Freedom Holding Corp. Annual report pursuant to Section 13 and 15(d)

Annual report pursuant to Section 13 and 15(d)

9. Deferred Tax Assets

9. Deferred Tax Assets

12 Months Ended

Mar. 31, 2018

The Company is subject to taxation in the Russian Federation, Kazakhstan, Kyrgyzstan, Cyprus, Ukraine, Uzbekistan and the United States of America.

The tax rates used for deferred tax assets and liabilities for the years ended March 31, 2018 and 2017, is the 34% for the US and 20% for the Russian Federation, Kazakhstan, Kyrgyzstan, Ukraine and Uzbekistan.

Deferred tax assets and liabilities of the Company are comprised of the following:

	March 31, 2018			March 31, 2017 (Recast)

*Deferred tax assets:*
Tax losses carryforward	$	2,937		$	2,398
Accrued liabilities		49			20
Revaluation on trading securities		88			76
Stock compensation expenses		405			-
Valuation allowance		(2,433	)		(1,468	)
Deferred tax assets	$	1,046		$	1,026

*Deferred tax liabilities:*
Revaluation on trading securities	$	387		$	-

Deferred tax liabilities	$	387		$	-

Net deferred tax assets	$	659		$	1,026

The Company is subject to the US state income taxes at a rate of 34%. The reconciliation of the provision for income taxes at the 34% tax rate compared to the Company’s income tax expense as reported is as follows:

	Year ended March 31, 2018			Year ended March 31, 2017 (Recast)

Profit before tax at 34%	$	6,702		$	2,321
Nontaxable gains		(7,129	)		(6,114	)
Provision for impairment losses		81			-
Impact of Tax Reform		190			-
Foreign tax rate differential		30			288
Other differences		127			2,189
Valuation allowance		478			792
Income tax provision/(benefit)	$	479		$	(524	)

The income tax expense comprises:

	Year ended March 31, 2018		Year ended March 31, 2017 (Recast)
Current income tax charge	$	131	$	543
Deferred income tax charge/(benefit)		348		(1,067	)
Income tax provision/(benefit)	$	479	$	(524	)

During the year ended March 31, 2018 and 2017, the effective tax rate was equal to 2.43% and (9.08%), respectively, primarily due to non-taxable gains on trading securities in Freedom KZ in the amounts of $20,346 and $17,983, respectively. During the year ended March 31, 2018, the Company realized net income before income tax of $19,712, primarily from non-taxable revenues generated from the Company’s Freedom KZ’s trading operations. This resulted in the Company realizing an income tax expense for the year ended March 31, 2018 of $479. During the year ended March 31, 2017, the Company realized net income before income tax of $5,772 primarily from non-taxable revenues generated from Freedom KZ’s trading operations resulting in an income tax benefit of $524.

Tax losses carryforward as of March 31, 2018 comprises $ 2,937 and subject to income tax in Russia, Kazakhstan and Cyprus. US tax reform enacted on December 22, 2017, lowered the US tax rate which will reduce tax expenses of the Company.