2019 Integrated Report

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) for the year ended 31 December 2019 148 | PPS INTEGRATED REPORT 2019 28.FINANCE COSTS Group 2019 2018 R’000 R’000 Interest expense on borrowings 17 479 17 151 Notional interest expense on lease liabilities 6 887 – Total investment income 24 366 17 151 29.TAX Group 2019 2018 R’000 R’000 Current tax 242 989 137 699 – Current year tax 242 205 139 644 – Prior years underprovision/(overprovision) 784 (1 945) Deferred tax 45 576 (258 670) Dividend withholding tax on deemed dividends 92 733 93 032 Total tax 381 298 (27 939) Tax on the Group’s profit before tax differs from the theoretical amount that would arise using the tax rate applicable to South African/Namibian companies as follows: Profit/(loss) before movement in policy liabilities 2 804 209 (353 090) Tax calculated at domestic tax rates applicable to profits/(losses) in South Africa/Namibia 796 802 (112 520) Tax effect of income not subject to tax (1 738 805) (1 052 934) Tax effect of non-deductible expenses 1 262 511 1 076 503 Tax effect of tax rate on Dividend Withholding Tax on deemed dividends being different to tax rate on the individual policyholder fund ('IPF') 46 641 55 817 Prior year underprovision/(overprovision) 784 (1 945) Tax effect of CF tax rate being different to IPF tax rate 13 365 7 140 Total tax per Statement of Profit or Loss and Other Comprehensive Income 381 298 (27 939) The applicable tax rate was 28% (2018: 28%) for South African companies and 32% (2018: 32%) for Professional Provident Society Insurance Company (Namibia) Limited. Professional Provident Society Insurance Company Limited has five separate tax funds: the individual policyholders’ fund (taxed at 30%), the Company policyholders’ fund (taxed at 28%), the untaxed policyholder's fund (not taxed), the risk-policy fund (taxed at 28%) and the corporate fund (taxed at 28%). The tax reconciliation is done on total tax on all funds. The Professional Provident Society Holdings Trust is taxed at 45%. Dividend withholding tax is payable on dividends received in the individual policy fund. The Group has accumulated losses of R327.2 million (2018: R290.4 million) available in certain subsidiaries for offset against future taxable income in those subsidiaries.