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CURRENT AND DEFERRED TAXES

12 Months Ended

Dec. 31, 2022

Disclosure Of Income Tax Text Block Abstract

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