The Bank recognizes, when appropriate, deferred tax assets and liabilities by the future estimate of tax effects attributable to differences between book values of assets, liabilities and their tax bases. Deferred tax assets and liabilities are measured based on the tax rate that, in accordance with the valid tax laws in each country where The Bank has operations, must be applied in the year in which the deferred tax assets and liabilities are realized or settled. The future effects of changes in tax laws or tax rates are recognized in the deferred taxes as from the date of publication of the law providing for such changes.
Tax bases for deferred tax must be calculated by factoring in the definition of IAS 12 and the value of the assets and liabilities that will be realized or settled in the future according to the valid tax laws of each of the countries where the Bank has operations.
Deferred tax liabilities due to deductible temporary differences associated with investments in subsidiary and associated entities or shares in joint ventures, are recognized except when the Bank is able to control the period in which the deductible temporary difference is reverted. Furthermore, it is likely that it will not be reverted in the foreseeable future.
Deferred tax assets, identified with temporary differences, are only recognized if it is considered likely that The Bank is going to have sufficient taxable income in the future that allow it to be recovered.
Tax credit from fiscal losses and surplus amounts from the presumptive income on the net income are recognized as a deferred asset, provided that it is likely that The Bank is going to generate future net income to allow their offset.
The deferred tax is recorded as debit or credit according to the result of each of the companies that form The Bank and for the purpose of disclosure on the Statement of Financial Position it is disclosed as net.
The income tax expense is recognized on the consolidated income statement under the heading Income Tax, except when referring to amounts directly recognized in the OCI (Other Comprehensive Income).
Regulatory changes in tax laws and in tax rates are recognized in the consolidated income statement under the Income Tax heading in the period when such rule becomes enforceable. Interest and fines are recognized on the consolidated income statement under the overhead and administrative expenses heading.
The Bank periodically assesses the tax positions adopted in tax returns and according to the results of the tax audits held by the control entity determines possible tax eventualities provided it has a present obligation and it is likely that The Bank must part with economic resources to cancel the obligation, for which purpose there must be a reliable estimate of the amount of the obligation. The recorded sums are based on the estimated fair amount that is expected to cover the amount expected to be paid in the future.
Revisions of tax returns must be documented, as well as any uncertain tax positions that are taken in them.
Transfer prices policy
The Bank recognizes operations with economic links applying the Arm's Length Principle. These operations are documented and reported to the tax administration.
