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Current Taxes and Deferred Taxes | 12 Months Ended
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Dec. 31, 2018
Current Taxes and Deferred Taxes |
Current Taxes and Deferred Taxes | 18. Current Taxes and Deferred Taxes: (a) Current Tax: The Bank and its subsidiaries at the end of each year, have constituted a First Category Income Tax Provision, which was determined based on current tax regulations, and has been reflected in the statement of financial position net of taxes to be recovered or payable, as applicable, as of December 31, 2018 and 2017, according to the following detail:
|  | 2017 |  | 2018
|  | MCh$ |  | MCh$
Income taxes |  | 108,844 |  | 150,798
Less: |  |  |  |
Monthly prepaid taxes (PPM) |  | (123,717) |  | (126,917)
Credit for training expenses |  | (2,036) |  | (2,224)
Other |  | (2,670) |  | (1,410)
Total tax (receivable) payable, net |  | (19,579) |  | 20,247
|  | 2017 |  | 2018
|  | MCh$ |  | MCh$
Current tax assets |  | 23,032 |  | 677
Current tax liabilities |  | (3,453) |  | (20,924)
Total tax receivable (payable), net |  | 19,579 |  | (20,247)
(b) Income Tax: The Bank’s tax expense recorded for the years ended December 31, 2016, 2017 and 2018 is detailed as follows:
|  | 2016 |  | 2017 |  | 2018 |
|  | MCh$ |  | MCh$ |  | MCh$ |
Income tax expense: |  |  |  |  |  |  |
Current year taxes |  | 134,759 |  | 105,024 |  | 159,153 |
Tax from previous period |  | 1,030 |  | (1,401) |  | 2,574 |
Subtotal |  | 135,789 |  | 103,623 |  | 161,727 |
(Credit) charge for deferred taxes: |  |  |  |  |  |  |
Origin and reversal of temporary differences |  | (26,044) |  | 20,043 |  | (4,582) |
Effect of changes in tax rate |  | (9,158) |  | (5,729) |  | ― |
Subtotal |  | (35,202) |  | 14,314 |  | (4,582) |
Other |  | (375) |  | (2,576) |  | 2,623 |
Net charge to income for income taxes |  | 100,212 |  | 115,361 |  | 159,768 |
Tax Rate |  | 24.00 | % | 25.50 | % | 27.00 | %
(c) Reconciliation of effective tax rate: The following table reconciles the income tax rate to the effective rate applied to determine the Bank’s income tax expense as of December 31, 2016, 2017 and 2018:
|  | 2016 |  | 2017 |  | 2018
|  | Tax rate |  |  |  | Tax rate |  |  |  | Tax rate |  |
|  | % |  | MCh$ |  | % |  | MCh$ |  | % |  | MCh$
Income tax calculated on net income before tax |  | 24.00 |  | 162,063 |  | 25.50 |  | 175,298 |  | 27.00 |  | 206,116
Subordinated Debt Payment (*) |  | (5.05) |  | (34,092) |  | (5.67) |  | (38,997) |  | (3.21) |  | (24,515)
Additions or deductions (**) |  | (3.90) |  | (26,332) |  | (2.88) |  | (19,794) |  | (4.18) |  | (31,894)
Tax from previous years |  | 0.15 |  | 1,030 |  | (0.20) |  | (1,401) |  | 0.34 |  | 2,574
Effect of changes in tax rate |  | (1.36) |  | (9,158) |  | (0.83) |  | (5,729) |  | — |  | —
Other |  | 1.00 |  | 6,701 |  | 0.87 |  | 5,984 |  | 0.98 |  | 7,487
Effective rate and income tax expense |  | 14.84 |  | 100,212 |  | 16.79 |  | 115,361 |  | 20.93 |  | 159,768
(*) The tax expense related to the subordinated debt held by SAOS S.A, it ended during the current fiscal year, as a result of the generation of sufficient resources to pay off the total debt. (**) The deductions of the tax rate for 2016, 2017 and 2018 mainly relate to permanent differences between tax and financial accounting rules. On September 29, 2014, Law 20,780, published in the Diario Oficial of Chile (equivalent to the “Federal Register”), amended the System of Income Taxation and introduced various adjustments to the tax system. In the same line, on February 8, 2016 Law 20,899 was published, which established that open corporations must apply the tax regime of the first category with partial deduction of the credit in the final taxes. A regime characterized by the fact that shareholders will only be entitled to allocate against personal taxes (Global Supplementary or Additional), 65% of the first category tax paid by the company. For this tax regime, the law 20,780 establishes a gradual increase of rates to the first category tax rates according to the following periodicity:
Year |  | Rate |
2014 |  | 21.0 | %
2015 |  | 22.5 | %
2016 |  | 24.0 | %
2017 |  | 25.5 | %
2018 |  | 27.0 | %
Additionally, according to No. 11 of Article 1 of Law 20,780, as of January 1, 2017, the rate of sole tax has been increased to rejected expenses of article 21 from 35% to 40%. (b) Effect of deferred taxes on income and equity: The effects of deferred taxes on assets, liabilities and income accounts are detailed as follows:
|  | Balance as of |  | Effect |  | Balance as of |  | Balance as of |  | Effect |  | Balance as of
|  | January 1, |  |  |  |  |  | December 31, |  | January 1, |  |  |  |  |  | December 31,
|  | 2017 |  | Income |  | Equity |  | 2017 |  | 2018 |  | Income |  | Equity |  | 2018
|  | MCh$ |  | MCh$ |  | MCh$ |  | MCh$ |  | MCh$ |  | MCh$ |  | MCh$ |  | MCh$
Debit differences: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Allowances for loan losses |  | 127,719 |  | (12,276) |  | — |  | 115,443 |  | 138,643 |  | 3,232 |  | — |  | 141,875
Personnel provisions |  | 11,231 |  | 1,290 |  | — |  | 12,521 |  | 12,521 |  | 756 |  | — |  | 13,277
Staff vacations |  | 6,674 |  | 234 |  | — |  | 6,908 |  | 6,908 |  | 333 |  | — |  | 7,241
Accrued interest and indexation adjustments from past due loans |  | 3,355 |  | 59 |  | — |  | 3,414 |  | 3,414 |  | (182) |  | — |  | 3,232
Staff severance indemnities provision |  | 1,854 |  | (352) |  | (45) |  | 1,457 |  | 1,457 |  | (8) |  | 35 |  | 1,484
Provisions of credit card expenses |  | 12,459 |  | (3,504) |  | — |  | 8,955 |  | 8,955 |  | 858 |  | — |  | 9,813
Provisions of accrued expenses |  | 14,489 |  | 1,869 |  | — |  | 16,358 |  | 16,358 |  | (3,203) |  | — |  | 13,155
Derivative instruments adjustments |  | — |  | — |  | — |  | — |  | — |  | 1,356 |  | — |  | 1,356
Adjustment for valuation and impairment of financial assets at fair value through OCI |  | — |  | — |  | — |  | — |  | — |  | (419) |  | 1,365 |  | 946
Leasing |  | 37,119 |  | (4,570) |  | — |  | 32,549 |  | 32,549 |  | 10,439 |  | — |  | 42,988
Other adjustments |  | 5,664 |  | 581 |  | 1 |  | 6,246 |  | 6,246 |  | (5,233) |  | 1 |  | 1,014
Total debit differences |  | 220,564 |  | (16,669) |  | (44) |  | 203,851 |  | 227,051 |  | 7,929 |  | 1,401 |  | 236,381
Credit differences: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Depreciation of property and equipment and investment properties |  | 11,815 |  | 2,466 |  | — |  | 14,281 |  | 14,281 |  | 709 |  | — |  | 14,990
Adjustment for valuation and impairment of financial assets at fair value through OCI |  | 1,092 |  | 1 |  | 1,299 |  | 2,392 |  | 2,392 |  | — |  | (2,392) |  | —
Transitory assets |  | 4,772 |  | 714 |  | — |  | 5,486 |  | 5,486 |  | 28 |  | — |  | 5,514
Derivative instruments adjustments |  | 7,707 |  | (3,329) |  | — |  | 4,378 |  | 4,378 |  | (4,378) |  | — |  | —
Accrued interest to effective rate |  | 2,247 |  | (644) |  | — |  | 1,603 |  | 1,603 |  | (39) |  | — |  | 1,564
Advance payment of lump-sum under union contracts |  | — |  | — |  | — |  | — |  | — |  | 6,699 |  | — |  | 6,699
Intangible assets amortization |  | 6,090 |  | (587) |  | — |  | 5,503 |  | 5,503 |  | — |  | — |  | 5,503
Other adjustments |  | 9,918 |  | (976) |  | 1 |  | 8,943 |  | 8,943 |  | 328 |  | — |  | 9,271
Total credit differences |  | 43,641 |  | (2,355) |  | 1,300 |  | 42,586 |  | 42,586 |  | 3,347 |  | (2,392) |  | 43,541
Total Assets (Liabilities), net |  | 176,923 |  | (14,314) |  | (1,344) |  | 161,265 |  | 184,465 |  | 4,582 |  | 3,793 |  | 192,840

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