6. INCOME TAXES

The Company records deferred tax assets and liabilities based on the difference between the financial statement and income tax basis of assets and liabilities using the enacted statutory tax rate in effect for the year these differences are expected to be taxable or reversed. Deferred income tax expenses or credits are based on the changes in the asset or liability from period to period. The recorded deferred tax assets are reviewed for impairment on a quarterly basis by reviewing the Company’s internal estimates for future taxable income.

As of June 30, 2012, the Company has established a valuation allowance for its U.S. deferred tax assets of $5.2 million, a $0.9 million valuation allowance on its Calgary property and a $1.3 million valuation allowance on the Century Casinos Europe subsidiary deferred tax assets due to the uncertainty of future taxable income. The Company assesses the continuing need for a valuation allowance that results from uncertainty regarding its ability to realize the benefits of the Company’s deferred tax assets. The ultimate realization of deferred income tax assets depends on generation of future taxable income in the jurisdictions where the assets are located during the periods in which those temporary differences become deductible. If the Company concludes that its prospects for the realization of its deferred tax assets are more likely than not, the Company will then reduce its valuation allowance as appropriate and credit income tax expense after considering the following factors:

· The level of historical taxable income and projections for future taxable income in the jurisdictions where the assets are located over periods in which the deferred tax assets would be deductible;

· Accumulation of net income before tax utilizing a look-back period of three years, and

· Tax planning strategies.

The income tax provisions are based on estimated full-year earnings for financial reporting purposes adjusted for permanent differences. The Company’s provision for income taxes from operations consists of the following:




	For the six months
Amounts in thousands	ended June 30,
	2012	2011
U.S. Federal - Current	$122	$52
U.S. Federal - Deferred	0	0
Provision for U.S. federal income taxes	122	52

Foreign - Current	$366	$307
Foreign - Deferred	1	119
Provision for foreign income taxes	367	426
Total provision for income taxes	$489	$478

The Company’s income tax expense by jurisdiction is summarized in the table below:


	For the six months			For the six months
Amounts in thousands	ended June 30, 2012			ended June 30, 2011
	Pre-tax income	Income tax	Effective tax rate	Pre-tax income (loss)	Income tax	Effective tax rate
Canada	$1,563	$361	23.1%	$1,258	$403	32.0%
United States	144	122	85.1%	(1,056)	52	-4.9%
Mauritius	147	4	3.0%	1,133	22	1.9%
Austria	539	1	0.2%	(222)	1	-0.5%
Poland	377	-	0.0%	373	-	0.0%
Total	$2,770	$489	17.7%	$1,486	$478	32.2%

The US income tax rate has increased significantly due to a one-time withholding tax payment of $0.1 million related to a Canadian intercompany payable.