NOTE 14 INCOME TAXES
a) Current income tax provision.
At the end of each year the bank recognizes an income tax provision, which is determined based on currently enacted tax legislation. Current recoverable taxes recognized as of December 31, 2017 was MCh$237,828 (MCh$162,410 as of December 31, 2016). The income tax provision (net of recoverable taxes) is as follows:
a.1 Tax current:
| As of December 31, 2017 | |||||||||
| Chile | New York (*) | Colombia | Total | ||||||
| MCh$ | MCh$ | MCh$ | MCh$ | ||||||
| Current tax assets | 202,093 | — | 36,359 | 238,452 | |||||
| Current tax liabilities | (624 | ) | — | — | (624 | ) | |||
| Net total | 201,469 | — | 36,359 | 237,828 | |||||
| As of December 31, 2016 | |||||||||
| Chile | New York | Colombia | Total | ||||||
| MCh$ | MCh$ | MCh$ | MCh$ | ||||||
| Current tax assets | 138,172 | 770 | 25,354 | 164,296 | |||||
| Current tax liabilities | (475 | ) | — | (1,411 | ) | (1,886 | ) | ||
| Net total | 137,697 | 770 | 23,943 | 162,410 | |||||
a.2 Effect of current taxes by geographic area:
| As of December 31, 2017 | |||||||||
| Chile | New York (*) | Colombia | Total | ||||||
| MCh$ | MCh$ | MCh$ | MCh$ | ||||||
| Income tax | 8,332 | — | 11,357 | 19,689 | |||||
| Less: | |||||||||
| Monthly Provisional Payment | (49,529 | ) | — | (2,940 | ) | (52,469 | ) | ||
| Tax Credit for Training Costs | (831 | ) | — | — | (831 | ) | |||
| Tax Credit Donations | — | — | — | ||||||
| Other taxes to be recovered (**) | (159,441 | ) | — | (44,776 | ) | (204,217 | ) | ||
| Total | (201,469 | ) | — | (36,359 | ) | (237,828 | ) | ||
| As of December 31, 2016 | |||||||||
| Chile | New York | Colombia | Total | ||||||
| MCh$ | MCh$ | MCh$ | MCh$ | ||||||
| Income tax | 17,672 | — | 10,409 | 28,081 | |||||
| Less: | |||||||||
| Monthly Provisional Payment | (153,330 | ) | (770 | ) | (32,232 | ) | (186,332 | ) | |
| Tax Credit for Property Taxes on leased real estate assets | — | — | — | — | |||||
| Tax Credit for Training Costs | (603 | ) | — | — | (603 | ) | |||
| Tax Credit Donations | (538 | ) | — | — | (538 | ) | |||
| Other taxes to be recovered | (898 | ) | — | (2,120 | ) | (3,018 | ) | ||
| Total | (137,697 | ) | (770 | ) | (23,943 | ) | (162,410 | ) | |
(*) Corresponds the subsidiary located in New York. On December 22, 2017, the United States enacted comprehensive tax reform, which introduced various modifications to the tax system. One modification was a decrease in the income tax rate from 35% to 21% as from January 1, 2018
(**) The balance is mainly comprised of the provisional payments on account of from income tax of the tax year 2017, pending return by the tax authority.
b) Effect on income.
The tax expense for the years ended December 31, 2017, 2016 and 2015 was comprised of the following items:
| 2017 | 2016 | 2015 | |||||
| MCh$ | MCh$ | MCh$ | |||||
| Income Tax Expense | |||||||
| Current tax expense | (19,689 | ) | (19,326 | ) | (14,249 | ) | |
| Deferred taxes | |||||||
| Deferred tax expenses / (benefit) | 74,611 | 23,105 | (966 | ) | |||
| Subtotal | 54,922 | 3,779 | (15,215 | ) | |||
| Others | (2,051 | ) | (211 | ) | (2,048 | ) | |
| Net expense for income taxes | 52,871 | 3,568 | (17,263 | ) |
c) Effective tax rate reconciliation.
The following table reconciles the income tax rate to the effective rate applied to determine the Bank’s income tax expense as of December 31, 2017, 2016 and 2015.
The nominal tax rates of the countries where consolidated subsidiaries were located are:
| 2017 | 2016 | 2015 | |||||
| Rate | Rate | Rate | |||||
| Chile | 25.5% | 24.0% | 22.5% | ||||
| Colombia | 40.0% | 40.0% | 39.0% | ||||
| United States | 35.0% | 35.0% | 34.0% |
| As of December 31, | |||||||||||||
| 2017 | 2016 | 2015 | |||||||||||
| Tax Rate | Amount | Tax Rate | Amount | Tax Rate | Amount | ||||||||
| % | MCh$ | % | MCh$ | % | MCh$ | ||||||||
| Calculation of Statutory Rate | (25.50 | ) | 2,538 | (24.00 | ) | 2,617 | (22.50 | ) | 27,682 | ||||
| Colombia investment foreign exchange rate variation | 204.84 | (20,390 | ) | 1.06 | (116 | ) | — | — | |||||
| Monetary Correction Tax Capital | 141.93 | (14,128 | ) | 129.59 | (14,132 | ) | 5.12 | (6,300 | ) | ||||
| Local Tax for United States and Panama results | 98.46 | (9,801 | ) | (57.55 | ) | 6,276 | — | — | |||||
| Effect of rate change Chile | 51.68 | (5,144 | ) | 36.27 | (3,955 | ) | (0.02 | ) | 26 | ||||
| Tax Reform EE.UU 35%-21% | (95.21 | ) | 9,477 | — | — | — | — | ||||||
| Effect of rate change Colombia | (47.07 | ) | 4,685 | 21.57 | (2,352 | ) | — | — | |||||
| Effect of rates New York subsidiary (**) | (14.65 | ) | 1,458 | 20.52 | (2,238 | ) | — | — | |||||
| Effect of rates Colombia subsidiary (**) | 54.55 | (5,430 | ) | 34.06 | (3,714 | ) | — | — | |||||
| Other differences (*) | 162.11 | (16,136 | ) | (128.80 | ) | 14,046 | 3.37 | (4,145 | ) | ||||
| 531.14 | (52,871 | ) | 32.72 | (3,568 | ) | (14.03 | ) | 17,263 | |||||
(*)Other includes, mainly, a) benefits derived from the tax effect of goodwill from business combinations in Colombia made by Corpbanca prior to the acquisition of Itau, amounting to MCh($20,568) in 2017 and MCh($14,276) in 2016 and, b) the 2016 period includes effects of wealth tax in Colombia and one-time effects derived from a business combination between Itaú and Corpbanca.
(**) This line reflects the differences in tax rates in other jurisdictions, based on the Bank’s consolidated results.
d) Other comprehensive income — tax effects.
The table below sets for a summary of the deferred tax effect on other comprehensive income for the years ended December 31, 2017, 2016 and 2015, which consists of the following items:
d.1 Tax effect of “OCI” that may be reclassified to profit in subsequent periods:
| 2017 | 2016 | 2015 | |||||
| MCh$ | MCh$ | MCh$ | |||||
| Financial assets available-for sale | (3,333 | ) | (4,025 | ) | (218 | ) | |
| Hedge of a net investment in foreign operations | (14,211 | ) | (2,685 | ) | — | ||
| Cash flow hedge | 44 | 1,345 | — | ||||
| Total charge to other comprehensive income | (17,500 | ) | (5,365 | ) | (218 | ) |
d.2 “OCI” that will not be reclassified subsequently to profit or loss:
| 2017 | 2016 | 2015 | |||||
| MCh$ | MCh$ | MCh$ | |||||
| Income tax relating to defined benefit obligation | (6 | ) | 1,090 | — | |||
| Total charge to other comprehensive income | (6 | ) | 1,090 | — |
e) Effect of deferred taxes.
The deferred tax effects presented by geographic area were as follows:
e.1 Deferred taxes:
| As of December 31, 2017 | |||||||||
| Chile | New York | Colombia | Total | ||||||
| MCh$ | MCh$ | MCh$ | MCh$ | ||||||
| Deferred tax assets | 125,917 | 14,768 | — | 140,685 | |||||
| Deferred tax liabilities | (53 | ) | — | (26,301 | ) | (26,354 | ) | ||
| Net by geographic area | 125,864 | 14,768 | (26,301 | ) | 114,331 | ||||
| As of December 31, 2016 | |||||||||
| Chile | New York | Colombia | Total | ||||||
| MCh$ | MCh$ | MCh$ | MCh$ | ||||||
| Deferred tax assets | 87,399 | 23,340 | 26 | 110,765 | |||||
| Deferred tax liabilities | (29 | ) | — | (57,607 | ) | (57,636 | ) | ||
| Net by geographic area | 87,370 | 23,340 | (57,581 | ) | 53,129 | ||||
e.2 Deferred taxes by geographic area:
Below are the effects of deferred taxes on assets and liabilities assigned as a result of temporary differences (by geographic area):
| As of December 31, 2017 | |||||||||
| Chile | New York | Colombia | Total | ||||||
| MCh$ | MCh$ | MCh$ | MCh$ | ||||||
| Loan provision | 93,864 | 11,615 | 17,621 | 123,100 | |||||
| Accrued interest and indexation past due portfolio | 6,970 | — | — | 6,970 | |||||
| Unaccrued price difference | 220 | — | — | 220 | |||||
| Personnel provisions | 7,829 | 282 | 4,439 | 12,550 | |||||
| Miscellaneous provisions | 28,582 | 1,221 | 4,225 | 34,028 | |||||
| Subsidiary tax loss | 16,607 | 9,146 | 46,166 | 71,919 | |||||
| Net tax value of amortizable assets | 20,683 | — | — | 20,683 | |||||
| Depreciation of property, plant and equipment | (34,308 | ) | — | (11,548 | ) | (45,856 | ) | ||
| Lease division and others | 25,392 | — | 4,175 | 29,567 | |||||
| Market value of financial instruments | (12,259 | ) | — | (26,730 | ) | (38,989 | ) | ||
| Intagration Itaú Corpbanca | (18,139 | ) | — | (50,158 | ) | (68,297 | ) | ||
| Others | (9,577 | ) | (7,496 | ) | (14,491 | ) | (31,564 | ) | |
| Total asset (liability), net | 125,864 | 14,768 | (26,301 | ) | 114,331 | ||||
| As of December 31, 2016 | |||||||||
| Chile | New York | Colombia | Total | ||||||
| MCh$ | MCh$ | MCh$ | MCh$ | ||||||
| Loan provision | 73,019 | 8,846 | 15,988 | 97,853 | |||||
| Accrued interest and indexation past due portfolio | 6,958 | — | — | 6,958 | |||||
| Unaccrued price difference | 142 | — | — | 142 | |||||
| Personnel provisions | 4,899 | 1,885 | 5,742 | 12,526 | |||||
| Miscellaneous provisions | 7,627 | 14,058 | 22,534 | 44,219 | |||||
| Subsidiary tax loss | 1,201 | 640 | — | 1,841 | |||||
| Net tax value of amortizable assets | 18,557 | — | — | 18,557 | |||||
| Depreciation of property, plant and equipment | (23,864 | ) | — | (3,908 | ) | (27,772 | ) | ||
| Lease division and others | 19,823 | — | 5,171 | 24,994 | |||||
| Market value of financial instruments | (12,554 | ) | — | (27,989 | ) | (40,543 | ) | ||
| Intangible assets Corpbanca Colombia | (1,512 | ) | — | (366 | ) | (1,878 | ) | ||
| Intangible assets mercantile credit Corpbanca Colombia | — | — | 67 | 67 | |||||
| Intagration Itaú Corpbanca | (8,652 | ) | — | (55,727 | ) | (64,379 | ) | ||
| Others | 1,726 | (2,089 | ) | (19,093 | ) | (19,456 | ) | ||
| Total asset (liability), net | 87,370 | 23,340 | (57,581 | ) | 53,129 | ||||