NOTE 14
CURRENT AND DEFERRED TAXES
a) Current taxes
As of December 31, 2017 and 2016, the Bank recognizes taxes payable (recoverable), which is determined based on the currently applicable tax legislation. This amount is recorded net of recoverable taxes, and is shown as follows:
| As of December 31, | ||||
| 2017 | 2016 | |||
| MCh$ | MCh$ | |||
| Summary of current tax liabilities (assets) | ||||
| Current tax (assets) | - | - | ||
| Current tax liabilities | 6,435 | 29,294 | ||
| Total tax payable (recoverable) | 6,435 | 29,294 | ||
| (Assets) liabilities current taxes detail (net) | ||||
| Income tax, tax rate(*) | 145,112 | 145,963 | ||
| Minus: | ||||
| Provisional monthly payments | (136,562) | (113,700) | ||
| Credit for training expenses | (1,768) | (1,972) | ||
| Land taxes leasing | - | - | ||
| Grant credits | (968) | (1,079) | ||
| Other | 621 | 82 | ||
| Total tax payable (recoverable) | 6,435 | 29,294 | ||
(*)The tax rate is 25.5% for 2017 and 24.0% for 2016.
b) Effect on income
The effect of tax expense on income for the years ended December 31, 2017 and 2016 is comprised of the following items:
| As of December 31, | |||||
| 2017 | 2016 | 2015 | |||
| MCh$ | MCh$ | MCh$ | |||
| Income tax expense | |||||
| Current tax | 145,112 | 145,963 | 121,775 | ||
| Credits (debits) for deferred taxes | |||||
| Origination and reversal of temporary differences | (6,751) | (37,269) | (45,672) | ||
| Valuation provision | 5,955 | ||||
| Subtotals | 144,316 | 108,694 | 76,103 | ||
| Tax for rejected expenses (Article No.21) | 610 | 336 | 340 | ||
| Other | 105 | 1 | (48) | ||
| Net charges for income tax expense | 145,031 | 109,031 | 76,395 | ||
c) Effective tax rate reconciliation
The reconciliation between the income tax rate and the effective rate applied in determining tax expenses as of December 31, 2017, 2016 and 2015, is as follows:
| Fort he year ended December 31, | ||||||||||||
| 2017 | 2016 | 2015 | ||||||||||
Tax rate |
Amount |
|
Tax rate |
Amount | Tax | |||||||
| rate | Amount | |||||||||||
| % | MCh$ | % | MCh$ | % | MCh$ | |||||||
| Tax calculated over profit before tax | 25.50 | 183,671 | 24.00 | 140,991 | 22.50 | 118,828 | ||||||
| Price level restatement for tax purposes(1) | (3.03) | (21,829) | (5.49) | (32,256) | (5.42) | (28,630) | ||||||
| Single penalty tax (rejected expenses) | 0.08 | 610 | 0.06 | 336 | 0.06 | 340 | ||||||
| Effect of tax reform changes on deferred tax(2) | (2.86) | (20,600) | 0.01 | 86 | (2.01) | (10,600) | ||||||
| Real estate taxes | 0.00 | - | 0.00 | - | (0.73) | (3,853) | ||||||
| Other | 0.44 | 3,179 | (0.02) | (126) | 0.06 | 310 | ||||||
| Effective rates and expenses for income tax | 20.13 | 145,031 | 18.56 | 109,031 | 14.46 | 76,395 | ||||||
(1) Price level restatement on tax purpose capital
(2) In accordance with Chilean Law N°20.780 published in September 29, 2014 the income tax rate are 25,5% and 27% for 2017 and 2018 respectively.
d) Effect of deferred taxes on comprehensive income
Below is a summary of the separate effect of deferred tax on other comprehensive income, showing the asset and liability balances, for the years ended December 31, 2017 and 2016:
| As of December 31, | ||||
| 2017 | 2016 | |||
| MCh$ | MCh$ | |||
| Deferred tax assets | ||||
| Available for sale investments | 368 | 3,266 | ||
| Cash flow hedges | 908 | - | ||
| Total deferred tax assets recognized through other comprehensive income | 1,276 | 3,266 | ||
| Deferred tax liabilities | ||||
| Available for sale investments | (841) | (5,036) | ||
| Cash flow hedges | - | (549) | ||
| Total deferred tax liabilities recognized through other comprehensive income | (841) | (5,585) | ||
| Net deferred tax balances in equity | 435 | (2,319) | ||
| Deferred taxes in equity attributable to equity holders of the Bank | 791 | (2,097) | ||
| Deferred tax in equity attributable to non-controlling interests | (356) | (222) | ||
e) Effect of deferred taxes on income
As of December 31, 2017 and 2016, the Bank has recorded effects for deferred taxes in the financial statements.
| As of December 31, | |||
| 2017 | 2016 | ||
| MCh$ | MCh$ | ||
| Deferred tax assets | |||
| Interests and adjustments | 8,645 | 9,473 | |
| Non-recurring charge-offs | 11,651 | 9,891 | |
| Assets received in lieu of payment | 1,582 | 2,999 | |
| Exchange rate adjustments | 882 | - | |
| Property, plant and equipment valuation | 4,410 | 4,570 | |
| Allowance for loan losses | 160,359 | 163,456 | |
| Provision for expenses | 73,518 | 67,073 | |
| Leased assets | 98,090 | 71,834 | |
| Subsidiaries tax losses | 5,277 | 9,467 | |
| Prepaid expenses | 151 | - | |
| Other | 5,249 | 17,571 | |
| Total deferred tax assets | 369,814 | 356,334 | |
| Deferred tax liabilities | |||
| Valuation of investments | (1,911) | (1,802) | |
| Depreciation | (532) | - | |
| Valuation proviision | (5,955) | - | |
| Other | (432) | (299) | |
| Total deferred tax liabilities | (8,830) | (2,101) | |
f) Summary of deferred tax assets and liabilities
Below is a summary of the deferred taxes impact on equity and income.
| As of December 31, | |||
| 2017 | 2016 | ||
| MCh$ | MCh$ | ||
| Deferred tax assets | |||
| Recognized through other comprehensive income | 1,276 | 3,266 | |
| Recognized through profit or loss | 369,815 | 356,334 | |
| Total deferred tax assets | 371,091 | 359,600 | |
| Deferred tax liabilities | |||
| Recognized through other comprehensive income | (841) | (5,585) | |
| Recognized through profit or loss | (8,822) | (2.101) | |
| Total deferred tax liabilities | (9,663) | (7.686) | |