
	Year ended December 31,
	2021	2020	2019

Current tax
Current tax	(1,650,281)	(338,408)	(256,460)
Effect of changes in tax law (1)	—	—	4,178

Deferred tax (Note 19)
Deferred tax	185,655	39,895	38,785
Effect of changes in tax law (1)	(9,117)	—	16,979


Recovery of income tax (2)	76,604	7,025	—

Income tax expense	(1,397,139)	(291,488)	(196,519)

(1) For 2021, it includes the modification of the tax rate in Argentina enacted in 2017 and modified in 2019 and 2021, setting the corporate income tax rate to 35% for the year 2021 going forward.

For 2019, it includes mainly the application of the new tax law in Argentina that enables the tax inflation adjustment. The reduction of the tax rate in Argentina enacted in 2017 was modified in 2019, setting the corporate income tax rate to 30% for the year 2020 and to 25% from the year 2021 going forward.

Income tax expense for the years ended December 31, 2021, 2020 and 2019 differed from the amount computed by applying the statutory income tax rate in force in each country in which the company operates to pre-tax income as a result of the following:


	Year ended December 31,
	2021	2020	2019

Income before income tax	5,764,330	1,159,359	826,564

Income tax expense at statutory tax rate	(1,633,556)	(350,896)	(247,592)
Non taxable income	37,815	118,540	71,101
Non deductible expenses	—	—	(476)
Effect of currency translation on tax base (1)	131,115	(66,157)	33,133
Increase of unrecognized tax losses carried-forward	—	—	(73,842)
Recovery of income tax	76,604	7,025	—

Effect of changes in tax law	(9,117)	—	21,157

Income tax expense	(1,397,139)	(291,488)	(196,519)

(1) Ternium applies the liability method to recognize deferred income tax on temporary differences between the tax bases of assets and their carrying amounts in the financial statements. By application of this method, Ternium recognizes gains and losses on deferred income tax due to the effect of the change in the value on the tax basis in subsidiaries, which have a functional currency different to their local currency, mainly Mexico and Argentina.

Tax rates used to perform the reconciliation between tax expense (income) and accounting profit are those in effect at each relevant date or period in each applicable jurisdiction.

Deferred income taxes are calculated in full on temporary differences under the liability method using the tax rate of the applicable country.



	As of December 31,
	2021	2020

At the beginning of the year	(187,782)	(239,740)


Translation differences	(69)	(36)
Effect of changes in tax law (note 10)	(9,117)	—

Credits directly to other comprehensive income	(14,158)	12,100
Deferred tax credit (note 10)	185,655	39,894

At the end of the year	(25,471)	(187,782)

The changes in deferred tax assets and liabilities (prior to offsetting the balances within the same tax jurisdiction) during the year are as follows:


Deferred tax liabilities	PP&E	Inventories	Intangible assets	Other	Total at December 31, 2021

At the beginning of the year	(426,140)	(30,187)	(20,710)	(2,021)	(479,058)




Income statement credit (charge)	72,720	79,624	(5,613)	(8,938)	137,793

At the end of the year	(353,420)	49,437	(26,323)	(10,959)	(341,265)


Deferred tax assets	Provisions	Trade receivables	Tax losses (1)	Other (2)	Total at December 31, 2021

At the beginning of the year	52,342	9,186	31,084	198,664	291,276

Translation differences	—	—	—	(69)	(69)

Credits directly to other comprehensive income	—	—	—	(14,158)	(14,158)
Effect of changes in tax law	—	—	—	(9,117)	(9,117)
Income statement credit (charge)	29,797	25,958	(27,506)	19,613	47,862

At the end of the year	82,139	35,144	3,578	194,933	315,794

(1) As of December 31, 2021, the recognized deferred tax assets on tax losses amount to $3,578 and there are net unrecognized deferred tax assets of $0.1 billion and unrecognized tax losses amounting to $0.8 billion. These two last effects are connected to the acquisition of Ternium Brasil Ltda.

(2) It corresponds mainly to the deferred tax assets related to post-employment benefits and asset retirement obligations.


Deferred tax liabilities	PP&E	Inventories	Intangible assets	Other	Total at December 31, 2020

At the beginning of the year	(437,376)	(63,460)	(17,109)	(1,189)	(519,134)

Translation differences	46	—	—	—	46




Income statement credit (charge)	11,190	33,273	(3,601)	(832)	40,030

At the end of the year	(426,140)	(30,187)	(20,710)	(2,021)	(479,058)


Deferred tax assets	Provisions	Trade receivables	Tax losses (3)	Other	Total at December 31, 2020

At the beginning of the year	45,654	10,200	42,766	180,774	279,394

Translation differences	—	—	—	(82)	(82)

Credits directly to other comprehensive income	—	—	—	12,100	12,100

Income statement credit (charge)	6,688	(1,014)	(11,682)	5,872	(136)

At the end of the year	52,342	9,186	31,084	198,664	291,276

(3) As of December 31, 2020, the recognized deferred tax assets on tax losses amount to $31,084 and there are net unrecognized deferred tax assets of $0.2 billion and unrecognized tax losses amounting to $1.0 billion. These two last effects are connected to the acquisition of Ternium Brasil Ltda.

Deferred tax assets and liabilities are offset when the entity a) has a legally enforceable right to set off the recognized amounts; and b) intends to settle the tax on a net basis or to realize the asset and settle the liability simultaneously.