TBC Bank Group PLC ("TBC PLC") announces that the recent amendment to the Georgian Tax Code in relation to corporate income tax will have an immediate impact on its deferred tax liability. The amendment, which comes into force on 12 June 2018, postpones tax relief for re-invested profit from 1 January 2019 to 1 January 2023 for financial institutions. As a result, TBC PLC will reverse the one-off deferred tax gain recognized in 2016. This reversal will result in an estimated GEL 14-19 million expense on the profit and loss statement and an estimated GEL 5 million reduction in equity in Q2 2018. Excluding this effect, TBC PLC expects its effective tax rate to be in the range of 9-11% in 2018.
Bank of Georgia Group PLC ("the Group") announces that an amendment to the current corporate taxation model applicable to financial institutions, including banks and insurance businesses (“financial institutions”), has become effective from 12 June 2018. The change implies a zero corporate tax rate on retained earnings and a 15% corporate tax rate on distributed earnings starting from 1 January 2023, instead of 1 January 2019 as previously enacted in 2016. The current model implies a 15% tax rate charged to financial institutions profit before tax, regardless of the retention or distribution status.
The change will have an immediate impact on deferred tax asset and deferred tax liability balances (“deferred taxes”) attributable to previously recognised temporary differences arising from prior periods. The re-measurement of deferred taxes is estimated to result in a GEL 40-45 million oneoff deferred income tax expense that will be recognised in the Group’s 2nd quarter and half-year 2018 results. This impact is a reversal of the one-off deferred tax gain recognised by the Group in 2016. The Group continues to expect its effective tax rate, excluding the one-off deferred tax impact, to be in the range of 9-11% in 2018.
