| 20. | Income Taxes |
Income tax expenses have been allocated as follows:
| Year ended December 31, | ||||||||||||||||
| 2015 | 2016 | 2017 | 2017 | |||||||||||||
| BRL | BRL | BRL | USD | |||||||||||||
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Income tax benefit (expense) |
R$ | (80 | ) | R$ | — | R$ | (2 | ) | US$ | (1 | ) | |||||
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Income tax expense recognized in statements of operations |
(80 | ) | — | (2 | ) | (1 | ) | |||||||||
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Income tax expense recognized in statements of other compredensive income (loss) |
R$ | (447 | ) | R$ | — | R$ | (2 | ) | US$ | (1 | ) | |||||
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Income tax benefit (expense) |
R$ | (527 | ) | R$ | — | R$ | (2 | ) | US$ | (1 | ) | |||||
A reconciliation of income tax expense at the weighted average tax rate to the Company’s and its subsidiaries actual income tax expense at December 31, 2015, 2016 and 2017, is shown below:
| Year ended December 31, | ||||||||||||||||
| 2015 | 2016 | 2017 | 2017 | |||||||||||||
| BRL | BRL | BRL | USD | |||||||||||||
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Loss before income tax |
R$ | (99,433 | ) | R$ | (151,896 | ) | R$ | (170,343 | ) | US$ | (51,494 | ) | ||||
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Tax rate |
28.18 | % | 31.46 | % | 30.62 | % | 30.62 | % | ||||||||
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| 28,020 | 47,786 | 52,156 | 15,767 | |||||||||||||
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Increase (decrease) resulting from: |
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Non-deductible expenses |
(779 | ) | (881 | ) | (4,382 | ) | (1,325 | ) | ||||||||
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Unrecognized deferred tax benefits |
(26,726 | ) | (46,542 | ) | (47,776 | ) | (14,444 | ) | ||||||||
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Other |
(595 | ) | (364 | ) | — | — | ||||||||||
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| (80 | ) | — | (2 | ) | (1 | ) | ||||||||||
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Effective tax rate |
0.08 | % | 0.00 | % | 0.00 | % | 0.00 | % | ||||||||
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Income tax expense |
R$ | (80 | ) | R$ | — | R$ | (2 | ) | US$ | (1 | ) | |||||
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The Company believes that its accruals for tax liabilities are adequate based on its assessment of many factors, including interpretations of tax law and prior experience.
Unrecognized deferred income tax assets
The Company and its subsidiaries have experienced tax losses since inception and therefore they have not recognized deferred income tax assets in respect of the following items to the extent there is no taxable temporary difference that will reverse in the same period that deductible temporary differences reverse.
Deferred income tax assets may be recognized when the Company starts to experience future sustainable taxable income during the carryforward period and it is probable that these tax benefits will be realized.
| Year ended December 31, | ||||||||||||
| 2016 | 2017 | 2017 | ||||||||||
| BRL | BRL | USD | ||||||||||
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Deductible temporary differences |
R$ | 54,305 | R$ | 52,139 | US$ | 15,761 | ||||||
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Income tax loss carry foward |
169,765 | 195,538 | 59,111 | |||||||||
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Total unrecognized deferred income tax assets |
R$ | 224,070 | R$ | 247,677 | US$ | 74,872 | ||||||
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Brazilian unrecognized income tax carryforward losses amounting to R$142,218 (US$42,992) at December 31, 2017 do not expire, however they can only offset up to 30 percent of a taxpayer’s taxable income in any given year.
Tax loss carryforwards for Argentina and Mexico expire as follows:
| Year ended December 31, | ||||||||
| 2017 | 2017 | |||||||
| Expiry date | BRL | USD | ||||||
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2018 |
R$ | 1,178 | US$ | 356 | ||||
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2019 |
4,056 | 1,226 | ||||||
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2020 |
5,970 | 1,805 | ||||||
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2021 |
7,128 | 2,155 | ||||||
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2022 and thereafter |
34,988 | 10,577 | ||||||
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| R$ | 53,320 | US$ | 16,119 | |||||
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