Taxation
Adecoagro is subject to the applicable general tax regulations in Luxembourg.
The Group’s income tax has been calculated on the estimated assessable taxable results for the year at the rates prevailing in the respective foreign tax jurisdictions. The subsidiaries of the Group are required to calculate their income taxes on a separate basis according to the rules and regulations of the jurisdictions where they operate. Therefore, the Group is not legally permitted to compensate subsidiaries’ losses against subsidiaries’ income. The details of the provision for the Group’s consolidated income tax are as follows:
|
| | | | | | | | |
| 2017 | | 2016 | | 2015 |
Current income tax | (13,425 | ) | | (21,505 | ) | | (2,163 | ) |
Deferred income tax | 19,493 |
| | 12,118 |
| | 10,117 |
|
Income tax benefit / (expense) | 6,068 |
| | (9,387 | ) | | 7,954 |
|
The statutory tax rate in the countries where the Group operates for all of the years presented are:
|
| | | |
Tax Jurisdiction | | Income Tax Rate |
Argentina(i) | | 35 | % |
Brazil | | 34 | % |
Uruguay | | 25 | % |
Spain | | 25 | % |
Luxembourg | | 26 | % |
(i) During 2017, the Argentine Government introduced changes in the income tax. The income tax rate will be reduced to 30% for the years 2018 and 2019, and to 25% from 2020 onwards. A new tax on dividends is created with a rate of 7% for the years 2018 and 2019, and 13% from 2020 onwards.
Deferred tax assets and liabilities of the Group as of December 31, 2017 and 2016, without taking into consideration the offsetting of balances within the same tax jurisdiction, will be recovered or settled as follows:
|
| | | | | |
| 2017 | | 2016 |
Deferred income tax asset to be recovered after more than 12 months | 109,830 |
| | 96,822 |
|
Deferred income tax asset to be recovered within 12 months | 20,191 |
| | 17,504 |
|
Deferred income tax assets | 130,021 |
| | 114,326 |
|
| | | |
Deferred income tax liability to be settled after more than 12 months | (90,951 | ) | | (86,573 | ) |
Deferred income tax liability to be settled within 12 months | (6,090 | ) | | (3,856 | ) |
Deferred income tax liability | (97,041 | ) | | (90,429 | ) |
Deferred income tax assets, net | 32,980 |
| | 23,897 |
|
The gross movement on the deferred income tax account is as follows:
|
| | | | | |
| 2017 | | 2016 |
Beginning of year | 23,897 |
| | 53,108 |
|
Exchange differences | (1,695 | ) | | 10,953 |
|
Tax (charge) relating to cash flow hedge (i) | (8,715 | ) | | (52,282 | ) |
Income tax benefit | 19,493 |
| | 12,118 |
|
End of year | 32,980 |
| | 23,897 |
|
(i) Relates to the gain or loss before income tax of cash flow hedge recognized in other comprehensive income amounting to US$ (565) for the year ended December 31, 2017 (2016: US$ (67,683)); net of the reclassification from Equity to Income Statements of US$ (20,758) for the year ended December 31, 2017 (2016: US$ (85,214))
The movement in the deferred income tax assets and liabilities during the year, without taking into consideration the offsetting of balances within the same tax jurisdiction, is as follows:
|
| | | | | | | | | | | | |
Deferred income tax liabilities | | Property, plant and equipment | | Biological assets | | Others | | Total |
At January 1, 2016 | | 55,964 |
| | 15,963 |
| | — |
| | 71,927 |
|
Charged / (credited) to the statement of income | | 3,380 |
| | (2,752 | ) | | 16,787 |
| | 17,415 |
|
Exchange differences | | (512 | ) | | 911 |
| | 688 |
| | 1,087 |
|
At December 31, 2016 | | 58,832 |
| | 14,122 |
| | 17,475 |
| | 90,429 |
|
Charged / (credited) to the statement of income | | 23,249 |
| | 3,707 |
| | (15,583 | ) | | 11,373 |
|
Exchange differences | | (4,437 | ) | | (1,057 | ) | | 733 |
| | (4,761 | ) |
At December 31, 2017 | | 77,644 |
| | 16,772 |
| | 2,625 |
| | 97,041 |
|
|
| | | | | | | | | | | | | | | | | | |
Deferred income tax assets | | Provisions | | Tax loss carry forwards | | Equity-settled share-based compensation | | Biological assets | | Others | | Total |
At January 1, 2016 | | 1,789 |
| | 107,191 |
| | 5,620 |
| | 1,727 |
| | 8,708 |
| | 125,035 |
|
Charged/(credited) to the statement of income | | 353 |
| | 31,074 |
| | 20 |
| | (2,063 | ) | | 149 |
| | 29,533 |
|
Tax charge relating to cash flow hedge | | — |
| | (52,282 | ) | | — |
| | — |
| | — |
| | (52,282 | ) |
Exchange differences | | 289 |
| | 11,135 |
| | | | 336 |
| | 280 |
| | 12,040 |
|
At December 31, 2016 | | 2,431 |
| | 97,118 |
| | 5,640 |
| | — |
| | 9,137 |
| | 114,326 |
|
(Credited) / charged to the statement of income | | (705 | ) | | 11,907 |
| | 41 |
| | — |
| | 19,623 |
| | 30,866 |
|
Tax charge relating to cash flow hedge | | — |
| | (8,715 | ) | | — |
| | — |
| | — |
| | (8,715 | ) |
Exchange differences | | 757 |
| | (4,193 | ) | | — |
| | — |
| | (3,020 | ) | | (6,456 | ) |
At December 31, 2017 | | 2,483 |
| | 96,117 |
| | 5,681 |
| | — |
| | 25,740 |
| | 130,021 |
|
Tax loss carry forwards in Argentina and Uruguay generally expire within 5 years. Tax loss carry forwards in Brazil and Luxembourg do not expire. However, in Brazil, the taxable profit for each year can only be reduced by tax loss carry forward up to a maximum of 30%.
In order to fully realize the deferred tax asset, the Group will need to generate future taxable income in the countries where the tax loss carry forward were incurred. Based upon the level of historical taxable income and projections for future taxable income over the periods in which the deferred tax assets are deductible, management believes that as at December 31, 2017, it is probable that the Group will realize some portion of the deferred tax assets in Brazil and Argentina.
As of December 31, 2017, the Group’s tax loss carry forwards and their corresponding jurisdictions are as follows:
|
| | | | | |
Jurisdiction | | Tax loss carry forward | | Expiration period |
Argentina | | 80,988 |
| | 5 years |
Brazil | | 195,894 |
| | No expiration date. |
Uruguay | | 3,394 |
| | 5 years |
Luxembourg | | 29,212 |
| | No expiration date. |
Deferred income tax assets are recognized for tax loss carry-forwards to the extent that the realization of the related tax benefit through future taxable profits is probable. The Group did not recognize deferred income tax assets of US$ 5.6 million in respect of losses amounting to US$ 18.0 million that can be carried forward against future taxable income.
The tax on the Group’s profit before income tax differs from the theoretical amount that would arise using the weighted average tax rate applicable to profits of the consolidated entities as follows:
|
| | | | | | | | |
| 2017 | | 2016 | | 2015 |
Tax calculated at the tax rates applicable to profits in the respective countries | (1,937 | ) | | (3,644 | ) | | 3,842 |
|
Non-deductible items | (1,406 | ) | | (3,304 | ) | | (133 | ) |
Non-deductible items – changes in estimates on previous year | — |
| | (1,182 | ) | | — |
|
Effect of the changes in the statutory income tax rate in Argentina | 1,781 |
| | — |
| | — |
|
Unused tax losses | (2,265 | ) | | — |
| | — |
|
Tax losses where no deferred tax asset was recognized | (29 | ) | | (569 | ) | | (317 | ) |
Non-taxable income | 2,437 |
| | — |
| | 4,625 |
|
Previously unrecognised tax losses now recouped to reduce tax expenses | 7,595 |
| | — |
| | — |
|
Others | (108 | ) | | (688 | ) | | (63 | ) |
Income tax benefit / (expense) | 6,068 |
| | (9,387 | ) | | 7,954 |
|
