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Income and Social Contribution Taxes | 12 Months Ended
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Dec. 31, 2017
Text block1 [abstract] |
Income and Social Contribution Taxes |
10. | INCOME AND SOCIAL CONTRIBUTION TAXES
a) | Income and Social Contribution taxes recoverable
The balances of income tax and Social Contribution tax refer to tax credits in the corporate income tax returns of previous years and to advance payments which will be offset against federal taxes eventually payable.
|  | 2017 |  |  | 2016 |
Current |  |  |  |  |  |  |  |
Income tax |  |  | 224 |  |  |  | 436 |
Social contribution tax |  |  | 116 |  |  |  | 154 |
|  |  | 340 |  |  |  | 590 |
Non-current |  |  |  |  |  |  |  |
Income tax |  |  | 7 |  |  |  | 98 |
Social contribution tax |  |  | 14 |  |  |  | 14 |
|  |  | 21 |  |  |  | 112 |
|  |  | 361 |  |  |  | 702 |
b) | Deferred income tax and Social Contribution tax
The Company has tax credits for income tax and the Social Contribution tax, arising from balances of tax losses, negative base for the Social Contribution tax, and temporary differences, at the rates of 25% (for Income tax) and 9% (for the Social Contribution tax), as follows:
|  | 2017 |  |  | 2016 |
Deferred tax assets |  |  |  |  |  |  |  |
Tax loss carryforwards |  |  | 524 |  |  |  | 290 |
Provisions |  |  | 1,093 |  |  |  | 1,027 |
Post-retirement obligations |  |  | 1,179 |  |  |  | 1,175 |
Estimated provision for doubtful receivables |  |  | 207 |  |  |  | 229 |
Taxes with suspended liability |  |  | 14 |  |  |  | 202 |
Paid concession |  |  | 8 |  |  |  | 8 |
Adjustment to fair value: Swap/loss |  |  | 13 |  |  |  | — |
Others |  |  | 14 |  |  |  | 22 |
Total |  |  | 3,052 |  |  |  | 2,953 |
Deferred tax liabilities |  |  |  |  |  |  |  |
Funding cost |  |  | (31 | ) |  |  | (45 | )
Deemed cost |  |  | (276 | ) |  |  | (268 | )
Cost of acquisition of equity interests |  |  | (464 | ) |  |  | (481 | )
Borrowing costs capitalized |  |  | (166 | ) |  |  | (149 | )
Taxes on revenues not redeemed – Presumed Profit accounting method |  |  | (1 | ) |  |  | (2 | )
Transmission assets: Indemnity gain |  |  | (937 | ) |  |  | (517 | )
Adjustment to expectation of cash flow from the indemnifiable Financial assets of the distribution concession |  |  | — |  |  |  | (271 | )
Others |  |  | (41 | ) |  |  | (5 | )
Total |  |  | (1,916 | ) |  |  | (1,738 | )
Total, net |  |  | 1,136 |  |  |  | 1,215 |
Total assets |  |  | 1,871 |  |  |  | 1,797 |
Total liabilities |  |  | (735 | ) |  |  | (582 | )
The changes in deferred income and Social Contribution taxes were as follows:
Balance at December 31, 2014 |  |  | 635 |
Effects allocated to Statement of income |  |  | (12 | )
Effects allocated to Statement of comprehensive income |  |  | 191 |
Realized |  |  | (5 | )
Balance at December 31, 2015 |  |  | 809 |
Effects allocated to Statement of income |  |  | 141 |
Effects allocated to Statement of comprehensive income |  |  | 265 |
Balance at December 31, 2016 |  |  | 1,215 |
Effects allocated to Statement of income |  |  | (198 | )
Effects allocated to Statement of comprehensive income |  |  | 133 |
Variations in deferred tax assets and liabilities |  |  | (14 | )
Balance at December 31, 2017 |  |  | 1,136 |
On March 28, 2018, the Board of Directors meeting approved the analysis prepared by the Finance Department, on the forecast on the Company’s future taxable profits. This study was also submitted to examination by the Fiscal Council on March 28, 2018. Under the current Brazilian tax legislation deductible temporary differences and accumulated tax losses do not expire. Deferred tax assets have been recognized in relation to these items, because it is probable that the future taxable profits will be available for the Company to realized these assets. The use of tax losses and negative tax-balance carryforwards is limited to 30% of taxable income for the year. The Company estimated that the balance of deferred tax asset on December 31, 2017 will be realized, as follows:
2018 |  |  | 421 |
2019 |  |  | 477 |
2020 |  |  | 476 |
2021 |  |  | 452 |
2022 |  |  | 465 |
2023–2025 |  |  | 493 |
2026–2027 |  |  | 268 |
|  |  | 3,052 |
c) | Reconciliation of income tax and Social Contribution tax effective rate
This table reconciles the statutory income tax (rate 25%) and social contribution tax (rate 9%) with the current income tax expense in the Statement of income:
|  | 2017 |  |  | 2016 |  |  | 2015 |
Profit before income and Social Contribution taxes |  |  | 1,646 |  |  |  | 367 |  |  |  | 3,362 |
Income tax and Social Contribution tax – nominal expense |  |  | (560 | ) |  |  | (125 | ) |  |  | (1,143 | )
Tax effects applicable to: |  |  |  |  |  |  |  |  |  |  |  |
Gain (loss) in subsidiaries by equity method (net of effects of Interest on Equity) |  |  | (129 | ) |  |  | (132 | ) |  |  | 105 |
Interest on Equity |  |  | — |  |  |  | 129 |  |  |  | 68 |
Gain on formation of Aliança Geração |  |  | — |  |  |  | — |  |  |  | 87 |
Gain on dilution of an equity interest |  |  | 8 |  |  |  | — |  |  |  | — |
Deduction – Intangible assets of concession amortized – capital gain –Taesa |  |  | — |  |  |  | 20 |  |  |  | — |
Non-deductible contributions and donations |  |  | (6 | ) |  |  | (4 | ) |  |  | (7 | )
Tax incentives |  |  | 11 |  |  |  | 3 |  |  |  | 43 |
Tax credits not recognized |  |  | — |  |  |  | 5 |  |  |  | (1 | )
Difference between Presumed Profit and Real Profit |  |  | 81 |  |  |  | 126 |  |  |  | 25 |
Non-deductible penalties |  |  | (14 | ) |  |  | (16 | ) |  |  | (10 | )
Excess reactive power and demand |  |  | (2 | ) |  |  | (12 | ) |  |  | (11 | )
Write-down of part of estimated losses for doubtful debtors |  |  | — |  |  |  | (22 | ) |  |  | (32 | )
Others |  |  | (33 | ) |  |  | (5 | ) |  |  | (17 | )
Income tax and Social Contribution – effective gain (expense) |  |  | (644 | ) |  |  | (33 | ) |  |  | (893 | )
Current tax |  |  | (446 | ) |  |  | (174 | ) |  |  | (881 | )
Deferred tax |  |  | (198 | ) |  |  | 141 |  |  |  | (12 | )
|  |  | (644 | ) |  |  | (33 | ) |  |  | (893 | )
Effective rate |  |  | 39.13 | % |  |  | 8.99 | % |  |  | 26.56 | %

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