Note 27 – Income tax and social contribution
ITAÚ UNIBANCO HOLDING and each of its subsidiaries file separate, for each fiscal year, corporate income tax returns and social contribution on net income.
| a) | Composition of income tax and social contribution expenses |
Demonstration of Income tax and social contribution expense calculation:
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Due on operations for the period |
01/01 to 12/31/2017 |
01/01 to 12/31/2016 |
01/01 to 12/31/2015 |
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Income before income tax and social contribution |
32,211 | 38,192 | 18,265 | |||||||||
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Charges (income tax and social contribution) at the rates in effect (Note 2.4 k) |
(14,495 | ) | (17,187 | ) | (7,611 | ) | ||||||
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Increase / decrease in income tax and social contribution charges arising from: |
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Share of profit or (loss) of associates and joint ventures net |
169 | 165 | 176 | |||||||||
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Foreign exchange variation on investiments abroad |
397 | (4,313 | ) | 8,329 | ||||||||
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Interest on capital |
3,873 | 3,617 | 2,585 | |||||||||
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Corporate reorganizations (Note 2.4 a III) |
628 | 628 | 631 | |||||||||
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Dividends and interest on external debt bonds |
420 | 365 | 271 | |||||||||
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Other nondeductible expenses net of non taxable income (*) |
4,469 | 12,827 | (13,346 | ) | ||||||||
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Income tax and social contribution expenses |
(4,539 | ) | (3,898 | ) | (8,965 | ) | ||||||
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Related to temporary differences |
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Increase (reversal) for the period |
(3,474 | ) | (10,774 | ) | 13,006 | |||||||
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Increase (reversal) of prior periods |
70 | 62 | (71 | ) | ||||||||
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Increase in the social contribution tax rate (Note 27b III) |
— | — | 3,921 | |||||||||
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(Expenses)/Income related to deferred taxes |
(3,404 | ) | (10,712 | ) | 16,856 | |||||||
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Total income tax and social contribution expenses |
(7,943 | ) | (14,610 | ) | 7,891 | |||||||
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| (*) | Includes temporary (additions) and exclusions. |
| b) | Deferred taxes |
I—The deferred tax asset balance and respective changes are as follows:
| 12/31/2016 | Realization / reversal |
Increase | 12/31/2017 | |||||||||||||
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Reflected in income |
47,883 | (16,199 | ) | 14,496 | 46,180 | |||||||||||
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Allowance for loan and lease losses |
26,975 | (9,453 | ) | 6,457 | 23,979 | |||||||||||
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Related to income tax and social contribution tax carryforwards |
6,928 | (197 | ) | 794 | 7,525 | |||||||||||
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Provision for contingent liabilities |
5,707 | (2,733 | ) | 2,223 | 5,197 | |||||||||||
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Civil lawsuits |
1,955 | (576 | ) | 595 | 1,974 | |||||||||||
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Labor claims |
2,168 | (1,233 | ) | 1,265 | 2,200 | |||||||||||
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Tax and social security |
1,582 | (924 | ) | 362 | 1,020 | |||||||||||
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Other |
2 | — | 1 | 3 | ||||||||||||
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Goodwill on purchase of investments |
165 | (758 | ) | 734 | 141 | |||||||||||
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Legal liabilities – tax and social security |
387 | (557 | ) | 658 | 488 | |||||||||||
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Adjustments of operations carried out on the futures settlement market |
485 | (239 | ) | 31 | 277 | |||||||||||
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Adjustment to market value of financial assets held for trading and derivatives |
145 | (145 | ) | 380 | 380 | |||||||||||
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Provision related to health insurance operations |
300 | — | 41 | 341 | ||||||||||||
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Other |
6,791 | (2,117 | ) | 3,178 | 7,852 | |||||||||||
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Reflected in stockholders’ equity |
2,994 | (1,126 | ) | 141 | 2,009 | |||||||||||
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Corporate reorganizations (Note 2.4 a III) |
1,256 | (628 | ) | — | 628 | |||||||||||
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Adjustment to market value of available-for-sale securities |
642 | (498 | ) | — | 144 | |||||||||||
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Cash flow hedge |
843 | — | 140 | 983 | ||||||||||||
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Other |
253 | — | 1 | 254 | ||||||||||||
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Total (1)(2) |
50,877 | (17,325 | ) | 14,637 | 48,189 | |||||||||||
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| (1) | Deferred income tax and social contribution assets and liabilities are recorded in the balance sheet offset by a taxable entity and total R$ 33,547 and R$ 441. |
| (2) | The accounting records of deferred tax assets on income tax losses and/or social contribution loss carryforwards, as well as those arising from temporary differences, are based on technical feasibility studies which consider the expected generation of future taxable income, considering the history of profitability for each subsidiary individually, and for the consolidated taken as a whole. For the subsidiaries, Itaú Unibanco S.A. and Banco Itaucard S.A., a petition has been sent to Central Bank of Brazil, in compliance with paragraph 7 of article 1 of Resolution No. 4,441/15 and pursuant to Circular 3,776/15. |
| 12/31/2015 | Realization / reversal |
Increase | 12/31/2016 | |||||||||||||
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Reflected in income |
48,911 | (16,508 | ) | 15,480 | 47,883 | |||||||||||
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Allowance for loan and lease losses |
25,572 | (6,337 | ) | 7,740 | 26,975 | |||||||||||
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Related to income tax and social contribution tax carryforwards |
6,655 | (288 | ) | 561 | 6,928 | |||||||||||
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Provision for contingent liabilities |
5,385 | (1,784 | ) | 2,106 | 5,707 | |||||||||||
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Civil lawsuits |
2,149 | (701 | ) | 507 | 1,955 | |||||||||||
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Labor claims |
1,812 | (1,010 | ) | 1,366 | 2,168 | |||||||||||
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Tax and social security |
1,420 | (71 | ) | 233 | 1,582 | |||||||||||
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Other |
4 | (2 | ) | — | 2 | |||||||||||
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Goodwill on purchase of investments |
511 | (346 | ) | — | 165 | |||||||||||
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Legal liabilities – tax and social security |
508 | (200 | ) | 79 | 387 | |||||||||||
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Adjustments of operations carried out in futures settlement market |
1,253 | (797 | ) | 29 | 485 | |||||||||||
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Adjustment to market value of financial assets held for trading and |
4,951 | (4,951 | ) | 145 | 145 | |||||||||||
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derivatives |
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Provision related to health insurance operations |
322 | (22 | ) | — | 300 | |||||||||||
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Other |
3,754 | (1,783 | ) | 4,820 | 6,791 | |||||||||||
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Reflected in stockholders’ equity |
4,253 | (1,970 | ) | 711 | 2,994 | |||||||||||
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Corporate reorganizations (Note 2.4 a III) |
1,883 | (627 | ) | — | 1,256 | |||||||||||
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Adjustment to market value of available-for-sale securities |
1,980 | (1,338 | ) | — | 642 | |||||||||||
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Cash flow hedge |
137 | — | 706 | 843 | ||||||||||||
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Other |
253 | (5 | ) | 5 | 253 | |||||||||||
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Total (*) |
53,164 | (18,478 | ) | 16,191 | 50,877 | |||||||||||
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| (*) | Deferred income tax and social contribution assets and liabilities are recorded in the balance sheet offset by a taxable entity and total R$ 37,395 and R$ 643. |
II—The provision for deferred tax and contributions and respective changes are as follows:
| 12/31/2016 | Realization / reversal |
Increase | 12/31/2017 | |||||||||||||
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Reflected in income |
13,507 | (8,716 | ) | 9,690 | 14,481 | |||||||||||
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Depreciation in excess – finance lease |
936 | (323 | ) | — | 613 | |||||||||||
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Adjustment of escrow deposits and contingent liabilities |
1,193 | (179 | ) | 266 | 1,280 | |||||||||||
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Pension plans |
233 | — | 71 | 304 | ||||||||||||
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Adjustments of operations carried out on the futures settlement market |
1,095 | — | 326 | 1,421 | ||||||||||||
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Adjustment to market value of financial assets held for trading and derivatives |
7,293 | (7,293 | ) | 7,592 | 7,592 | |||||||||||
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Taxation of results abroad – capital gains |
1,502 | — | 382 | 1,884 | ||||||||||||
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Other |
1,255 | (921 | ) | 1,053 | 1,387 | |||||||||||
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Reflected in stockholders’ equity accounts |
618 | (132 | ) | 116 | 602 | |||||||||||
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Adjustment to market value of available-for-sale securities |
486 | (85 | ) | 13 | 414 | |||||||||||
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Cash flow hedge |
63 | — | 103 | 166 | ||||||||||||
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Provision for pension plan benefits |
35 | (25 | ) | — | 10 | |||||||||||
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Other |
34 | (22 | ) | — | 12 | |||||||||||
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Total (*) |
14,125 | (8,848 | ) | 9,806 | 15,083 | |||||||||||
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| (*) | Deferred income tax and social contribution asset and liabilities are recorded in the balance sheet offset by a taxable entity and total R$ 33,547 and R$ 441. |
| 12/31/2015 | Realization / reversal |
Increase | 12/31/2016 | |||||||||||||
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Reflected in income |
4,277 | (2,283 | ) | 11,513 | 13,507 | |||||||||||
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Depreciation in excess – finance lease |
1,487 | (551 | ) | — | 936 | |||||||||||
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Adjustment of escrow deposits and contingent liabilities |
1,130 | (168 | ) | 231 | 1,193 | |||||||||||
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Pension plans |
336 | (143 | ) | 40 | 233 | |||||||||||
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Adjustments of operations carried out on the futures settlement market |
51 | (100 | ) | 1,144 | 1,095 | |||||||||||
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Adjustment to market value of financial assets held for trading and derivatives |
198 | (198 | ) | 7,293 | 7,293 | |||||||||||
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Taxation of results abroad – capital gains |
286 | — | 1,216 | 1,502 | ||||||||||||
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Other |
789 | (1,123 | ) | 1,589 | 1,255 | |||||||||||
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Reflected in stockholders’ equity accounts |
1,804 | (1,639 | ) | 453 | 618 | |||||||||||
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Adjustment to market value of available-for-sale securities |
53 | — | 433 | 486 | ||||||||||||
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Cash flow hedge |
1,313 | (1,250 | ) | — | 63 | |||||||||||
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Provision for pension plan benefits |
424 | (389 | ) | — | 35 | |||||||||||
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Other |
14 | — | 20 | 34 | ||||||||||||
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Total (*) |
6,081 | (3,922 | ) | 11,966 | 14,125 | |||||||||||
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| (*) | Deferred income tax and social contribution asset and liabilities are recorded in the balance sheet offset by a taxable entity and total R$ 37,395 and R$ 643. |
III—The estimate of realization and present value of tax credits and from the Provision for Deferred Income Tax and Social Contribution existing at 12/31/2017, are:
| Deferred tax assets | ||||||||||||||||||||||||||||||||||||||||
| Temporary differences |
% |
Tax loss / social contribution loss carryforwards |
% | Total | % | Deferred tax liabilities |
% | Net deferred taxes |
% | |||||||||||||||||||||||||||||||
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2018 |
22,219 | 55 | % | 3,248 | 43 | % | 25,467 | 53 | % | (3,132 | ) | 21 | % | 22,335 | 67 | % | ||||||||||||||||||||||||
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2019 |
9,824 | 24 | % | 162 | 2 | % | 9,986 | 20 | % | (4,654 | ) | 31 | % | 5,332 | 16 | % | ||||||||||||||||||||||||
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2020 |
1,983 | 5 | % | 768 | 10 | % | 2,751 | 6 | % | (2,020 | ) | 14 | % | 731 | 2 | % | ||||||||||||||||||||||||
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2021 |
1,286 | 3 | % | 725 | 10 | % | 2,011 | 4 | % | (1,787 | ) | 11 | % | 224 | 1 | % | ||||||||||||||||||||||||
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2022 |
832 | 2 | % | 918 | 12 | % | 1,750 | 4 | % | (825 | ) | 5 | % | 925 | 3 | % | ||||||||||||||||||||||||
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After 2022 |
4,520 | 11 | % | 1,704 | 23 | % | 6,224 | 13 | % | (2,665 | ) | 18 | % | 3,559 | 11 | % | ||||||||||||||||||||||||
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Total |
40,664 | 100 | % | 7,525 | 100 | % | 48,189 | 100 | % | (15,083 | ) | 100 | % | 33,106 | 100 | % | ||||||||||||||||||||||||
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Present value (*) |
37,701 | 6,682 | 44,383 | (13,427 | ) | 30,956 | ||||||||||||||||||||||||||||||||||
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| (*) | The average funding rate, net of tax effects, was used to determine the present value. |
The projections of future taxable income include estimates related to macroeconomic variables, exchange rates, interest rates, volume of financial operations and services fees and others, which can vary in relation to actual data and amounts.
Net income in the financial statements is not directly related to the taxable income, due to differences between the accounting criteria and tax legislation, in addition to corporate aspects. Accordingly, it is recommended that the trends for the realization of deferred tax assets arising from temporary differences, and tax loss carry forwards should not be used as an indication of future net income.
Considering the temporary effects of Law 13,169/15, which increases the Social Contribution tax rate to 20% until December 31, 2018, tax credits were accounted for based on their expected realization. There are no unrecorded deferred tax assets at 12/31/2017 and 12/31/2016.