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.

    Capital 
allowances 
R’000 		 Purchase 
price 
allocations 
and fair 
value 
gains*
R’000 		 Provisions 
R’000 		 Tax 
losses 
R’000 		 Prepayments 
R’000 		 Unrealised 
foreign 
exchange 
differences 
R’000 		 Other**
R’000   		 Total 
R’000 
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)
Charged to other comprehensive income    —  1 460  —  (4 668) —  —  —    (3 208)
Tax rate change    —  —  —  —  —  —  (1 879)   (1 879)
At 31 May 2023    328 325  57 884  (140 199) (88 085) 4 441  10 195  (18 229)   154 332 
Charged/(credited) to the income statement    (48 174) (8 206) 106 204  (14 749) 625  (1 729) 27 951    61 922 
Charged to other comprehensive income    —  —  —  —  —  —  (3 487)   (3 487)
At 31 May 2024    280 151  49 678  (33 995)   (102 834) 5 066  8 466  6 235    212 767 
* These relate to intangible assets included in note 4.2.
** Other deferred tax includes R31.4 million (2023: 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 South African income tax purposes this is included in gross income when the sale of the airtime takes place. For accounting purposes, the gross profit on the airtime will only be recognised in profit or loss when the airtime repurchased, is sold to customers. This is offset by a R35.4 million (2023: R26.2 million) deferred tax liability that arose as a result of contract revenue recognised in advance.

    2024 
R’000 		   2023 
R’000 
Deferred tax asset comprises:         
Capital allowances    (339)   (243)
Provisions    (72 443)   (140 199)
Tax losses    (102 834)   (88 085)
Other    (29 137)   (44 464)
Total deferred tax asset    (204 753)   (272 991)
Deferred tax liability comprises:         
Capital allowances    280 489    328 567 
Purchase price allocations and fair value gains    49 678    57 884 
Provisions    38 448    — 
Prepayments    5 066    4 441 
Unrealised foreign exchange differences    8 466    10 195 
Other    35 373    26 236 
Total deferred tax liability    417 520    427 323 
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    (32 354)   (14 641)
Deferred tax assets to be recovered within 12 months    (111 523)   (150 167)
Net deferred tax asset    (143 877)   (164 808)
Deferred tax liabilities         
Deferred tax liabilities to be recovered after more than 12 months    106 599    252 082 
Deferred tax liabilities to be recovered within 12 months    250 045    67 058 
Net deferred tax liability    356 644    319 140 

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 R50 million (2023: R48.8 million) in respect of losses amounting to R181.4 million (2023: R180.9 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.