22 Taxation

Shipping income from dry bulk international trade is either not subject to or exempt from taxation according to the tax regulations prevailing in the countries in which the Group operates. Income from non-shipping activities are subject to tax at prevailing rates in the countries in which these businesses operate.

The amount of taxation charged/(credited) to the consolidated income statement represents:

US$'00020182017
Current taxation
Hong Kong profits tax, provided at the rate of 16.5% (2017: 16.5%)726323
Overseas tax, provided at the rates of taxation prevailing in the countries410348
Adjustments in respect of prior year126(1,025)
Tax charges/(credits)1,262(354)

The tax on the Group’s profit before taxation differs from the theoretical amount that would arise using the applicable tax rate, being the weighted average of rates prevailing in the countries in which the Group operates, as follows:

US$'00020182017
Profit before taxation73,5463,256
Tax calculated at applicable tax rates12,676642
Income not subject to taxation(152,929)(125,759)
Expenses not deductible for taxation purposes141,389125,788
Adjustments in respect of prior year126(1,025)
Tax charges/(credits)1,262(354)
Weighted average applicable tax rate17.2%19.7%

Accounting policy

Current income tax

The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the balance sheet date in the countries where the Company and its subsidiaries, joint ventures and associates operate and generate taxable income. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulations is subject to interpretation and establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities.

Deferred income tax

Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. However, the deferred income tax is not accounted for if it 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. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantively enacted by the balance sheet date and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled.

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, joint ventures 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.

Critical accounting estimates and judgements – Income taxes

The Group is subject to income taxes in certain jurisdictions. In the case of some transactions we entered into, the ultimate tax determination and tax classification may still be uncertain, requiring significant judgement to be used in determining the provision for income taxes. Where the eventual tax outcome of such cases is different from the amounts that are currently recorded, such differences will impact our income tax provision in future periods in which such determination is made.

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