2012 Annual Report - ZTE

ANNUAL REPORT 2012Notes to Financial Statements(Prepared under Hong Kong Financial Reporting Standards)31 December 201240. DEFERRED TAX (continued)The tax losses that have not been recognised as deferred tax assets will expire as follows:2012 2011RMB’000 RMB’0002012 — 9,3752013 2,188 2,0912014 20,328 19,429After 2014 7,904,609 1,753,8547,927,125 1,784,749Deferred tax assets have not been recognised in respect of these losses as they have arisen in subsidiariesthat have been loss-making for some time and it is not considered probable that taxable profits will beavailable against which the tax losses can be utilised.In accordance with the Enterprise Income Tax Law of the People’s Republic of China and its ImplementationRegulations, effective from 1 January 2008, a 10% withholding income tax is payable by a foreign investorin respect of dividend income derived from the profit generated by its Mainland China subsidiaries after 1January 2008. A lower withholding tax rate may be applied if there is a tax treaty between Mainland Chinaand the jurisdiction of the foreign investors. Accordingly, ZTE HK, a subsidiary of the Group deemed aforeign investor incorporated in Hong Kong, may recognise a deferred tax liability in respect of the net profitgenerated by its Mainland China subsidiaries after 1 January 2008 and attributable to the foreign investor,regardless of whether such Mainland China subsidiaries had declared any distribution of such profit as atthe end of the reporting period.As at 31 December 2012, the Group had not recognised any deferred tax liability in respect of tax obligationsarising from the future distribution of undistributed profits of such subsidiaries, as the Group was exercisingcontrol over the dividend policy of such subsidiaries and was in the opinion that it is not probable suchsubsidiaries will distribute the profits generated during the relevant period in the foreseeable future. As at31 December 2012, the total amount of temporary differences associated with investments in subsidiariesin Mainland China for which deferred tax liabilities have not been recognised totalled approximatelyRMB104,975,000 (2011: RMB695,306,000).403