INCOME TAX

9 Months Ended

Sep. 30, 2011

INCOME TAX

INCOME TAX

10.   INCOME TAX

        The Company is subject to US (domestic), Russian and Kazakh income taxes, based on the US legislation, the Russian tax legislation, the Kazakh legislation and the Double Tax Treaty of 1992 between the US and Russia ("Treaty"). The Russian- and Kazakh-based companies are subject to Russian and Kazakh income tax. The statutory income tax rate in Russia and Kazakhstan was 20% in 2010 and nine months ended September 30, 2011. US taxable income or losses recorded are reported on CTC Media, Inc.'s US income tax return. CTC Media, Inc.'s taxable revenues consist predominantly of dividends and interest paid by the Russian subsidiaries. Dividends distributed to CTC Media, Inc. are subject to a Russian withholding tax of 5% under the Treaty. Dividends distributed within Russia are subject to a withholding tax of 9%.

        The Company's effective income tax rate was 35% and 43% for the three months ended September 30, 2010 and September 30, 2011, respectively, and 35% and 39% for the nine months ended September 30, 2010 and September 30, 2011, respectively. In the three- and nine-months periods ended September 30, 2011, the Company's effective tax rate was impacted by the effect of the impairment loss recognized in the third quarter of 2011 in respect of the DTV trade name and certain of our regional broadcasting licenses. The impairment loss decreased the Company's income before tax by $16.8 million and decreased income tax expense by $3.4 million. Net of the impairment loss, the Company's effective tax rate for the three- and nine-months periods ended September 30, 2011 would have been 35% and 37%, respectively.