3.16. Taxation
Expenses related to income tax and social contributions represent the sum of the current and deferred taxes. Additionally, the option of calculating taxes on the results of the Company is by the method of actual profits.
3.16.1. Current taxes
The provision for income tax (IRPJ) and social contributions (CSLL) is based on the taxable income for the year. Taxable income differs from income presented in the statement of profit and loss because it excludes taxable income or expenses deductible in other periods, in addition to deleting items that are not taxable or not deductible on a permanent basis. The provision for income tax and social contributions is calculated individually for each company based on the Company’s current rates at the end of the period.
3.16.2. Deferred taxes
The deferred income tax and social contributions are recognized at the end of each reporting period, on temporary differences between the balances of assets and liabilities recognized in the financial statements and the corresponding tax bases used in the computation of taxable income, including the balance of tax losses, when applicable. The deferred tax liabilities are generally recognized for all taxable temporary differences and deferred asset taxes are recognized on all deductible temporary differences, only when it is probable that the Company will present sufficient future taxable income in relation to which these deductible temporary differences can be utilized.
The recovery of the balance of deferred asset taxes is reviewed at the end of each reporting period and, when it is no longer probable that future taxable income will be available to allow the recovery of all or part of asset the balance of the asset is adjusted by the amount which is expected to be recovered.
Deferred asset and liability taxes are measured by the tax rates applicable in the period in which the liability is expected to be settled or the asset is realized, based on tax rates provided for by the legislation in effect at the end of each reporting period, or when new legislation has been approved. The measurement of deferred tax on liabilities and assets reflects the tax consequences that would result in the manner which the Company expects, at the end of each reporting period, to recover or liquidate the book value of these assets and liabilities.
The current and deferred taxes are recognized in the income, except when they correspond to items recorded in other comprehensive income, or directly in equity, in which case the current and deferred taxes are also recognized in other comprehensive income or directly in net equity, respectively. When the current and deferred taxes originate from the initial accounting for a business combination, the tax effect is considered in the accounting of the business combination.