Income taxes

12 Months Ended

Dec. 31, 2018

Disclosure Of Income Taxes [Abstract]

12.	Income taxes

The Company is subject to income taxes, according to the tax laws in Mexico, Spain and Jamaica.

Current income taxes – The income taxes rate for the Mexican entities is 30% and will continue the same for subsequent years. With the exception of the airports located in the Border of Mexico with United States of America, which for the next two years will be 20%, applying the " Decreto de Estímulos Fiscales Región Fronteriza Norte" in which a third part of ISR will be applied. The tax rate for MBJA is 25% in Jamaica and will continue the same for the subsequent years, while for DCA in Spain the tax rate is 25% and will continue the same for the subsequent years.

To determine deferred income taxes at December 31, 2016, 2017 and 2018 the Company applied the applicable tax rates to temporary differences based on their estimated reversal dates in Entities of the Company.

Recoverable income taxes paid on dividends – Dividends paid to shareholders which are not derived from the net tax income account (CUFIN) generate current income taxes, which can be credited against the taxes of the Company during the year of the dividend payment and the two subsequent years for the Mexican entities.

Recoverable taxes – In the regular course of operations, the Company generates receivable balances by the overpayment of taxes payable, according to the calculation mechanism established in the Tax Law, which are recoverable through tax returns or offsetting. The main recoverable taxes are ISR, IMPAC and Value Added Tax (IVA).

In 2003, the Company filed a request with the tax authorities regarding the confirmation of the criteria with respect to the basis that the Company could use to calculate IMPAC, which included all airports and GAP. In this request, the Company requested that such calculation, based on the interpretations of tax law as published by the Mexican Treasury Department, should only take into account the amount effectively paid by AMP for the shares of the Company that was reflected in the assets in each concession acquired through the bidding process.

After several legal procedures, on August 29, 2006, the Mexican Treasury Department confirmed the criteria for the Aguascalientes, Hermosillo, La Paz, Los Mochis, Morelia and Manzanillo airports, reducing the asset tax basis for these airports. Thus, for these airports, the base used to calculate tax on assets considers only the amount effectively paid by AMP for its 15% of the shares of the Company. This generated a recoverable tax as of December 31, 2006 for Ps. 190,537, plus Ps. 18,026 of interest, for a total recoverable asset of Ps. 208,563, recognized within the current recoverable income tax asset.

As of December 31, 2014, the remaining portion pending to be recovered corresponds to the Hermosillo airport for Ps. 28,501 (values updated). The tax authorities determined that recoverable amount should be the result of the ISR calculation for the year and not be treated as an overpayment of taxes for the year. The risk with the resolution criteria is that the right to receive the refund of the amounts claimed will expire, as well as the favorable interest being sought by the Company. In a resolution dated October 25, 2013, the Company received a favorable ruling, however the authority filed for a review. On September 3, 2014 the Federal Tax and Administrative Judicial Tribunal (TFJFA) declared final judgment, which states that the authority has to return the amount of the refund and update the claim amount. On January 29, 2015 the Company received partial refund of Ps. 9,595 including interest, however, the TFJFA failed to rule on the accrued interest, therefore a judgment for recovery was presented. On May 9, 2017 the TFJFA ruled in favor of the Hermosillo airport, ordering the Mexican tax authority (SAT) to return the interest. On September 19, 2017 the SAT notified the Company of the return and deposit of Ps. 8,445, which was received on September 25, 2017.

The balances of recoverable taxes are comprised as follows:

	December 31, 2016		December 31, 2017		December 31, 2018
Recoverable taxes:
IMPAC	Ps.	58,960	Ps.	111,987	Ps.	57,759
ISR		23,420		21,780		40,492
IVA		39,385		30,886		28,729
Tax to cash deposits		1,412		863		343
Business flat tax (IETU)		4,263		3,506		3,399
Withholding taxes		18,157		26,040		22,362
Corporation taxes		—		3,316		66,338
Other		1,083		198		722
	Ps.	146,680	Ps.	198,576	Ps.	220,144

Income Tax – Income tax expense (benefit) for the years ended at December 31, 2016, 2017 and 2018 consists of the following:

	2016			2017			2018
ISR:
Current	Ps.	1,532,875		Ps.	1,849,551		Ps.	2,117,491
Deferred		(266,302	)		(408,910	)		(248,450	)
	Ps.	1,266,573		Ps.	1,440,641		Ps.	1,869,041

Effective tax rate – The reconciliation of the statutory income tax rate and the actual effective income tax rate as a percentage of income before income taxes for the years ended December 31, 2016, 2017 and 2018 is shown below:

	%			2016			%				2017			%			2018
Income before income taxes				Ps.	4,620,132					Ps.		6,171,722					Ps.	7,007,672
Income tax by applying the weighted average statutory rate (1)		29.5	%		1,362,939			30.0	%			1,851,517			30.0	%		2,102,302
Effects of tax inflation over monetary assets		(0.1	)%		(4,893	)		(7.8	)%			(478,609	)		(3.9	)%		(271,601	)
(Unrecognized) applied tax loss carryforwards		(2.1	%)		(96,635	)		1.0	%			62,975			0.8	%		57,733
Derecognition of deferred tax asset		—			—			1.0	%			63,657			0.9	%		60,115
Loss of goodwill impairment, not deductible		—			—			(0.1	)%			(4,043	)		—			—
Tax rate change in border area		—			—			—				—			0.3	%		19,391
Employee benefits		—			—			(0.2	%)			(12,220	)		0.1	%		(603	)
Cancellation of recoverable tax on assets - undue payments		—			—			(0.1	)%			(7,587	)		(0.8	)%		(54,444	)
Other		0.1	%		5,162			(0.6	)%			(35,049	)		(0.6	)%		(43,852	)
Effective tax rate		27.4	%	Ps.	1,266,573			23.3	%	Ps.		1,440,641			26.7	%	Ps.	1,869,041

(1)	The tax rate used for the 2016, 2017 and 2018 reconciliations above is the average corporate tax rate payable by corporate entities in Mexico, Jamaica and Spain on taxable profits under tax law in these jurisdictions.

Assets and liabilities Deferred income tax recognized –

Deferred taxes are presented according to the origin of the operations of the individual subsidiaries of the Company as IAS - 12 Income taxes does not allow the offsetting of taxes in accordance with the following:

An entity shall offset deferred tax assets are tax deferred tax liabilities if, and only if:

(a)

It has a legally enforceable right to set off the tax authority, the amounts recognized in these items; and

(b)

deferred tax assets and deferred tax liabilities arising from profit tax corresponding to the same fiscal authority, which fall on:

(i)

the same company or individual tax; or

(ii)

different companies or individuals for tax purposes that seek to either liquidate assets and current tax liabilities on a net basis, or to realize the assets and settle the liabilities simultaneously, in each future period in which expected to be settled or recovered significant amounts of assets or liabilities for deferred taxes.

The net deferred income tax assets are from Mexican subsidiaries:



	December 31, 2016			December 31, 2017			December 31, 2018
Deferred ISR asset (liability):
Allowance for doubtful accounts	Ps.	8,267		Ps.	7,209		Ps.	10,636
Machinery and equipment		31,854			37,645			46,723
Improvements to concession assets		411,620			511,166			567,497
Airport concessions and rights to use airport facilities		4,162,475			4,461,211			4,592,116
Other acquired rights		118,215			130,776			139,268
Derivative financial instruments		(20,446	)		(30,667	)		(39,492	)
Other assets		268			387			445
Tax loss carryforwards		233,965			170,990			113,257
Employee benefits		20,898			27,257			27,805
Accruals		9,469			12,966			14,024
Recoverable tax on assets		94,259			25,342			—
Deferred income tax asset	Ps.	5,070,844		Ps.	5,354,282		Ps.	5,472,279

The net deferred income tax liability corresponds to the subsidiary in Jamaica:

	December 31, 2016			December 31, 2017			December 31, 2018
Deferred tax (liability) asset:
Trade receivables	Ps.	(10,991	)	Ps.	(822	)	Ps.	(820	)
Machinery, equipment and improvements on leased buildings		(114,627	)		(103,782	)		(96,496	)
Improvements to concession assets		(2,209	)		(2,008	)		(1,905	)
Airport concessions		(835,432	)		(748,879	)		(700,168	)
Accruals		16,586			16,238			14,458
Deferred tax liability	Ps.	(946,673	)	Ps.	(839,253	)	Ps.	(784,931	)

Unrecognized deferred income tax assets – Unrecognized deferred income tax assets in the consolidated statement of financial position is comprised of the following items for the Mexican subsidiaries:

	December 31, 2016		December 31, 2017		December 31, 2018
Tax loss carryforwards	Ps.	221,330	Ps.	212,464	Ps.	235,475
Recoverable tax on assets		232,796		225,209		170,765
	Ps.	454,126	Ps.	437,673	Ps.	406,240

The Company does not recognize deferred tax assets on tax loss carryforwards for which it is not probable to generate future taxable profits to utilize such tax losses.

As disclosed in subparagraph i. of this Note, the recoverable tax on assets expired in 2017. During 2018, the last recoverable amount of tax on assets was filed to the SAT. Recoverable income tax from recoverable tax on assets detailed above has not been recognized.

The Company does not recognize deferred tax assets relating to temporary differences between the accounting and tax value of investments in subsidiaries, as it has the power to control the reversal date of those temporary differences, and does not expect them to reverse in the foreseeable future.

Deferred income tax from tax loss carryforwards – The Company generated tax loss carryforwards in the airports of Aguascalientes, Los Mochis, Manzanillo and Morelia, and at Grupo Aeroportuario del Pacífico, S.A.B. de C.V. The Company estimates tax loss carryforwards will be recoverable in the airports of Aguascalientes, Morelia and in Grupo Aeroportuario del Pacífico, S.A.B. de C.V., according to the amounts shown in the following table. With respect to tax legislation relative to concessions, such losses will expire in 2048, except for the tax losses of Grupo Aeroportuario del Pacífico, S.A.B. de C.V., which expire in 2025. Tax losses that can be recovered based on management’s financial projections are recognized as part of the deferred tax asset.

	December 31, 2016			December 31, 2017			December 31, 2018
Tax loss carryforwards	Ps.	1,517,650		Ps.	1,278,180		Ps.	1,162,441
Unrecognized tax loss carryforwards		(737,766	)		(708,212	)		(784,917	)
Recognized tax loss carryforwards	Ps.	779,884		Ps.	569,968		Ps.	377,524

Balances and movements in deferred taxes during the period.

	Balance as of January 1, 2016				Effects in profit and loss				Allocation to recoverable taxes			Other comprehensive income			Balance as of December 31, 2016
Temporary differences for the deferred tax asset:
Expected credit loss	Ps.	34,813			Ps.	(26,546)			Ps.	—		Ps.	—		Ps.	8,267
Machinery, equipment and improvements on leased assets			30,017				1,837			—			—				31,854
Improvements to concession assets			372,266				39,354			—			—				411,620
Airport concessions and rights to use airport facilities			4,046,418				116,057			—			—				4,162,475
Other acquired rights			111,492				6,723			—			—				118,215
Derivative financial instruments			—				(20,446	)		—			—				(20,446	)
Other assets			(121	)			389			—			—				268
Tax loss carryforwards			137,330				96,635			—			—				233,965
Employee benefits			25,701				61			—			(4,864	)			20,898
Accruals			7,251				2,218			—			—				9,469
Recoverable tax on assets			168,054				(842	)		(72,953	)		—				94,259
Total deferred tax asset	Ps.	4,933,221			Ps.	215,440			Ps.	(72,953	)	Ps.	(4,864	)	Ps.	5,070,844

	Balance as of January 1, 2017				Effects in profit and loss				Allocation to recoverable taxes				Other comprehensive income				Balance as of December 31, 2017
Temporary differences for the deferred tax asset:
Expected credit loss	Ps.	8,267			Ps.	(1,058)			Ps.	—			Ps.	—			Ps.	7,209
Machinery, equipment and improvements on leased assets			31,854				5,791			—				—				37,645
Improvements to concession assets			411,620				99,546				—			—				511,166
Airport concessions and rights to use airport facilities			4,162,475				298,736			—				—				4,461,211
Other acquired rights			118,215				12,561				—				—			130,776
Derivative financial instruments			(20,446	)			(10,221	)			—				—			(30,667	)
Other assets			268				119				—				—			387
Tax loss carryforwards			233,965				(62,975	)			—				—			170,990
Employee benefits			20,898				8,721				—				(2,362	)		27,257
Accruals			9,469				3,497				—				—			12,966
Recoverable tax on assets			94,259				2,656				(71,573	)			—			25,342
Total deferred tax asset	Ps.		5,070,844		Ps.		357,373		Ps.		(71,573	)	Ps.		(2,362	)	Ps.	5,354,282

	Balance as of January 1, 2018				Effects in profit and loss			Allocation to recoverable taxes				Other comprehensive income			Balance as of December 31, 2018
Temporary differences for the deferred tax asset:
Expected credit loss	Ps.	$	7,209		Ps.	3,427		Ps.	—			Ps.	—		Ps.	10,636
Machinery, equipment and improvements on leased assets			37,645			9,078			—				—			46,723
Improvements to concession assets			511,166			56,331				—			—			567,497
Airport concessions and rights to use airport facilities			4,461,211			130,905			—				—			4,592,116
Other acquired rights			130,776			8,492				—				—		139,268
Derivative financial instruments			(30,667	)		(8,825	)			—				—		(39,492	)
Other assets			387			58				—				—		445
Tax loss carryforwards			170,990			(57,733	)			—				—		113,257
Employee benefits			27,257			(5,236	)			—				5,784		27,805
Accruals			12,966			1,058				—				—		14,024
Recoverable tax on assets			25,342			54,444				(79,786	)			—		-
Total deferred tax asset	Ps.		5,354,282		Ps.	191,999		Ps.		(79,786	)	Ps.		5,784	Ps.	5,472,279

	Balance as of January 1, 2016			Effects in profit and loss			Other comprehensive income			Balance as of December 31, 2016
Temporary differences for the deferred tax liability:
Accounts receivable	Ps.	(2,158	)	Ps.	(535	)	Ps.	(8,298	)	Ps.	(10,991	)
Machinery, equipment and improvements on leased assets		(100,485	)		6,307			(20,449	)		(114,627	)
Improvements to concession assets		(2,466	)		94			163			(2,209	)
Airport concessions		(728,231	)		45,003			(152,204	)		(835,432	)
Accruals		14,461			(6	)		2,131			16,586
Total deferred tax liability	Ps.	(818,879	)	Ps.	50,863		Ps.	(178,657	)	Ps.	(946,673	)

	Balance as of January 1, 2017			Effects in profit and loss				Other comprehensive income				Balance as of December 31, 2017
Temporary differences for the deferred tax liability:
Accounts receivable	Ps.	(10,991	)	Ps.		(185	)	Ps.	10,354			Ps.	(822	)
Machinery, equipment and improvements on leased assets		(114,627	)			5,555				5,290			(103,782	)
Improvements to concession assets		(2,209	)			95				106			(2,008	)
Airport concessions		(835,432	)			45,675				40,878			(748,879	)
Accruals		16,586				398				(746	)		16,238
Total deferred tax liability	Ps.	(946,673	)	Ps.	51,538			Ps.	55,882			Ps.	(839,253	)

	Balance as of January 1, 2018			Effects in profit and loss			Other comprehensive income			Balance as of December 31, 2018
Temporary differences for the deferred tax liability:
Accounts receivable	Ps.	(822	)	Ps.	5,220		Ps.	(5,218	)	Ps.	(820	)
Machinery, equipment and improvements on leased assets		(103,782	)		6,998			288			(96,496	)
Improvements to concession assets		(2,008	)		97			6			(1,905	)
Airport concessions		(748,879	)		46,399			2,312			(700,168	)
Accruals		16,238			(2,263	)		483			14,458
Total deferred tax liability	Ps.	(839,253	)	Ps.	56,451		Ps.	(2,129	)	Ps.	(784,931	)

As a result of the enactment of IETU law beginning in 2008, specifically with respect to the third transitory article, the Company has ten years to recover, under specific circumstances, existing IMPAC paid in previous years, which as of December 31, 2018 amounted to Ps. 170,765. The previously mentioned article establishes the right to recover the tax on assets paid prior to the IETU law enactment date. However, to obtain a refund there are certain requirements that must be met, including: i) the tax on assets subject to recovery must have been paid over the previous ten years, ii) the ISR has to be higher than the tax on assets for the three years prior to 2008, and iii) is limited to 10% per year over the IMPAC effectively paid.

There are several interpretations as to how an entity can recover the tax on assets paid, but to the date there is no explicit definition from the tax authorities or a precedent from any court that provides clarity as to the proper manner in which to recover such amounts. The Company’s management believes it is not probable that they will recover certain amounts and has therefore not recognized an asset of Ps. 170,765 as of December 31, 2018. As of the close of 2018, the Company has recovered the IMPAC paid in prior years, that according to the afore mentioned rules, The Company had the right to recover.

At December 31, 2016, 2017 and 2018, the recoverable tax on assets is comprised as follows.

	December 31, 2016			December 31, 2017			December 31, 2018
Recoverable tax on assets paid	Ps.	327,055		Ps.	250,551		Ps.	170,765
Unrecognized recoverable tax on assets paid		(232,796	)		(225,209	)		(170,765	)
Recognized recoverable tax on assets	Ps.	94,259		Ps.	25,342		Ps.	—

At December 31, 2018, there is no paid Tax on Assets susceptible to recoverable.