Notes to the Group annual financial statements | Note 7.2

7. TAXATION
7.2 Deferred taxation
 

Deferred taxation is provided using the liability method for all temporary differences arising between the tax bases of assets and liabilities and their carrying values for financial reporting purposes.

However, if the deferred income tax arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss, it is not accounted for. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantively enacted by year-end and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled.

Critical accounting estimates and assumptions

Deferred income tax assets are recognised to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised. Deferred income tax is provided on temporary differences arising on investments in subsidiaries and associates, except where the timing of the reversal of the temporary difference is controlled by the Group and it is probable that the temporary difference will not reverse in the foreseeable future.

Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and when the deferred income tax assets and liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity or different taxable entities where there is an intention to settle the balances on a net basis.

      Purchase                   
      price allocations           Unrealised       
      and fair           foreign       
   Capital  value        Prepay-  exchange       
   allowances  gains*  Provisions  Tax losses  ments  differences  Other**  Total 
   R'000  R'000  R'000  R'000  R'000  R'000  R'000  R'000 
AT 31 MAY 2021  173 088  97 423  (52 072) (101 318) 2 776  —  (399) 119 498 
Charged/(credited) to the income statement  181 138  (27 193) (48 598) (31 051) 6 032  —  21 367  101 695 
Charged to other comprehensive income  —  —  —  —  —  —  3 726  3 726 
Tax rate change  (12 654) (2 494) 2 956  4 561  (185) —  (446) (8 262)
AT 31 MAY 2022  341 572  67 736  (97 714) (127 808) 8 623  —  24 248  216 657 
Charged/(credited) to the                         
income statement  (13 247) (11 312) (42 485) 44 391  (4 182) 10 195  (40 598) (57 238)
Acquisition of subsidiary  —  1 460  —  (4 668) —  —  —  (3 208)
Charged to other                         
comprehensive income  —  —  —  —  —  —  (1 879) (1 879)
AT 31 MAY 2023  328 325  57 884  (140 199) (88 085) 4 441  10 195  (18 229) 154 332 
* These relate to intangible assets included in note 4.2.
** Other deferred tax includes R50 million deferred taxation asset in respect of taxes paid on the gross profit that arose from the Airtime sale and repurchase transaction which formed part of the Cell C Recapitalisation Transaction. For SA income tax purposes this is included in gross income when the sale of the airtime took place. For IFRS purposes, the gross profit on the airtime will only be recognised in profit or loss when the airtime repurchased, is sold to customers. Refer to note 2.1.1. This is offset by a R26.2 million deferred tax liability that arose as a result of contract revenue recognised in advance.
   2023 
R'000 		 2022 
R'000 
Deferred tax asset comprises:       
Capital allowances  (243) (183)
Provisions  (140 199) (97 714)
Tax losses  (88 085) (127 808)
Other  (44 464) (6 402)
Total deferred tax asset  (272 991) (232 107)
Deferred tax liability comprises:       
Capital allowances  328 567  341 755 
Purchase price allocations and fair value gains  57 884  67 736 
Prepayments  4 441  8 623 
Unrealised foreign exchange differences  10 195  — 
Other  26 236  30 650 
Total deferred tax liability  427 323  448 764 
The analysis of deferred tax assets and deferred tax liabilities is as follows:       
Deferred tax assets       
Deferred tax assets to be recovered after more than 12 months  (14 641) (6 221)
Deferred tax assets to be recovered within 12 months  (150 167) (77 031)
Net deferred tax asset  (164 808) (83 252)
Deferred tax liabilities       
Deferred tax liabilities to be recovered after more than 12 months  252 082  230 146 
Deferred tax liabilities to be recovered within 12 months  67 058  69 763 
Net deferred tax liability  319 140  299 909 

Where deferred tax assets have been recognised in respect of entities which have incurred losses in the current or prior years, a formal process of assessment of the future profitability of the entity has been performed based on detailed budgets and cash flow forecasts. As a result, management believes that the current tax losses will be utilised within one to five years.

Deferred tax assets are recognised for tax losses carried forward to the extent that the realisation of the related tax benefit through future taxable profits is probable. The Group did not recognise deferred income tax assets of R48.8 million (2022: R47.9 million) in respect of losses amounting to R180.9 million (2022: R177.5 million) that can be carried forward against future taxable income.

There is no withholding tax that would be payable on any dividends received from the Group's equity-accounted associates and joint ventures and therefore no deferred tax has been raised in this regard.