,188 | 7,778,295 | 7,852,898 | |||||||||
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| Expected PRC income tax at the statutory tax rate of 25% |
1,059,297 | 1,944,574 | 1,963,225 | |||||||||
| Tax effect of share of profit of investments accounted for using the equity method |
(140,509 | ) | (225,813 | ) | (307,547 | ) | ||||||
| Tax effect of other non-taxable income |
(19,178 | ) | (16,610 | ) | (8,733 | ) | ||||||
| Tax effect of non-deductible loss, expenses and costs |
5,486 | 23,578 | 7,268 | |||||||||
| True up for final settlement of enterprise income taxes in respect of previous year |
1,752 | 32,457 | (15,121 | ) | ||||||||
| Utilisation of previously unrecognized tax losses |
— | (58 | ) | (1,185 | ) | |||||||
| Tax losses for which no deferred income tax asset was recognized |
32,273 | 25,219 | 60,832 | |||||||||
| Temporary differences for which no deferred income tax asset was recognized in current year |
15 | 13,511 | — | |||||||||
| Utilisation of previously unrecognised temporary differences |
(12,359 | ) | (36 | ) | — | |||||||
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| Actual income tax |
926,777 | 1,796,822 | 1,698,739 | |||||||||
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The provision for PRC income tax is calculated at the rate of 25% (2016 and 2015: 25%) on the estimated taxable income of the year ended 31 December 2017 determined in accordance with relevant income tax rules and regulations. The Group did not carry out business overseas and therefore does not incur overseas income taxes.
| (i) | The analysis of deferred tax assets and deferred tax liabilities is as follows: |
| 2016 | 2017 | |||||||
| RMB’000 | RMB’000 | |||||||
| Deferred tax assets: |
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| – Deferred tax asset to be recovered after more than 12 months |
69,382 | 87,341 | ||||||
| – Deferred tax asset to be recovered within 12 months |
40,309 | 37,053 | ||||||
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| 109,691 | 124,394 | |||||||
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| Deferred tax liabilities: |
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| – Deferred tax liabilities to be recovered after more than 12 months |
(4,500 | ) | (3,574 | ) | ||||
| – Deferred tax liabilities to be recovered within 12 months |
(2,100 | ) | (1,513 | ) | ||||
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| (6,600 | ) | (5,087 | ) | |||||
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| Deferred tax assets - net |
103,091 | 119,307 | ||||||
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| (ii) | Movements in deferred tax assets and liabilities are as follows: |
| Balance at 1 January |
Recognized in income statement |
Balance at 31 December |
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| RMB’000 | RMB’000 | RMB’000 | ||||||||||
| Impairment for bad and doubtful debts, provision for inventories and payroll payables |
19,792 | 1,081 | 20,873 | |||||||||
| Provision for impairment losses in fixed assets, construction in progress |
137,908 | 35,868 | 173,776 | |||||||||
| Difference in depreciation |
(91,321 | ) | (7,755 | ) | (99,076 | ) | ||||||
| Capitalisation of borrowing costs |
(8,701 | ) | 2,101 | (6,600 | ) | |||||||
| Tax losses carried forward |
2,875 | (2,875 | ) | — | ||||||||
| Share option |
5,675 | 4,501 | 10,176 | |||||||||
| Others |
4,817 | (875 | ) | 3,942 | ||||||||
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| Deferred tax assets |
71,045 | 32,046 | 103,091 | |||||||||
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| Balance at 1 January |
Recognized in income statement |
Balance at 31 December |
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| RMB’000 | RMB’000 | RMB’000 | ||||||||||
| Impairment for bad and doubtful debts and provision for inventories |
20,873 | 3,634 | 24,507 | |||||||||
| Provision for impairment losses in fixed assets |
173,776 | 29,212 | 202,988 | |||||||||
| Difference in depreciation |
(99,076 | ) | (16,419 | ) | (115,495 | ) | ||||||
| Capitalisation of borrowing costs |
(6,600 | ) | 2,933 | (3,667 | ) | |||||||
| Share option |
10,176 | (6,360 | ) | 3,816 | ||||||||
| Others |
3,942 | 3,216 | 7,158 | |||||||||
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| Deferred tax assets |
103,091 | 16,216 | 119,307 | |||||||||
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The Group recognizes deferred tax assets only to the extent that it is probable that future taxable income will be available against which the assets can be utilised. Based on the level of historical taxable income and projections for future taxable income over the periods which the deferred tax assets will be utilised, management believes that it is probable the Group will realize the benefits of these temporary differences for which deferred tax assets have been recognized.
| (iii) | Deferred tax assets not recognized |
As at 31 December 2017, certain subsidiaries of the Company did not recognise the deferred tax assets in respect of the impairment losses on property, plant and equipment amounting to RMB 486,592 thousands and provision for inventories amounting to RMB 47,582 thousands (31 December 2016: RMB 456,623 thousands and RMB 46,190 thousands respectively), because it was not probable that the related tax benefit would be realized.
As at 31 December 2017, certain subsidiaries of the Company did not recognize the deferred tax assets of RMB 607,753 thousands (31 December 2016: RMB 432,634 thousands) in respect of unused tax losses carried forward for PRC income tax purpose because it was not probable that the related tax benefit would be realized.
Tax losses carried forward that are not recognised as deferred tax assets will expire in the following years:
| 2016 | 2017 | |||||||
| RMB’000 | RMB’000 | |||||||
| 2017 |
68,211 | — | ||||||
| 2018 |
63,733 | 63,733 | ||||||
| 2019 |
70,723 | 70,723 | ||||||
| 2020 |
140,591 | 140,591 | ||||||
| 2021 |
89,376 | 89,376 | ||||||
| 2022 |
— | 243,330 | ||||||
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| 432,634 | 607,753 | |||||||
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