MOL GROUP Annual Report

28 Financial (income) / expense30 Income taxes2010 2009HUF millionHUF millionInterest received 7,437 10,534Foreign exchange gain on borrowings - 4,679Net gain on derivative transactions 7,710 -Net gain on sales of investments 313 -Dividends received 714 430Other financial income, net 9,698 745Total financial income 25,872 16,388Foreign exchange loss on borrowings 42,231 -Interest on borrowings 29,696 23,290Interest on provisions 16,219 12,633Fair valuation loss on conversion option (see Note 17) 5,381 19,698Interest on mining fee reimbursement (see Note 27) 4,840 -Net loss on derivative transactions - 7,798Other financial expensis, net 6,562 13,312Total financial expenses 104,929 76,731Total financial expense, net 79,057 60,343Net gain on derivative transactions in 2010 contain HUF 10,149 million gain on the fair valuation of the call option held by theGroup on the MOL shares representing 7% of its share capital owned by CEZ (see Note 17). In 2009 fair valuation differenceon CEZ option was HUF 3,745 million loss (see Note 17).29 Components of other comprehensive incomeTotal applicable income taxes reported in the consolidated financial statements for the years ended 31 December 2010 and2009 include the following components:2010 2009HUF millionHUF millionCurrent corporate income taxes 31,780 52,182Local trade tax and innovation fee 12,992 12,089Deferred corporate income taxes 18,525 15,860Total income tax expense/(benefit) 63,297 80,131The Group’s current income taxes are determined on the basis of taxable statutory profit of the individual companies ofthe Group. The applicable corporate income tax rate on the taxable income of the companies of the Group operating inHungary was 19% in 2010 and 16% in 2009. In addition, a solidarity surplus tax of 4% has been applicable for 2009 (cancelledfrom 1 January 2010 with the simultaneous increase of the corporate tax rate to 19%) and a further, temporary surplus taxof 8% applicable for domestic energy supplier entities until 2012. As per the Hungarian tax legislation, corporate tax ratewill decrease to 10% from 1 January 2013, however, the Hungarian Government announced its intention in March, 2011 towithdraw this decrease. Slovakian and Croatian tax rates were 19% and 20%, respectively, in both years. Italian tax rate was36.9 % and 37.9% in 2009 and 2010, respectively. Enacted changes in tax rates are considered when calculating deferred taxassets and liabilities.Local trade tax represents another revenue-based tax for Hungarian subsidiaries, payable to local municipialities. Tax baseis calculated by deducting certain production costs from sales revenue. Tax rates vary between 1-2% dependent on theresolution of local governments where the entities have their business activities.Notes to the financialstatements2010 2009HUF millionHUF millionExchange differences on translating foreign operationsGains / (losses) arising during the year 42,875 640Reclassification adjustments for gains and losses included in the income statement - 11542,875 755Available-for-sale financial assets, net of deferred taxGains / (losses) arising during the year 3,834 5,003Reclassification adjustments for gains and losses included in the income statement (5,257) -(1,423) 5,003Cash-flow hedges, net of deferred taxGains / (losses) arising during the year 351 1,775Reclassification adjustments for gains and losses included in the income statement - (437)351 1,338Share of other comprehensive income for associatesGains / (losses) arising during the year 7,083 8,016Reclassification adjustments for gains and losses included in the income statement 589 (17,399)7,672 (9,383)There is no dividend withholding tax in Hungary on dividends paid to foreign tax resident legal entities. As regards dividendpaid to private individuals, a 10% personal income tax liability arises, also withheld at source.Income tax recognised in other comprehensive income2010 2009HUF millionHUF millionDeferred tax recognised in other comprehensive income:Revaluations of available-for-sale financial assets (39) (730)Revaluations of financial instruments treated as cash flow hedges 374 (391)335 (1,121)Reclassifications from equity to profit or loss:Relating to available-for-sale financial assets (219) (595)Relating to cash flow hedges - 109(219) (486)Total income tax recognised in other comprehensive income 116 (1,607)142 MOL Group annual report 2010 143