On  December  15, 1999 the Estonian Parliament (Riigikogu) approved the

new  Law  on  Income  Tax, which will significantly alter the presently

effective  income  tax  regime and will become into force on January 1,

2000.  The  new  law  will  abolish income tax on retained earnings for

resident  corporate  identities  in  order  to promote new investments.

Therefore,  starting  from  year  2000  Hansapank  and  the other group

companies  that  operate  in  Estonia will have an effective income tax

rate of 0%.

Hansapank  has made the tax appropriations through the income statement

according to IAS 12 and good accounting practice. However, this expense

is  not  an  actual cash tax, but deferred tax liability. At the end of

November  1999  Hansapank  had  made  such  appropriations in the total

amount  of EEK 112.6 million. Since according to the new law, corporate

tax  on retained earnings is abolished, Hansapank will record the above

mentioned appropriations back as revenue into the profit of 1999.