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CURRENT AND DEFERRED TAXES | 12 Months Ended
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Dec. 31, 2022
Disclosure Of Income Tax Text Block Abstract |
CURRENT AND DEFERRED TAXES | NOTE 17 - CURRENT AND DEFERRED TAXES The Company calculated and booked its income tax provision for the period ended December 31, 2022 using the partially integrated system with a tax rate of 27%, in accordance with the Law No. 21,210, published in the Journal of the Republic of Chile, dated February 24, 2020, which update the Tax Legislation. The net result for deferred tax corresponds to the variation of the year, of the assets and liabilities for deferred taxes generated by temporary differences and tax losses. For the permanent differences that give rise to a book value of assets and liabilities other than their tax value, no deferred tax has been recorded since they are caused by transactions that are recorded in the financial statements and that will have no effect on income tax expense. (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, |
|  | 2022 |  |  | 2021 |  |  | 2022 |  |  | 2021 |  |  | 2022 |  |  | 2021 |
|  | ThUS$ |  |  | ThUS$ |  |  | ThUS$ |  |  | ThUS$ |  |  | ThUS$ |  |  | ThUS$ |
Provisional monthly payments (advances) |  |  | 18,559 |  |  |  | 32,086 |  |  |  | - |  |  |  | - |  |  |  | 18,559 |  |  |  | 32,086 |
Other recoverable credits |  |  | 14,474 |  |  |  | 9,178 |  |  |  | - |  |  |  | - |  |  |  | 14,474 |  |  |  | 9,178 |
Total current tax assets |  |  | 33,033 |  |  |  | 41,264 |  |  |  | - |  |  |  | - |  |  |  | 33,033 |  |  |  | 41,264 |
(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, |
|  | 2022 |  |  | 2021 |  |  | 2022 |  |  | 2021 |  |  | 2022 |  |  | 2021 |
|  | ThUS$ |  |  | ThUS$ |  |  | ThUS$ |  |  | ThUS$ |  |  | ThUS$ |  |  | ThUS$ |
Income tax provision |  |  | 1,026 |  |  |  | 675 |  |  |  | - |  |  |  | - |  |  |  | 1,026 |  |  |  | 675 |
Total current tax liabilities |  |  | 1,026 |  |  |  | 675 |  |  |  | - |  |  |  | - |  |  |  | 1,026 |  |  |  | 675 |
(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 |  | 2022 |  |  | 2021 |  |  | 2022 |  |  | 2021 |
|  | ThUS$ |  |  | ThUS$ |  |  | ThUS$ |  |  | ThUS$ |
Properties, Plants and equipment |  |  | (1,006,814 | ) |  |  | (1,128,225 | ) |  |  | 81,326 |  |  |  | 80,468 |
Assets by right of use |  |  | 249,462 |  |  |  | 715,440 |  |  |  | (45 | ) |  |  | (68 | )
Amortization |  |  | (88,172 | ) |  |  | (44,605 | ) |  |  | 10 |  |  |  | 10 |
Provisions |  |  | (20,563 | ) |  |  | 111,468 |  |  |  | 69,519 |  |  |  | 74,047 |
Revaluation of financial instruments |  |  | 2,438 |  |  |  | (16,575 | ) |  |  | - |  |  |  | - |
Tax losses |  |  | 852,654 |  |  |  | 358,284 |  |  |  | (94,005 | ) |  |  | (87,378 | )
Intangibles |  |  | - |  |  |  | - |  |  |  | 270,512 |  |  |  | 254,155 |
Other |  |  | 16,910 |  |  |  | 19,503 |  |  |  | 17,308 |  |  |  | 19,777 |
Total |  |  | 5,915 |  |  |  | 15,290 |  |  |  | 344,625 |  |  |  | 341,011 |
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 (b.1) From January 1 to December 31, 2020
|  | Opening balance Assets/(liabilities) |  |  | Recognized in consolidated income |  |  | Recognized in comprehensive income |  |  | Exchange rate variation |  |  | Ending balance Asset (liability) |
|  | ThUS$ |  |  | ThUS$ |  |  | ThUS$ |  |  | ThUS$ |  |  | ThUS$ |
Property, plant and equipment |  |  | (1,513,904 | ) |  |  | 110,010 |  |  |  | - |  |  |  | 7,557 |  |  |  | (1,396,337 | )
Assets for right of use |  |  | 133,481 |  |  |  | 95,774 |  |  |  | - |  |  |  | - |  |  |  | 229,255 |
Amortization |  |  | (53,136 | ) |  |  | (14,142 | ) |  |  | - |  |  |  | 2,130 |  |  |  | (65,148 | )
Provisions |  |  | 43,567 |  |  |  | 158,178 |  |  |  | 924 |  |  |  | (58,639 | ) |  |  | 144,030 |
Revaluation of financial instruments |  |  | 10,279 |  |  |  | (27,901 | ) |  |  | 959 |  |  |  | (1,470 | ) |  |  | (18,133 | )
Tax losses (*) |  |  | 1,356,268 |  |  |  | 216,897 |  |  |  | - |  |  |  | (15,428 | ) |  |  | 1,557,737 |
Intangibles |  |  | (349,082 | ) |  |  | 1,030 |  |  |  | - |  |  |  | 77,371 |  |  |  | (270,681 | )
Others |  |  | (8,693 | ) |  |  | 6,541 |  |  |  | - |  |  |  | 1,965 |  |  |  | (187 | )
Total |  |  | (381,220 | ) |  |  | 546,387 |  |  |  | 1,883 |  |  |  | 13,486 |  |  |  | 180,536 |
(b.2) From January 1 to December 31, 2021
|  | Opening |  |  | Recognized in |  |  | Recognized in |  |  | Exchange |  |  | Ending |
|  | balance |  |  | consolidated |  |  | comprehensive |  |  | rate |  |  | balance |
|  | Assets/(liabilities) |  |  | income |  |  | income |  |  | variation |  |  | Asset (liability) |
|  | ThUS$ |  |  | ThUS$ |  |  | ThUS$ |  |  | ThUS$ |  |  | ThUS$ |
Property, plant and equipment |  |  | (1,396,337 | ) |  |  | 187,644 |  |  |  | - |  |  |  | - |  |  |  | (1,208,693 | )
Assets for right of use |  |  | 229,255 |  |  |  | 486,253 |  |  |  | - |  |  |  | - |  |  |  | 715,508 |
Amortization |  |  | (65,148 | ) |  |  | 20,533 |  |  |  | - |  |  |  | - |  |  |  | (44,615 | )
Provisions |  |  | 144,030 |  |  |  | (103,826 | ) |  |  | (2,783 | ) |  |  | - |  |  |  | 37,421 |
Revaluation of financial instruments |  |  | (18,133 | ) |  |  | 1,616 |  |  |  | (58 | ) |  |  | - |  |  |  | (16,575 | )
Tax losses (*) |  |  | 1,557,737 |  |  |  | (1,112,075 | ) |  |  | - |  |  |  | - |  |  |  | 445,662 |
Intangibles |  |  | (270,681 | ) |  |  | (1,394 | ) |  |  | - |  |  |  | 17,920 |  |  |  | (254,155 | )
Others |  |  | (187 | ) |  |  | (87 | ) |  |  | - |  |  |  | - |  |  |  | (274 | )
Total |  |  | 180,536 |  |  |  | (521,336 | ) |  |  | (2,841 | ) |  |  | 17,920 |  |  |  | (325,721 | )
(b.3) From January 1 to December 31, 2022
|  | Opening |  |  | Recognized in |  |  | Recognized in |  |  | Exchange |  |  | Ending |
|  | balance |  |  | consolidated |  |  | comprehensive |  |  | rate |  |  | balance |
|  | Assets/(liabilities) |  |  | income |  |  | income |  |  | variation |  |  | Asset (liability) |
|  | ThUS$ |  |  | ThUS$ |  |  | ThUS$ |  |  | ThUS$ |  |  | ThUS$ |
Property, plant and equipment |  |  | (1,208,693 | ) |  |  | 120,553 |  |  |  | - |  |  |  | - |  |  |  | (1,088,140 | )
Assets for right of use |  |  | 715,508 |  |  |  | (466,001 | ) |  |  | - |  |  |  | - |  |  |  | 249,507 |
Amortization |  |  | (44,615 | ) |  |  | (43,567 | ) |  |  | - |  |  |  | - |  |  |  | (88,182 | )
Provisions |  |  | 37,421 |  |  |  | (128,070 | ) |  |  | 567 |  |  |  | - |  |  |  | (90,082 | )
Revaluation of financial instruments |  |  | (16,575 | ) |  |  | 19,248 |  |  |  | (235 | ) |  |  | - |  |  |  | 2,438 |
Tax losses (*) |  |  | 445,662 |  |  |  | 500,997 |  |  |  | - |  |  |  | - |  |  |  | 946,659 |
Intangibles |  |  | (254,155 | ) |  |  | 2,114 |  |  |  | - |  |  |  | (18,471 | ) |  |  | (270,512 | )
Others |  |  | (274 | ) |  |  | (124 | ) |  |  | - |  |  |  | - |  |  |  | (398 | )
Total |  |  | (325,721 | ) |  |  | 5,150 |  |  |  | 332 |  |  |  | (18,471 | ) |  |  | (338,710 | )
Unrecognized deferred tax assets: Deferred tax assets are recognized to the extent that it is probable that sufficient taxable profits will be generated in the future. In total the Company has not recognized deferred tax assets for ThUS$ 3,651,023 at December 31, 2022 (ThUS$ 2,638,473 as of December 31, 2021) which include deferred tax assets related to negative tax results of ThUS$ 14,930,487 at December 31, 2022 (ThUS$ 9,030,059 at December 31, 2021).
(*) | As stated in note 2c), on November 26th, 2021 the Company filed a Reorganization Plan and Disclosure Statement in which, among other items, financial forecasts were included together with the proposed issuance of new shares and convertible notes. With that information the Company´s management updated its analysis on the recoverability of deferred tax assets and determined that during the time covered by the financial forecast it will not be probable that part of such deferred tax assets may be offset by future taxable profits. Therefore, the Company during the fourth quarter of 2021 derecognized deferred tax assets not considered recoverable in the amount of ThUS$1,251,912. On the other hand, on December 31, 2022 the Company management of subsidiary Lan Cargo S.A determined that considering financial forecast it will not be probable that part of the deferred tax assets may be offset with future taxable profits. Therefore, the Company derecognized deferred tax assets not considered recoverable in the amount of ThUS$6,173.
(Expenses)/income from deferred taxes and income tax:
|  | For the year ended December 31, |
|  | 2022 |  |  | 2021 |  |  | 2020 |
|  | ThUS$ |  |  | ThUS$ |  |  | ThUS$ |
Income tax (expense)/benefit |  |  |  |  |  |  |  |  |
Current tax (expense) benefit |  |  | (14,064 | ) |  |  | (47,139 | ) |  |  | 3,602 |
Adjustments to the current tax of the previous year |  |  | - |  |  |  | (460 | ) |  |  | 199 |
Total current tax (expense) benefit |  |  | (14,064 | ) |  |  | (47,599 | ) |  |  | 3,801 |
(Expense)/benefit from deferred income taxes |  |  |  |  |  |  |  |  |  |  |  |
Deferred (expense) benefit for taxes related to the creation and reversal of temporary differences |  |  | 5,150 |  |  |  | (521,336 | ) |  |  | 546,387 |
Total deferred tax (expense)benefit |  |  | 5,150 |  |  |  | (521,336 | ) |  |  | 546,387 |
Income tax (expense)/benefit |  |  | (8,914 | ) |  |  | (568,935 | ) |  |  | 550,188 |
|  | For the year ended December 31, |
|  | 2022 |  |  | 2021 |  |  | 2020 |
|  | ThUS$ |  |  | ThUS$ |  |  | ThUS$ |
Current tax (expense) benefit, foreign |  |  | 19,573 |  |  |  | (9,943 | ) |  |  | (4,232 | )
Current tax (expense) benefit, domestic |  |  | (33,637 | ) |  |  | (37,656 | ) |  |  | 8,033 |
Total current tax (expense) benefit |  |  | (14,064 | ) |  |  | (47,599 | ) |  |  | 3,801 |
Deferred tax (expense) benefit, foreign |  |  | (532 | ) |  |  | 4,309 |  |  |  | (235,963 | )
Deferred tax (expense) benefit, domestic |  |  | 5,682 |  |  |  | (525,645 | ) |  |  | 782,350 |
Total deferred tax (expense)benefit |  |  | 5,150 |  |  |  | (521,336 | ) |  |  | 546,387 |
Income tax (expense)/benefit |  |  | (8,914 | ) |  |  | (568,935 | ) |  |  | 550,188 |
Income before tax from the Chilean legal tax rate (27% as of December 31, 2022, 2021 and 2020)
|  | For the year ended |  |  | For the year ended |
|  | December 31, |  |  | December 31, |
|  | 2022 |  |  | 2021 |  |  | 2020 |  |  | 2022 |  |  | 2021 |  |  | 2020 |
|  | ThUS$ |  |  | ThUS$ |  |  | ThUS$ |  |  | % |  |  | % |  |  | % |
Income tax benefit/(expense) using the legal tax rate |  |  | (363,434 | ) |  |  | 1,102,736 |  |  |  | 1,378,547 |  |  |  | (27.00 | ) |  |  | (27.00 | ) |  |  | (27.00 | )
Tax effect by change in tax rate |  |  | 9,016 |  |  |  | - |  |  |  | - |  |  |  | 0.67 |  |  |  | - |  |  |  | - |
Tax effect of rates in other jurisdictions |  |  | 20,398 |  |  |  | 54,775 |  |  |  | 58,268 |  |  |  | 1.52 |  |  |  | (1.34 | ) |  |  | (1.14 | )
Tax effect of non-taxable income (*) |  |  | 1,201,618 |  |  |  | 9,444 |  |  |  | 19,529 |  |  |  | 89.27 |  |  |  | (0.23 | ) |  |  | (0.38 | )
Tax effect of disallowable expenses |  |  | (33,855 | ) |  |  | (30,928 | ) |  |  | (40,528 | ) |  |  | (2.52 | ) |  |  | 0.76 |  |  |  | 0.79 |
Other increases (decreases): |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Derecognition of deferred tax liabilities for early termination of aircraft financing |  |  | 90,823 |  |  |  | 205,458 |  |  |  | 294,969 |  |  |  | 6.75 |  |  |  | (5.03 | ) |  |  | (5.78 | )
Tax effect for goodwill impairment losses |  |  | - |  |  |  | - |  |  |  | (453,681 | ) |  |  | - |  |  |  | - |  |  |  | 8.89 |
Derecognition of deferred tax assets not recoverable |  |  | (6,173 | ) |  |  | (1,251,912 | ) |  |  | (237,637 | ) |  |  | (0.46 | ) |  |  | 30.65 |  |  |  | 4.65 |
Deferred tax asset not recognized |  |  | (990,095 | ) |  |  | (667,702 | ) |  |  | (414,741 | ) |  |  | (73.56 | ) |  |  | 16.35 |  |  |  | 8.12 |
Other increases (decreases) |  |  | 62,788 |  |  |  | 9,194 |  |  |  | (54,538 | ) |  |  | 4.66 |  |  |  | (0.23 | ) |  |  | 1.07 |
Total adjustments to tax expense using the legal rate |  |  | 354,520 |  |  |  | (1,671,671 | ) |  |  | (828,359 | ) |  |  | 26.33 |  |  |  | 40.93 |  |  |  | 16.22 |
Income tax benefit/(expense) using the effective rate |  |  | (8,914 | ) |  |  | (568,935 | ) |  |  | 550,188 |  |  |  | (0.67 | ) |  |  | 13.93 |  |  |  | (10.78 | )
(*) | As of December 31, 2022, this amount mainly includes ThUS$974,826 and ThUS$218,775 related to amounts resulting from the gain resulting from the de-recognition of financial liabilities as a result of emergence from Chapter 11, and the equity issuance cost which is not taxable respectively.
Deferred taxes related to items charged to equity:
|  | For the year ended |
|  | December 31, |
|  | 2022 |  |  | 2021 |  |  | 2020 |
|  | ThUS$ |  |  | ThUS$ |  |  | ThUS$ |
Aggregate deferred taxation of components of other comprehensive income |  |  | 332 |  |  |  | (2,841 | ) |  |  | 1,883 |

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