Financial statements of JSW S.A. for 2012

31. Income tax

Income tax captured in net profit:

	2012	2011 restated
Current tax	250.9	495
– current tax liability	251	494.2
– adjustments posted in the current period relating to tax from the previous years	(0.1)	0.8
Deferred tax	24.2	86.5
Total income tax captured in net profit	275.1	581.5

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Income tax captured in other comprehensive income

	2012	2011
Current tax	-	-
Deferred tax	(43.6)	4.6
Total income tax captured in other comprehensive income	(43.6)	4.6

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Reconciliation of the theoretical tax calculated on gross profit and the statutory tax rate to the income tax liability shown in net profit:

	2012	2011 restated
Pre-tax profit	1,271.0	2,644.5
Tax calculated at the rate of 19%	241.5	502.4
Tax effect of income not classified as income according to tax regulations	(10.8)	(26.5)
Tax effect of costs which are not tax-deductible expenses according to tax regulations, including:	44.5	104.8
– employee share ownership plan	-	55.7
– profit-sharing payment for employees	24.7	30.4
– other	19.8	18.7
Adjustments posted in the current period relating to tax from the previous years	(0.1)	0.8
Income tax charges to the net profit	275.1	581.5

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Tax authorities may conduct inspection of accounting ledgers and tax settlements within 5 years after the end of the year in which tax returns were filed and charge the Company with additional tax liability, penalties and interest. The Company’s Management Board does not anticipate any significant tax liabilities to arise on this account.

In 2012, the effective tax rate was 21.64%, which resulted from recognition in comprehensive income of the profit-sharing payments to employees in the amount of PLN 130.0 million and dividends received in the amount of PLN 54.2 million.

In 2011, the effective tax rate was 21.99%, which resulted from recognition in comprehensive income of the costs of the employee share ownership program in the amount of PLN 293.0, profit-sharing payments to employees in the amount of PLN 160.0 million and income on account of interest on property tax in the amount of PLN 75.8 million.

In connection with the adoption of IFRS and new tax interpretations being issued, on 15 June 2012 the Company filed a request with the Director of the Katowice Treasury Chamber to issue an individual interpretation on recognition of profit-sharing payments to employees as tax-deductible expenses. On 18 September 2012, JSW S.A. received a negative individual tax interpretation, which on 4 December 2012 it challenged before the Voivodship Court of Administration in Gliwice.