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INCOME AND SOCIAL CONTRIBUTION TAXES | 12 Months Ended
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Dec. 31, 2021
Income And Social Contribution Taxes |
INCOME AND SOCIAL CONTRIBUTION TAXES |
| 10. | INCOME AND SOCIAL CONTRIBUTION TAXES
a) Income tax and social contribution tax 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. Current tax assets and current tax liabilities related to income tax and social contribution tax are offset in the statement of financial position subject to criteria established in IAS 12. Schedule of income and social contribution taxes recoverable
|  | 2021 |  | 2020
Income tax |  |  | 763 |  |  |  | 698 |
Social contribution tax |  |  | 251 |  |  |  | 247 |
Income and social contribution tax credits |  |  | 1,014 |  |  |  | 945 |
Current |  |  | 699 |  |  |  | 598 |
Non-current |  |  | 315 |  |  |  | 347 |
The balances of income tax and social contribution tax posted in non-current assets arise from advanced payments required by tax law and withholding taxes, which the expectation of offsetting is greater than 12 months. On September 24, 2021, the Brazilian Federal Supreme Court decided, unanimously, that the incidence of income tax and social contribution tax on the indexation charges applying Selic interest rate over undue paid taxes is unconstitutional. Since this is a constitutional decision with general repercussion, the Company is awaiting the final judgment, which is pending on eventual motions for clarification, and the result of any modulation, before assessing and recognizing any potential effects of the decision, since there is no legal action on this subject.
| b) | Income tax and social contribution tax payable
The balances of income tax and social contribution tax recorded in current liabilities refer mainly to the taxes owed by the subsidiaries which report by the Real Profit method and have opted to make monthly payments based on estimated revenue, and also by the subsidiaries that have opted for the Presumed Profit method, in which payments are made quarterly. Schedule of income and social contribution taxes payable
|  | 2021 |  | 2020
Current |  |  |  |
Income tax |  |  | 147 |  |  |  | 108 |
Social contribution tax |  |  | 43 |  |  |  | 32 |
Total |  |  | 190 |  |  |  | 140 |
| c) | Deferred income tax and social contribution tax
The Company has deferred taxed assets and liabilities from unused tax loss carryforwards, negative base for the social contribution tax, and deductible temporary differences, at the statutory rates applicable to each legal entity in Brazil of 25% (for Income tax) and 9% (for the social contribution tax), as follows: Schedule of deferred income and social contribution taxes
|  | 2021 |  | 2020 |  | 2019
Deferred tax assets |  |  |  |  |  |  |  |  |  |  |  |
Tax loss carryforwards |  |  | 807 |  |  |  | 401 |  |  |  | 116 |
Provisions for contingencies |  |  | 542 |  |  |  | 538 |  |  |  | 544 |
Impairment on investments |  |  | 244 |  |  |  | 640 |  |  |  | 660 |
Fair value of derivative financial instruments (PUT SAAG) |  |  | 216 |  |  |  | 182 |  |  |  | 164 |
Post-employment obligations |  |  | 1,981 |  |  |  | 2,168 |  |  |  | 2,090 |
Estimated provision for doubtful receivables |  |  | 315 |  |  |  | 256 |  |  |  | 283 |
Others |  |  | 150 |  |  |  | 138 |  |  |  | 171 |
Total |  |  | 4,255 |  |  |  | 4,323 |  |  |  | 4,028 |
Deferred tax liabilities |  |  |  |  |  |  |  |  |  |  |  |
Deemed cost |  |  | (219 | ) |  |  | (225 | ) |  |  | (232 | )
Acquisition costs of equity interests |  |  | (466 | ) |  |  | (486 | ) |  |  | (503 | )
Borrowing costs capitalized |  |  | (165 | ) |  |  | (169 | ) |  |  | (166 | )
Adjustment to expectation of cash flow – Concession assets |  |  | (245 | ) |  |  | (242 | ) |  |  | (247 | )
Revenues arising from transmission contract asset |  |  | (895 | ) |  |  | (768 | ) |  |  | (624 | )
Adjustment to fair value: Swap/Gains |  |  | (412 | ) |  |  | (1,002 | ) |  |  | (575 | )
Updating on escrow deposits |  |  | (7 | ) |  |  | (6 | ) |  |  | (5 | )
Reimbursement of costs – GSF |  |  | (319 | ) |  |  | — |  |  |  | — |
Others |  |  | (24 | ) |  |  | (12 | ) |  |  | (16 | )
Total |  |  | (2,752 | ) |  |  | (2,910 | ) |  |  | (2,368 | )
Total, net |  |  | 1,503 |  |  |  | 1,413 |  |  |  | 1,660 |
Total assets |  |  | 2,465 |  |  |  | 2,453 |  |  |  | 2,430 |
Total liabilities |  |  | (962 | ) |  |  | (1,040 | ) |  |  | (770 | )
The changes in deferred income tax and social contribution tax were as follows: Schedule of changes in deferred income and social contribution taxes
|  | Consolidated
Balance at December 31, 2018 |  |  | 1,344 |
Effect allocated to other comprehensive income |  |  | 544 |
Effects allocated to net profit from continuing operations |  |  | (145 | )
Effects allocated to net profit from discontinuing operations (note 34) |  |  | (85 | )
Others |  |  | 2 |
Balance at December 31, 2019 |  |  | 1,660 |
Effects allocated to net profit from continuing operations |  |  | (252 | )
Effect allocated to other comprehensive income |  |  | 4 |
Others |  |  | 1 |
Balance at December 31, 2020 |  |  | 1,413 |
Effect allocated to other comprehensive income |  |  | (102 | )
Effects allocated to net profit from continuing operations |  |  | 210 |
Deferred taxes arising from shareholding reorganization |  |  | (16 | )
Others |  |  | (2 | )
Balance at December 31, 2021 |  |  | 1,503 |
The estimated taxable profits forecast, on which the realization of deferred tax assets are based, are determined by the annual budget and the long-term budget, both reviewed periodically, and by the historical profit. However, the taxable profit may be either higher or lower than the evaluation used by the management when the amount of the deferred tax recognized was determined. Based on Company and its subsidiaries’ estimates, it is probable that future taxable profit will be available against which the unused tax losses and unused tax credits can be utilized. The Company estimated that the balance of deferred tax asset as of December 31, 2021 will be recovered, as follows: Schedule of estimated balance of deferred tax asset
|  | Consolidated
| 2022 |  |  |  | 717 |
| 2023 |  |  |  | 583 |
| 2024 |  |  |  | 662 |
| 2025 |  |  |  | 507 |
| 2026 |  |  |  | 481 |
| 2027 to 2029 |  |  |  | 845 |
| 2030 to 2031 |  |  |  | 460 |
|  |  |  |  | 4,255 |
| d) | 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: Schedule of reconciliation of statutory on income and social contribution Ttxes
|  | 2021 |  | 2020
Profit before income tax and social contribution tax |  |  | 4,699 |  |  |  | 3,800 |
Income tax and social contribution tax — nominal expense (34%) |  |  | (1,597 | ) |  |  | (1,292 | )
Tax effects applicable to: |  |  |  |  |  |  |  |
Gain in subsidiaries by equity method |  |  | 6 |  |  |  | 93 |
Interest on Equity |  |  | 325 |  |  |  | 188 |
Tax incentives |  |  | 63 |  |  |  | 39 |
Effects from subsidiaries taxed based on gross revenues |  |  | 146 |  |  |  | 97 |
Non-deductible penalties |  |  | (23 | ) |  |  | (25 | )
Impairment of accounts receivable from related parties |  |  | — |  |  |  | (13 | )
Income arising from the Light sale |  |  | 154 |  |  |  | — |
Others |  |  | (20 | ) |  |  | (23 | )
Income tax and social contribution tax — effective expense |  |  | (946 | ) |  |  | (936 | )
Current tax |  |  | (1,156 | ) |  |  | (684 | )
Deferred tax |  |  | 210 |  |  |  | (252 | )
|  |  | (946 | ) |  |  | (936 | )
Effective rate |  |  | 20.12 | % |  |  | 24.62 | %

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