INCOME AND SOCIAL CONTRIBUTION TAXES (Tables)

12 Months Ended

Dec. 31, 2018

INCOME AND SOCIAL CONTRIBUTION TAXES

Schedule of reconciliations of income and social contribution taxes at statutory rates to amounts presented in the Statement Of Income


	2018		2017		2016
Income (loss) before income taxes	2,157,431		(43,276)		(2,581,615)
Statutory tax rates	34	%	34	%	34	%
Income and social contribution taxes at statutory rates	(733,527)		14,714		877,749
Tax adjustment with respect to:
- Difference in tax rates in foreign companies	663,116		(183,787)		(1,162,174)
- Equity in earnings of unconsolidated companies	3,448		(11,763)		(4,342)
- Interest on equity*	128,418		113		(162)
- Tax credits and incentives	9,531		23,185		18,494
- Recognition of previously unrecognized tax losses	47,545		—		(40,279)
- Capital Gain**	—		(98,290)		—
- Other permanent differences, net	50,420		(39,563)		6,400
Income and social contribution taxes	168,951		(295,391)		(304,314)
Current	(629,209)		(313,758)		(110,511)
Deferred	798,160		18,367		(193,803)

(*) Brazilian Law 9,249/95 provides that a company may, at its sole discretion, consider dividends distributions to shareholders to be considered as interest on own capital — subject to specific limitations - which has the effect of a taxable deduction in the determination of income tax and social contribution. The limitation is the greater of (i) shareholders’ equity multiplied by the TJLP (Long Term Interest Rate) rate or (ii) 50% of the net income in the fiscal year.

(**) The merger of Gerdau Aços Especiais S.A. and Gerdau América Latina Part. S.A. at Gerdau S.A., generated a taxable capital gain.

Schedule of breakdown and changes in deferred income and social contribution tax assets and liabilities at statutory tax rates


			Effect of selling
	Balance as of	Recognized in	of subsidiary	Comprehensive	Balance as of
	January 1, 2016	income	and others	Income	December 31, 2016

Tax loss carryforward	887,980	327,743	(263,297)	(78,069)	874,357
Social contribution tax losses	191,638	120,254	—	—	311,892
Provision for tax, civil and labor liabilities	639,566	118,526	(2,671)	(223)	755,198
Benefits granted to employees	549,865	(67,133)	34,982	(85,177)	432,537
Other temporary differences	381,991	(21,985)	20,776	(30,020)	350,762
Deferred exchange variance*	2,158,149	(907,690)	—	1,083	1,251,542
Provision for losses	151,678	(34,059)	(4,671)	(12)	112,936
Fair value adjustments on businesses acquired	(1,567,880)	270,541	2,984	216,925	(1,077,430)
	3,392,987	(193,803)	(211,897)	24,507	3,011,794

Non-current assets	4,307,462				3,407,230
Non-current liabilities	(914,475)				(395,436)

*Corresponds to deferred taxes over foreign exchange gains and loss which certain subsidiaries elected to tax on a cash basis


			Effect of selling
	Balance as of	Recognized in	of subsidiary	Comprehensive	Balance as of
	December 31, 2016	income	and Others	Income	December 31, 2017

Tax loss carryforward	874,357	157,402	(22,362)	(35,759)	973,638
Social contribution tax losses	311,892	58,963	(15,073)	—	355,782
Provision for tax, civil and labor liabilities	755,198	(479,836)	101	—	275,463
Benefits granted to employees	432,537	(48,466)	(9,363)	(91,905)	282,803
Other temporary differences	350,762	(81,627)	92,174	48,991	410,300
Deferred exchange variance*	1,251,542	(199,200)	8,185	—	1,060,527
Provision for losses	112,936	(2,208)	—	—	110,728
Fair value adjustments on businesses acquired	(1,077,430)	613,339	(51,606)	18,163	(497,534)
	3,011,794	18,367	2,056	(60,510)	2,971,707

Non-current assets	3,407,230				3,054,393
Non-current liabilities	(395,436)				(82,686)

*Corresponds to deferred taxes over foreign exchange gains and loss which certain subsidiaries elected to tax on a cash basis



	Balance as of	Recognized in		Comprehensive	Balance as of
	December 31, 2017	income	Others	Income	December 31, 2018

Tax loss carryforward	973,638	341,664	36,445	(11,814)	1,339,933
Social contribution tax losses	355,782	(18,524)	—	—	337,258
Provision for tax, civil and labor liabilities	275,463	(5,214)	168	—	270,417
Benefits granted to employees	282,803	(16,564)	67,184	(46,929)	286,494
Other temporary differences	410,300	93,094	17,177	5,247	525,818
Deferred exchange variance*	1,060,527	223,850	—	—	1,284,377
Provision for losses	110,728	(33,165)	(12)	6,286	83,837
Fair value adjustments on businesses acquired	(497,534)	213,019	(89,859)	1,926	(372,448)
	2,971,707	798,160	31,103	(45,284)	3,755,686

Non-current assets	3,054,393				3,874,054
Non-current liabilities	(82,686)				(118,368)

*Corresponds to deferred taxes over foreign exchange gains and loss which certain subsidiaries elected to tax on a cash basis

Schedule of estimated recovery and reversal of income and social contributions tax assets and liabilities


	Assets
	2018	2017
2018	—	326,356
2019	609,546	198,590
2020	585,047	400,597
2021	338,896	369,857
2022	306,130	168,125
2023 after	2,034,435	1,590,868
	3,874,054	3,054,393


	Liabilities
	2018	2017
2018	—	(2,680)
2019	(18,055)	(6,116)
2020	(25,144)	(6,498)
2021	(13,548)	(4,745)
2022	(14,009)	(18,514)
2023 after	(47,612)	(44,133)
	(118,368)	(82,686)