| 12 | TAXATION |
| (a) | Taxation in the consolidated statements of comprehensive income represents: |
| 2017 | 2016 | 2015 | ||||||||||||||
| Note | Million | Million | Million | |||||||||||||
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Current tax |
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Provision for Hong Kong profits tax on the estimated assessable profits for the year |
(i | ) | 260 | 193 | 164 | |||||||||||
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Provision for the PRC enterprise income tax on the estimated taxable profits for the year |
(ii | ) | 36,945 | 39,709 | 39,588 | |||||||||||
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| 37,205 | 39,902 | 39,752 | ||||||||||||||
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Deferred tax |
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Origination and reversal of temporary differences (note 20) |
(iii | ) | (3,482 | ) | (4,279 | ) | (4,673 | ) | ||||||||
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| 33,723 | 35,623 | 35,079 | ||||||||||||||
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Note:
| (i) | The provision for Hong Kong profits tax is calculated at 16.5% (2016: 16.5%; 2015: 16.5%) of the estimated assessable profits for the year ended December 31, 2017. |
| (ii) | The provision for the PRC enterprise income tax is based on the statutory tax rate of 25% (2016: 25%; 2015: 25%) on the estimated taxable profits determined in accordance with the relevant income tax rules and regulations of the PRC for the year ended December 31, 2017. Certain subsidiaries of the Company enjoy the preferential tax rate of 15% (2016: 15%; 2015: 15%). |
| (iii) | Deferred taxes of the Group are recognized based on tax rates that are expected to apply to the periods when the temporary differences are realized or settled. |
| (iv) | On April 22, 2009, SAT issued the “Notice regarding Matters on Determination of Tax Residence Status of Chinese-controlled Offshore Incorporated Enterprises under Rules of Effective Management” (“2009 Notice”). The Company is qualified as a PRC offshore-registered resident enterprise for purposes of the 2009 Notice. In accordance with the 2009 Notice and the PRC enterprise income tax law, the dividend income of the Company from its subsidiaries in the PRC is exempted from PRC enterprise income tax. |
| (b) | Reconciliation between income tax expense and accounting profit at applicable tax rates: |
| 2017 | 2016 | 2015 | ||||||||||
| Million | Million | Million | ||||||||||
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Profit before taxation |
148,137 | 144,462 | 143,734 | |||||||||
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Notional tax on profit before tax, calculated at the PRC’s statutory tax rate of 25% (Note) |
37,034 | 36,116 | 35,934 | |||||||||
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Tax effect of non-taxable items |
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- Share of profit of investments accounted for using the equity method |
(2,487 | ) | (2,159 | ) | (2,023 | ) | ||||||
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- Interest income |
(41 | ) | (22 | ) | (31 | ) | ||||||
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Tax effect of non-deductible expenses on the PRC operations |
772 | 798 | 986 | |||||||||
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Tax effect of non-deductible expenses on Hong Kong operations |
70 | 76 | 68 | |||||||||
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Rate differential of certain PRC operations (note 12(a)(ii)) |
(2,317 | ) | (1,580 | ) | (1,576 | ) | ||||||
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Rate differential on Hong Kong operations (note 12(a)(i)) |
(182 | ) | (133 | ) | (122 | ) | ||||||
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Tax effect of deductible temporary difference for which no deferred tax asset was recognized |
154 | 1,562 | 98 | |||||||||
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Tax effect of deductible tax loss for which no deferred tax asset was recognized |
818 | 1,349 | 356 | |||||||||
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Tax effect on the eliminated unrealized profits related to the transfer of Tower Assets |
— | — | 1,547 | |||||||||
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Others |
(98 | ) | (384 | ) | (158 | ) | ||||||
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Taxation |
33,723 | 35,623 | 35,079 | |||||||||
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Note: The PRC’s statutory tax rate is adopted as the majority of the Group’s operations are subject to this rate.
| (c) | The tax credited/(charged) relating to components of other comprehensive income is as follows: |
| 2017 | 2016 | 2015 | ||||||||||||||||||||||||||||||||||
| Before tax |
Tax credited |
After tax |
Before tax |
Tax charged |
After tax |
Before tax |
Tax charged |
After tax |
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| Million | Million | Million | Million | Million | Million | Million | Million | Million | ||||||||||||||||||||||||||||
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Change in value of available-for-sale financial assets |
(7 | ) | 2 | (5 | ) | 32 | (8 | ) | 24 | — | — | — | ||||||||||||||||||||||||
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Currency translation differences |
(735 | ) | — | (735 | ) | 774 | — | 774 | 603 | — | 603 | |||||||||||||||||||||||||
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Share of other comprehensive (loss)/income of investments accounted for using the equity method |
(1,038 | ) | — | (1,038 | ) | (1,059 | ) | — | (1,059 | ) | 901 | — | 901 | |||||||||||||||||||||||
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Other comprehensive (loss)/income |
(1,780 | ) | 2 | (1,778 | ) | (253 | ) | (8 | ) | (261 | ) | 1,504 | — | 1,504 | ||||||||||||||||||||||
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Current tax |
— | — | — | |||||||||||||||||||||||||||||||||
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Deferred tax |
2 | (8 | ) | — | ||||||||||||||||||||||||||||||||
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| 2 | (8 | ) | — | |||||||||||||||||||||||||||||||||
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