Income tax is calculated on the profit for the year as adjusted for income tax for the Bank purposes as follows:
-- up to MUR 1.5bn - 5%
-- over to MUR 1.5bn - 15%

However, taxable income above MUR 1.5bn may be subject to graduated tax rate provided as per table below:
-- the taxable income of current year exceeds MUR 1.5bn;
-- the taxable income of base year exceeds MUR 1.5bn;
-- the current year’s taxable income exceeds that of its base year; and
-- the bank satisfies prescribed conditions.

As per Income tax Act, ‘base year’ refer to taxable profit of year of assessment 2017/18, that is, financial year ended 30 June 2017. The bank has complied with the
prescribed conditions for the year under review and has applied the graduated tax rate.

The Bank is being subject to tax review for the year of assessment 2014 and 2015 and the tax assessment is still ongoing with the regulators.

The income tax rate applicable for 2019 and 2018 was 15%.

Up to 30 June 2019, the Bank, was entitled to a tax credit equivalent to 80% of Mauritius tax payable in respect of its foreign source income (Segment B) thus reducing its maximum effective tax rate on segment B to 3%.

Income tax of the subsidaries is calculated at the rate of 15% (2019 and 2018: 15%)

Corporate Social Responsibility fund

The Corporate Social Responsibility (‘CSR’) was legislated by the Government of Mauritius in July 2009. In terms of the legislation, the Bank is required to allocate 2% of its chargeable income under Segment A (‘Resident’) of the preceding financial year to Government-approved CSR projects. Where the amount paid out of the CSR fund is less than the amount provided under the fund, the difference shall be remitted to the Mauritius Revenue Authority at the time of submission of the income tax return on the year under review. 

Special levy

Special levy on banks was amended under the Finance Act 2018 and 2019 and is now governed under the VAT Act. Every bank shall in every year be liable to pay
the taxation authorities a special levy calculated at 5.5% where leviable income is less than or equal to MUR 1.2bn or at 4.5% where leviable income is greater than
MUR 1.2bn. Leviable income applies to banking transactions of Segment A and is defined as the sum of net interest income and other income before deduction of
expenses as per VAT act.

As from 30 June 2019, special levy has been reclassified under other operating expenses. (Note 10).

Up to 30 June 2018, special levy was calculated at (a) 10% on chargeable income for Segment A (‘Resident’); and (b) 3.4% of its book profit and 1% of its operating income
for Segment B, derived during the previous year. Operating income means the sum of net interest income and other income before deductiing non-interest expense.

Total tax paid (including levy, APS ,CSR and tax assessment review) during the year ended 30 June 2020 was MUR 328.6m (2019: MUR 96.3m, 2018: MUR 230.5m).

The components of income tax expense for the years ended 30 June 2020, 2019 and 2018 are as follows:

A reconciliation between the tax expense and the accounting profit multiplied by the tax rate for the years ended 30 June 2020, 2019 and 2018 is as follows:

The applicable tax rate used for the above is on the basis that the majority of taxable income is being taxed at income tax rate of 5%.

Prior to 30 June 2020, deferred tax was calculated on all temporary differences under the liability method at the rate of 17% for Segment A and 3% for Segment B. Following the enactment of the new tax rates in August 2018, deferred tax is calculated at the rate of 7% for Segment A and 5% for Segment B.