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CURRENT AND DEFERRED TAXES

12 Months Ended

Dec. 31, 2017

Major components of tax expense (income) [abstract]

NOTE 18 - CURRENT AND DEFERRED TAXES

In the period ended December 31, 2017, the income tax provision was calculated for such period, applying the rate of 25.5% for the business year 2017, in accordance with the Law No. 20,780 published in the Official Journal of the Republic of Chile on September 29, 2014.

Among the main changes is the progressive increase of the First Category Tax which will reach 27% in 2018 if the "Partially Integrated Taxation System" is chosen. Alternatively, if the Company chooses the "Attributed Income Taxation System" the top rate would reach 25% in 2017.

As LATAM Airlines Group S.A. is a public company, by default it must choose the "Partially Integrated Taxation System", unless a future Extraordinary Meeting of Shareholders of the Company agrees, by a minimum of 2/3 of the votes, to choose the "Attributed Income Taxation System". This decision was taken in the last quarter of 2016.

On February 8, 2016, an amendment to the abovementioned Law was issued (as Law 20,899) stating, as its main amendments, that Companies such Latam Airlines Group S.A. had to mandatorily choose the "Partially Integrated Taxation System" and could not elect to use the other system.

The Partially Integrated Taxation System is based on the taxation by the perception of profits and the Attributed Income Taxation System is based on the taxation by the accrual of profits.

Assets and deferred tax liabilities are offset if there is a legal right to offset the assets and liabilities always correspond to the same entity and tax authority.

(a)	Current taxes

(a.1) The composition of the current tax assets is the following:

	Current assets				Non-current assets				Total assets
	As of		As of		As of		As of		As of		As of
	December 31,		December 31,		December 31,		December 31,		December 31,		December 31,
	2017		2016		2017		2016		2017		2016
	ThUS$		ThUS$		ThUS$		ThUS$		ThUS$		ThUS$

Provisional monthly
payments (advances)		65,257		43,821		-		-		65,257		43,821
Other recoverable credits		12,730		21,556		17,532		20,272		30,262		41,828
Total assets by current tax		77,987		65,377		17,532		20,272		95,519		85,649

(a.2) The composition of the current tax liabilities are as follows:

	Current liabilities				Non-current liabilities				Total liabilities
	As of		As of		As of		As of		As of		As of
	December 31,		December 31,		December 31,		December 31,		December 31,		December 31,
	2017		2016		2017		2016		2017		2016
	ThUS$		ThUS$		ThUS$		ThUS$		ThUS$		ThUS$

Income tax provision		3,511		9,632		-		-		3,511		9,632
Additional tax provision		-		4,654		-		-		-		4,654
Total liabilities by current tax		3,511		14,286		-		-		3,511		14,286

(b) Deferred taxes

The balances of deferred tax are the following:

	Assets						Liabilities
	As of			As of			As of			As of
	December 31,			December 31,			December 31,			December 31,
Concept	2017			2016			2017			2016
	ThUS$			ThUS$			ThUS$			ThUS$

Depreciation		210,855			11,735			1,401,277			1,387,760
Leased assets		(103,201	)		(35,922	)		275,142			203,836
Amortization		(484	)		(15,820	)		54,335			61,660
Provisions		(9,771	)		222,253			690			(59,096	)
Revaluation of financial instruments		(734	)		-			(4,484	)		(3,223	)
Tax losses		290,973			202,536			(1,188,586	)		(1,126,200	)
Intangibles		-			-			406,536			430,705
Others		(23,617	)		(202	)		4,787			20,317
Total		364,021			384,580			949,697			915,759

The balance of deferred tax assets and liabilities are composed primarily of temporary differences to be reversed in the long term.

Movements of Deferred tax assets and liabilities

(a)	From January 1 to December 31, 2015

	Opening			Recognized in			Recognized in			Exchange						Ending
	balance			consolidated			comprehensive			rate						balance
	Assets/(liabilities)			income			income			variation			Others			Asset (liability)
	ThUS$			ThUS$			ThUS$			ThUS$			ThUS$			ThUS$
Depreciation		(871,640	)		(267,891	)		-			8,540			-			(1,130,991	)
Leased assets		(185,775	)		(73,330	)		-			7,803			-			(251,302	)
Amortization		(160,100	)		84,330			-			4,606			-			(71,164	)
Provisions		351,077			150,362			3,911			(126,813	)		-			378,537
Revaluation of financial instruments		12,806			19,760			(21,103	)		(3,179	)		-			8,284
Tax losses (*)		722,749			320,397			-			(33,364	)		-			1,009,782
Intangibles		(523,275	)		(8,362	)		-			167,323			-			(364,314	)
Others		9,587			45,638			-			(62,182	)		(6,845	)		(13,802	)

Total		(644,571	)		270,904			(17,192	)		(37,266	)		(6,845	)		(434,970	)

(b)	From January 1 to December 31, 2016

	Opening			Recognized in			Recognized in			Exchange						Ending
	balance			consolidated			comprehensive			rate						balance
	Assets/(liabilities)			income			income			variation			Others			Asset (liability)
	ThUS$			ThUS$			ThUS$			ThUS$			ThUS$			ThUS$
Depreciation		(1,130,991	)		(241,435	)		-			(3,599	)		-			(1,376,025	)
Leased assets		(251,302	)		14,833			-			(3,289	)		-			(239,758	)
Amortization		(71,164	)		(4,375	)		-			(1,941	)		-			(77,480	)
Provisions		378,537			(149,969	)		921			53,448			(1,568	)		281,369
Revaluation of financial instruments		8,284			28,294			(34,695	)		1,340			-			3,223
Tax losses (*)		1,009,782			304,892			-			14,062			-			1,328,736
Intangibles		(364,314	)		4,131			-			(70,522	)		-			(430,705	)
Others		(13,802	)		(30,185	)		-			22,234			1,214			(20,539	)

Total		(434,970	)		(73,814	)		(33,774	)		11,733			(354	)		(531,179	)

(c)	From January 1 to December 31, 2017

	Opening			Recognized in			Recognized in			Exchange			Ending
	balance			consolidated			comprehensive			rate			balance
	Assets/(liabilities)			income			income			variation			Asset (liability)
	ThUS$			ThUS$			ThUS$			ThUS$			ThUS$
Depreciation		(1,376,025	)		185,282			-			322			(1,190,421	)
Leased assets		(239,758	)		(138,879	)		-			294			(378,343	)
Amortization		(77,480	)		22,486			-			174			(54,820	)
Provisions		281,369			(286,267	)		(785	)		(4,778	)		(10,461	)
Revaluation of financial instruments		3,223			2,417			(1,770	)		(120	)		3,750
Tax losses (*)		1,328,736			152,081			-			(1,257	)		1,479,560
Intangibles		(430,705	)		24,436			-			(267	)		(406,536	)
Others		(20,539	)		(7,547	)		-			(319	)		(28,405	)

Total		(531,179	)		(45,991	)		(2,555	)		(5,951	)		(585,676	)

Deferred tax assets not recognized:

	As of		As of
	December 31,		December 31,
	2017		2016
	ThUS$		ThUS$

Tax losses		81,155		115,801
Total Deferred tax assets not recognized		81,155		115,801

Deferred tax assets on tax loss, are recognized to the extent that it is likely probable the realization of future tax benefit By the above at December 31, 2017, the Company has not recognized deferred tax assets of ThUS$ 81,155 (ThUS$ 115,801 at December 31, 2016) according with a loss of ThUS$ 247,920 (ThUS$ 340,591 at December 31, 2016).

Deferred tax expense and current income taxes:

	For the period ended
	December 31,
	2017		2016		2015
	ThUS$		ThUS$		ThUS$
Current tax expense
Current tax expense		127,024		87,307		92,916
Adjustment to previous period’s current tax		489		2,083		(395	)
Total current tax expense, net		127,513		89,390		92,521

Deferred tax expense
Deferred expense for taxes related to the creation and reversal of temporary differences		45,991		73,814		(270,904	)
Reduction (increase) in value of deferred tax assets during the evaluation of its usefulness		-		-		-
Total deferred tax expense, net		45,991		73,814		(270,904	)
Income tax expense		173,504		163,204		(178,383	)

Composition of income tax expense (income):

	For the period ended
	December 31,
	2017		2016			2015
	ThUS$		ThUS$			ThUS$

Current tax expense, net, foreign		100,657		80,600			89,460
Current tax expense, net, Chile		26,856		8,790			3,061
Total current tax expense, net		127,513		89,390			92,521

Deferred tax expense, net, foreign		21,846		119,175			(280,445	)
Deferred tax expense, net, Chile		24,145		(45,361	)		9,541
Deferred tax expense, net, total		45,991		73,814			(270,904	)
Income tax expense		173,504		163,204			(178,383	)

Profit before tax by the legal tax rate in Chile (25.5% and 24.0% at December 31, 2017 and 2016, respectively)

	For the period ended									For the period ended
	December 31,									December 31,
	2017			2016			2015			2017			2016			2015
	ThUS$			ThUS$			ThUS$			%			%			%

Tax expense using the legal rate (*)		95,425			65,449			(89,472	)		25.50			24.00			22.50
Tax effect by change in tax rate (*)		897			-			-			0.24			-			-
Tax effect of rates in other jurisdictions		42,326			16,333			(21,803	)		11.31			5.99			5.48
Tax effect of non-taxable operating revenues		(44,593	)		(62,419	)		(106,381	)		(11.92	)		(22.89	)		26.75
Tax effect of disallowable expenses		35,481			132,469			38,677			9.48			48.58			(9.73	)
Tax effect of the use of tax losses not previously recognized		211			-			-			0.06			-			-
Other increases (decreases) in legal tax charge		43,757			11,372			596			11.69			4.17			(0.15	)
Total adjustments to tax expense using the legal rate		78,079			97,755			(88,911	)		20.86			35.85			22.35
Tax expense using the effective rate		173,504			163,204			(178,383	)		46.36			59.85			44.85

(*) On September 29, 2014, Law No. 20,780 "Amendment to the system of income taxation and introduces various adjustments in the tax system." was published in the Official Journal of the Republic of Chile. Within major tax reforms that this law contains, the First- Category Tax rate is gradually modified from 2014 to 2018 and should be declared and paid in tax year 2015.

Thus, at December 31, 2017 the Company presents the reconciliation of income tax expense and legal tax rate considering the rate increase.

Deferred taxes related to items charged to net equity:

	For the period ended
	December 31,
	2017			2016
	ThUS$			ThUS$

Aggregate deferred taxation of components of other comprehensive income		(2,555	)		(33,774	)
Aggregate deferred taxation related to items charged to net equity		-			(807	)