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Note 17 - Deferred Income Tax and Social Contribution | 12 Months Ended
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Dec. 31, 2018
Statement Line Items [Line Items] |
Disclosure of deferred income tax and social contribution [text block] |
| 17. | DEFERRED INCOME TAX AND SOCIAL CONTRIBUTION
Deferred taxes for income tax and social contribution taxes are calculated on temporary differences between the tax bases of these taxes and the accounting calculation of the Company, among which, tax losses. The rates of these taxes in Brazil, which are expected at the realization of deferred taxes, are 25% for income tax and 9% for social contribution. For the other regions, with operational activity, expected rates, are as follow:
Central America and the Caribbean |  | from 23% | to | 31%
Latin America (i) |  | from 14% | to | 30%
Canada |  |  | 26% |
(i) Amendments to Argentine tax legislation approved on December 29, 2017 affected the Company beginning in October 2018 and reduced the income tax rate in the first two years from 35% to 30% and, in the following years, to 25%. Deferred tax assets are recognized to the extent that it is probable that future taxable profit is probable, which may be offset against temporary differences recorded currently, with a special emphasis on tax losses. The amount of deferred income tax and social contribution by type of temporary difference is detailed as follows:
|  | 2018 |  | 2017
|  |  | Assets |  |  |  | Liabilities |  |  |  | Net |  |  |  | Assets |  |  |  | Liabilities |  |  |  | Net |
Investment securities |  |  | 10.0 |  |  |  | – |  |  |  | 10.0 |  |  |  | 39.0 |  |  |  | – |  |  |  | 39.0 |
Intangible |  |  | – |  |  |  | (1,031.1 | ) |  |  | (1,031.1 | ) |  |  | – |  |  |  | (719.5 | ) |  |  | (719.5 | )
Employee benefits |  |  | 614.8 |  |  |  | – |  |  |  | 614.8 |  |  |  | 631.1 |  |  |  | – |  |  |  | 631.1 |
Trade payables |  |  | 1,807.8 |  |  |  | (271.9 | ) |  |  | 1,535.9 |  |  |  | 1,382.4 |  |  |  | (314.2 | ) |  |  | 1,068.2 |
Trade receivable |  |  | 41.3 |  |  |  | (2.3 | ) |  |  | 39.0 |  |  |  | 52.3 |  |  |  | – |  |  |  | 52.3 |
Derivatives |  |  | 18.7 |  |  |  | (304.2 | ) |  |  | (285.5 | ) |  |  | 6.8 |  |  |  | (5.8 | ) |  |  | 1.0 |
Interest-Bearing Loans and Borrowings |  |  | 2.5 |  |  |  | (78.5 | ) |  |  | (76.0 | ) |  |  | – |  |  |  | – |  |  |  | – |
Inventories |  |  | 266.7 |  |  |  | (44.8 | ) |  |  | 221.9 |  |  |  | 248.7 |  |  |  | (18.1 | ) |  |  | 230.6 |
Property, plant and equipment |  |  | 109.6 |  |  |  | (1,386.4 | ) |  |  | (1,276.8 | ) |  |  | – |  |  |  | (920.5 | ) |  |  | (920.5 | )
Withholding tax over undistributed profits and royalties |  |  | – |  |  |  | (863.8 | ) |  |  | (863.8 | ) |  |  | – |  |  |  | (788.6 | ) |  |  | (788.6 | )
Investments in joint ventures |  |  | – |  |  |  | (421.6 | ) |  |  | (421.6 | ) |  |  | – |  |  |  | (421.6 | ) |  |  | (421.6 | )
Loss carryforwards |  |  | 791.0 |  |  |  | – |  |  |  | 791.0 |  |  |  | 501.0 |  |  |  | – |  |  |  | 501.0 |
Provisions |  |  | 363.1 |  |  |  | (24.0 | ) |  |  | 339.1 |  |  |  | 347.3 |  |  |  | (39.7 | ) |  |  | 307.6 |
Other items |  |  | 50.6 |  |  |  | (54.6 | ) |  |  | (4.0 | ) |  |  | – |  |  |  | (30.5 | ) |  |  | (30.5 | )
Gross deferred tax assets / (liabilities) |  |  | 4,076.1 |  |  |  | (4,483.2 | ) |  |  | (407.1 | ) |  |  | 3,208.6 |  |  |  | (3,258.5 | ) |  |  | (49.9 | )
Netting by taxable entity |  |  | (2,058.6 | ) |  |  | 2,058.6 |  |  |  | – |  |  |  | (929.3 | ) |  |  | 929.3 |  |  |  | – |
Net deferred tax assets / (liabilities) |  |  | 2,017.5 |  |  |  | (2,424.6 | ) |  |  | (407.1 | ) |  |  | 2,279.3 |  |  |  | (2,329.2 | ) |  |  | (49.9 | )
The Company only offsets the balances of deferred income tax and social contribution assets against liabilities when they are within the same entity, same nature and are expected to be realized in the same period. At December 31, 2018 the assets and liabilities deferred taxes related to combined tax losses has an expected utilization/settlement by temporary differences as follows:
|  | 2018
Deferred taxes not related to tax losses |  | to be realized until 12 months |  | to be realized after 12 months |  | Total
Investment securities |  |  | – |  |  |  | 10.0 |  |  |  | 10.0 |
Intangible |  |  | 0.6 |  |  |  | (1,031.7 | ) |  |  | (1,031.1 | )
Employee benefits |  |  | 61.2 |  |  |  | 553.6 |  |  |  | 614.8 |
Trade payables |  |  | (208.6 | ) |  |  | 1,744.5 |  |  |  | 1,535.9 |
Trade receivable |  |  | 35.0 |  |  |  | 4.0 |  |  |  | 39.0 |
Derivatives |  |  | (302.3 | ) |  |  | 16.8 |  |  |  | (285.5 | )
Interest-bearing loans and borrowings |  |  | (20.6 | ) |  |  | (55.4 | ) |  |  | (76.0 | )
Inventories |  |  | 215.0 |  |  |  | 6.9 |  |  |  | 221.9 |
Property, plant and equipment |  |  | (82.8 | ) |  |  | (1,194.0 | ) |  |  | (1,276.8 | )
Withholding tax over undistributed profits and royalties |  |  | (72.2 | ) |  |  | (791.6 | ) |  |  | (863.8 | )
Investments in joint ventures |  |  | – |  |  |  | (421.6 | ) |  |  | (421.6 | )
Provisions |  |  | 215.8 |  |  |  | 123.3 |  |  |  | 339.1 |
Other items |  |  | (1.4 | ) |  |  | (2.6 | ) |  |  | (4.0 | )
Total |  |  | (160.3 | ) |  |  | (1,037.8 | ) |  |  | (1,198.1 | )
The majority of tax losses and negative social contribution bases on which deferred income tax and social contribution were calculated do not have a limitation period. Its use is based on the projection of the future existence of taxable profits, according to the reality of the past years and to the projections of the Company's business in the economies where it is located, in compliance, therefore, with the applicable fiscal and accounting rules.
Deferred tax related to tax losses |  |  | 2018 |
2019 |  |  | 255.0 |
2020 |  |  | 69.5 |
2021 |  |  | 50.8 |
2022 |  |  | 25.6 |
2023 |  |  | 40.8 |
2024 à 2026 |  |  | 271.3 |
2027 à 2029 (i) |  |  | 78.0 |
Total |  |  | 791.0 |
(i) There is no expectation of realization that exceeds the term of 10 years. As at December 31, 2018, the tax credit related to tax losses in the amount of R$624.3 ( R$427.4 as at December 31, 2017) was not recorded as the realization is not probable. Major part of the tax losses deferred asset amount do not have carryforward limit for utilization and the tax losses carried forward in relation to credit are equivalent to R$2,496.8 in December 31, 2018 ( R$1,709.5 in December 31, 2017). The net change in deferred income tax and social contribution is detailed as follows:
At December 31, 2016 |  |  | (61.5 | )
Full recognition of actuarial gains/(losses) |  |  | 40.2 |
Investment hedge in foreign operations |  |  | (262.7 | )
Investment hedge - put option of a subsidiary interest |  |  | (31.8 | )
Cash flow hedge - gains/(losses) |  |  | (269.2 | )
Gains/(losses) on translation of other foreign operations |  |  | 136.1 |
Recognized in other comprehensive income |  |  | (387.4 | )
Recognized in income statement |  |  | 253.0 |
Changes directly in balance sheet |  |  | 146.0 |
Recognized in deferred tax |  |  | 35.4 |
Recognized in other group of balance sheet |  |  | 110.6 |
At December 31, 2017 |  |  | (49.9 | )
Full recognition of actuarial gains/(losses) |  |  | (3.5 | )
Investment hedge in foreign operations |  |  | 34.5 |
Investment hedge - put option of a subsidiary interest |  |  | 44.1 |
Cash flow hedge - gains/(losses) |  |  | (118.3 | )
Gains/(losses) on translation of other foreign operations |  |  | 283.4 |
Recognized in other comprehensive income |  |  | 240.2 |
Recognized in income statement |  |  | 43.9 |
Changes directly in balance sheet |  |  | (641.3 | )
Recognized in deferred tax |  |  | (652.1 | )
Recognized in other group of balance sheet |  |  | 10.8 |
At December 31, 2018 |  |  | (407.1 | )

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