NOTE 9 — CURRENT AND DEFERRED INCOME TAXES
9.1 Tax Reform
On September 29, 2014, the Official Daily Newspaper published Law N°20,780 that amends the Chilean tax regime, with the main following changes:
|
· |
It establishes a new system of semi-integrated taxation, which can be used as an alternative to the integrated regime of attributed income. Taxpayers may opt freely to any of the two to pay their taxes. In the case of Embotelladora Andina S.A. by a general rule established by law the semi-integrated taxation system applies, which was ratified by the Shareholders’ Meeting. |
|
· |
The semi-integrated system establishes the gradual increase in the first category tax rate for the business years 2014, 2015, 2016, 2017 and 2018 onwards, increasing to 21%, 22.5%, 24%, 25.5% and 27% respectively. |
9.2Current tax assets
Current tax assets correspond to the following items:
|
Description |
|
12.31.2017 |
|
12.31.2016 |
|
|
|
|
ThCh$ |
|
ThCh$ |
|
|
Monthly provisional payments |
|
— |
|
1,330,379 |
|
|
Tax credits (1) |
|
— |
|
371,917 |
|
|
|
|
|
|
|
|
|
Total |
|
— |
|
1,702,296 |
|
|
|
|
|
|
|
|
|
(1) |
Tax credits correspond to income tax credits on training expenses, purchase of Property, plant and equipment, and donations, and additionally income tax recoveries requested by Brazil. |
9.3Current tax liabilities
Current tax payable are detailed as follows:
|
Description |
|
12.31.2017 |
|
12.31.2016 |
|
|
|
|
ThCh$ |
|
ThCh$ |
|
|
|
|
|
|
|
|
|
Income tax expense |
|
3,184,965 |
|
10,828,593 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
3,184,965 |
|
10,828,593 |
|
|
|
|
|
|
|
|
9.4Income tax expense
The current and deferred income tax expenses are detailed as follows:
|
Item |
|
12.31.2017 |
|
12.31.2016 |
|
12.31.2015 |
|
|
|
|
ThCh$ |
|
ThCh$ |
|
ThCh$ |
|
|
|
|
|
|
|
|
|
|
|
Current income tax expense |
|
40,183,261 |
|
35,902,002 |
|
33,322,550 |
|
|
Current tax adjustment previous period |
|
137,455 |
|
534,392 |
|
(117,316 |
) |
|
Withholding tax expense foreign subsidiaries |
|
6,730,031 |
|
7,645,218 |
|
7,027,661 |
|
|
Other current tax expense (income) |
|
(5,733 |
) |
92,008 |
|
1,212,398 |
|
|
|
|
|
|
|
|
|
|
|
Current income tax expense |
|
47,045,014 |
|
44,173,620 |
|
41,445,293 |
|
|
|
|
|
|
|
|
|
|
|
Income (expense) for the creation and reversal of current tax difference |
|
4,752,620 |
|
4,633,473 |
|
197,269 |
|
|
|
|
|
|
|
|
|
|
|
Expense (income) for deferred taxes |
|
4,752,620 |
|
4,633,473 |
|
197,269 |
|
|
|
|
|
|
|
|
|
|
|
Total income tax expense |
|
51,797,634 |
|
48,807,093 |
|
41,642,562 |
|
|
|
|
|
|
|
|
|
|
9.5Deferred income taxes
The net cumulative balances of temporary differences that give rise to deferred tax assets and liabilities are detailed as follows:
|
|
|
12.31.2017 |
|
12.31.2016 |
|
||||
|
Temporary differences |
|
Assets |
|
Liabilities |
|
Assets |
|
Liabilities |
|
|
|
|
ThCh$ |
|
ThCh$ |
|
ThCh$ |
|
ThCh$ |
|
|
Property, plant and equipment |
|
5,978,377 |
|
47,179,903 |
|
2,127,336 |
|
48,561,147 |
|
|
Obsolescence provision |
|
2,215,341 |
|
200,979 |
|
1,541,553 |
|
— |
|
|
Employee benefits |
|
5,391,796 |
|
— |
|
4,383,007 |
|
— |
|
|
Post-employment benefits |
|
61,155 |
|
1,020,522 |
|
49,900 |
|
1,010,779 |
|
|
Tax loss carried-forwards (1) |
|
10,056,534 |
|
— |
|
9,928,940 |
|
— |
|
|
Tax Goodwill Brazil |
|
23,195,957 |
|
— |
|
31,926,760 |
|
— |
|
|
Contingency provision |
|
31,177,351 |
|
— |
|
36,969,451 |
|
— |
|
|
Foreign exchange differences (2) |
|
7,631,498 |
|
— |
|
— |
|
2,124,435 |
|
|
Allowance for doubtful accounts |
|
1,155,542 |
|
— |
|
1,031,375 |
|
— |
|
|
Coca-Cola incentives (Argentina) |
|
451,790 |
|
— |
|
2,408,651 |
|
— |
|
|
Assets and liabilities for placement of bonds |
|
— |
|
1,297,000 |
|
— |
|
669,856 |
|
|
Lease liabilities |
|
1,083,010 |
|
— |
|
1,767,944 |
|
— |
|
|
Inventories |
|
350,746 |
|
— |
|
1,604,538 |
|
806.529 |
|
|
Distribution rights |
|
— |
|
163,850,599 |
|
— |
|
168,511,436 |
|
|
Others |
|
3,729,093 |
|
920,772 |
|
2,689,002 |
|
353,077 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Subtotal |
|
92,478,190 |
|
214,469,775 |
|
96,428,457 |
|
222,037,259 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities net |
|
3,212,981 |
|
125,204,566 |
|
— |
|
125,608,802 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total net movement fiscal year |
|
— |
|
121,991,585 |
|
— |
|
125,608,802 |
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
Tax losses mainly associated with the subsidiary Embotelladora Andina Chile S.A. In Chile tax losses have no expiration date |
|
(2) |
Corresponds to differed taxes for exchange rate differences generated on the translation of debt expressed in foreign currency in the subsidiary Rio de Janeiro Refrescos Ltda. and which for tax purposes are recognized in Brazil when incurred. |
9.6Deferred tax liability movement
The movement in deferred income tax accounts is as follows:
|
Item |
|
12.31.2017 |
|
12.31.2016 |
|
12.31.2015 |
|
|
|
|
ThCh$ |
|
ThCh$ |
|
ThCh$ |
|
|
|
|
|
|
|
|
|
|
|
Opening Balance |
|
125,608,802 |
|
130,201,701 |
|
126,126,147 |
|
|
Increase (decrease) in deferred tax |
|
(3,417,011 |
) |
(6,409,481 |
) |
9,474,186 |
|
|
Increase (decrease) due to foreign currency translation |
|
(200,206 |
) |
1,816,582 |
|
(5,398,632 |
) |
|
|
|
|
|
|
|
|
|
|
Movements |
|
(3,617,217 |
) |
(4,592,899 |
) |
4,075,554 |
|
|
|
|
|
|
|
|
|
|
|
Ending balance |
|
121,991,585 |
|
125,608,802 |
|
130,201,701 |
|
|
|
|
|
|
|
|
|
|
9.7Distribution of domestic and foreign tax expense
The composition of domestic and foreign tax expense is detailed as follows:
|
Income tax |
|
12.31.2017 |
|
12.31.2016 |
|
12.31.2015 |
|
|
|
|
ThCh$ |
|
ThCh$ |
|
ThCh$ |
|
|
Current income taxes |
|
|
|
|
|
|
|
|
Foreign |
|
(30,258,395 |
) |
(24,752,106 |
) |
(36,438,137 |
) |
|
Domestic |
|
(16,786,619 |
) |
(19,421,514 |
) |
(5,007,156 |
) |
|
|
|
|
|
|
|
|
|
|
Current income tax expense |
|
(47,045,014 |
) |
(44,173,620 |
) |
(41,445,293 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred income taxes |
|
|
|
|
|
|
|
|
Foreign |
|
(4,667,982 |
) |
(4,291,287 |
) |
9,745,398 |
|
|
Domestic |
|
(84,638 |
) |
(342,186 |
) |
(9,942,667 |
) |
|
|
|
|
|
|
|
|
|
|
Deferred income tax expense |
|
(4,752,620 |
) |
(4,633,473 |
) |
(197,269 |
) |
|
|
|
|
|
|
|
|
|
|
Income tax expense |
|
(51,797,634 |
) |
(48,807,093 |
) |
(41,642,562 |
) |
|
|
|
|
|
|
|
|
|
9.8 Reconciliation of effective rate
Below is the reconciliation between the effective tax rate and the statutory rate:
|
Reconciliation of effective rate |
|
12.31.2017 |
|
12.31.2016 |
|
12.31.2015 |
|
|
|
|
ThCh$ |
|
ThCh$ |
|
ThCh$ |
|
|
Net income before taxes |
|
170,798,359 |
|
140,856,204 |
|
129,740,488 |
|
|
|
|
|
|
|
|
|
|
|
Tax expense at legal rate (25.5%) |
|
(43,553,581 |
) |
— |
|
— |
|
|
|
|
|
|
|
|
|
|
|
Tax expense at legal rate (24.0%) |
|
— |
|
(33,805,489 |
) |
(29,191,610 |
) |
|
|
|
|
|
|
|
|
|
|
Effect of a different tax rate in other jurisdictions |
|
(4,971,103 |
) |
(9,214,270 |
) |
(8,161,392 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Permanent differences: |
|
|
|
|
|
|
|
|
Non-taxable revenues |
|
9,645,068 |
|
6,068,410 |
|
11,778,290 |
|
|
Non-deductible expenses |
|
(4,020,729 |
) |
(419,761 |
) |
(5,557,758 |
) |
|
Effect of tax on excess tax provision previous periods |
|
125,021 |
|
86,731 |
|
117,316 |
|
|
Effect of tax monetary restatement Chilean companies |
|
(1,465,753 |
) |
(1,875,343 |
) |
(2,387,349 |
) |
|
Foreign subsidiaries tax withholding expense and other legal tax debits and credits |
|
(7,556,557 |
) |
(9,647,371 |
) |
(8,240,059 |
) |
|
|
|
|
|
|
|
|
|
|
Adjustments to tax expense |
|
(3,272,950 |
) |
(5,787,334 |
) |
(4,289,560 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tax expense at effective rate |
|
(51,797,634 |
) |
(48,807,093 |
) |
(41,642,562 |
) |
|
|
|
|
|
|
|
|
|
|
Effective rate |
|
30.6 |
% |
34.7 |
% |
32.1 |
% |
|
|
|
|
|
|
|
|
|
Below are the income tax rates applicable in each jurisdiction where the Company operates:
|
|
|
Rate |
|
||||
|
Country |
|
2017 |
|
2016 |
|
2015 |
|
|
Chile |
|
25.5 |
% |
24.0 |
% |
22.5 |
% |
|
Brazil |
|
34.0 |
% |
34.0 |
% |
34.0 |
% |
|
Argentina |
|
35.0 |
% |
35.0 |
% |
35.0 |
% |
|
Paraguay |
|
10.0 |
% |
10.0 |
% |
10.0 |
% |