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Current and Deferred Taxes

12 Months Ended

Dec. 31, 2019

Current and Deferred Taxes [Abstract]

NOTE 15

CURRENT AND DEFERRED TAXES

Current taxes

As of December 31, 2019 and 2018, the Bank recognises taxes payable (recoverable), which is determined based on the currently applicable tax legislation, This amount is recorded net of recoverable taxes, and is shown as follows:

	As of December 31,
	2019			2018
	MCh$			MCh$

Summary of current tax liabilities (assets)
Current tax (assets)		(11,648	)		-
Current tax liabilities		-			8,093

Total tax payable (recoverable)		(11,648	)		8,093

(Assets) liabilities current taxes detail (net)
Income tax, tax rate		153,424			196,527
Minus:
Provisional monthly payments		(159,943	)		(186,060	)
Credit for training expenses		(2,145	)		(1,937	)
Land taxes leasing					-
Grant credits		(1,149	)		(1,320	)
Other		(1,835	)		883

Total tax payable		(11,648	)		8,093

Effect on income

The effect of income tax expense on income for the years ended December 31, 2019, 2018 and 2017 is comprised of the following items:

	As of December 31,
	2019			2018			2017
	MCh$			MCh$			MCh$

Income tax expense
Current tax		153,424			196,527			145,112

Credits (debits) for deferred taxes
Origination and reversal of temporary differences		37,432			(25,517	)		(6,751	)
Valuation provision		-			(56	)		5,955
Subtotals		190,856			170,954			144,316
Tax for rejected expenses (Article No21)		927			1,110			610
Other		(16,709	)		(4,920	)		105
Net charges for income tax expense		175,074			167,144			145,031

Effective tax rate reconciliation

The reconciliation between the income tax rate and the effective rate applied in determining tax expenses as of December 31, 2019, 2018 and 2017, is as follows:

	For the year ended December 31,
	2019						2018						2017
	Tax						Tax						Tax
	rate			Amount			rate			Amount			rate			Amount
	%			MCh$			%			MCh$			%			MCh$

Tax calculated over profit before tax		27.00			214,566			27.00			207,046			25.50			183,671
Price level restatement for tax purposes⁽¹⁾		(6.33	)		(50,297	)		(5.15	)		(39,494	)		(3.03	)		(21,829	)
Single penalty tax (rejected expenses)		0.12			927			0.14			1,110			0.08			610
Effect of tax reform changes on deferred tax⁽²⁾		-			-			-			-			(2.86	)		(20,600	)
Real estate taxes		-			-			-			-			-			-
Other		1.24			9,878			(0.20	)		(1,518	)		0.44			3,179
Effective tax rates and expenses for income tax		22.03			175,074			21.79			167,144			20.13			145,031

(1)

Mainly corresponds to the permanent differences originated from the Own Tax Monetary Correction and the effect of the bonds received to article 104 of LIR.

Effect of deferred taxes on comprehensive income

Below is a summary of the separate effect of deferred tax on other comprehensive income, showing the asset and liability balances, for the years ended December 31, 2019 and 2018:

	As of December 31,
	2019			2018
	MCh$			MCh$

Deferred tax assets
Debt instruments at FVOCI		8,074			1,166
Cash flow hedges		10,918			65
Total deferred tax assets recognised through other comprehensive income		18,992			1,231

Deferred tax liabilities
Available for sale investments		-			-
Debt instruments at FVOCI		(15,830	)		(2,976	)
Cash flow hedges		-			(2,711	)
Total deferred tax liabilities recognised through other comprehensive income		(15,830	)		(5,687	)

Net deferred tax balances in equity		3,162			(4,456	)

Deferred taxes in equity attributable to shareholders of the Bank		3,444			(4,102	)
Deferred tax in equity attributable to non-controlling interests		(282	)		(354	)

Effect of deferred taxes on income

As of December 31, 2019 and 2018, the Bank has recorded effects for deferred taxes in the financial statements:

	As of December 31,
	2019			2018
	MCh$			MCh$
Deferred tax assets
Interests and adjustments		9,531			9,384
Non-recurring charge-offs		15,325			13,389
Assets received in lieu of payment		1,214			785
Exchange rate adjustments		-			1,675
Property, plant and equipment valuation		6,381			6,138
Allowance for loan losses		188,956			184,488
Provision for expenses		89,098			63,134
Derivatives		-			3,924
Leased assets		116,226			107,897
Subsidiaries tax losses		5,416			5,314
Prepaid expenses		-			156
Right of use assets		249			-
Total deferred tax assets		432,396			396,284

Deferred tax liabilities
Valuation of investments		(17,518	)		(42	)
Prepaid expenses		(20,347	)		(349	)
Depreciation		-			-
Valuation provision		(6,058	)		(5,989	)
Derivatives		(36,512	)		-
Exchange rate adjustments		(2,817	)		(3,383	)
Other		(75	)		(20	)
Total deferred tax liabilities		(83,327	)		(9,783	)

Summary of deferred tax assets and liabilities

Below is a summary of the deferred taxes impact on equity and income,

	As of December 31,
	2019			2018
	MCh$			MCh$

Deferred tax assets
Recognised through other comprehensive income		18,992			1,231
Recognised through profit or loss		432,396			396,284
Total deferred tax assets		451,388			397,515

Deferred tax liabilities
Recognised through other comprehensive income		(15,830	)		(5,687	)
Recognised through profit or loss		(83,327	)		(9,783	)
Total deferred tax liabilities		(99,157	)		(15,470	)