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Note 17 - Deferred Income Tax and Social Contribution
 12 Months Ended
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
 )