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Income taxes
 12 Months Ended
Dec. 31, 2018
Major components of tax expense (income) [abstract]  
Income taxes
15)Income taxes

 

The Company is subject to Income Tax (ISR).

 

The analysis of the income tax charged to the results of 2018, 2017 and 2016 is as follows:

 

  2 0 1 8   2 0 1 7   2 0 1 6
                 
Income tax of the year for Mexican companies $ 67,745   $ 19   $ 6,751
Income tax year for foreign companies     444,104            44,751     60,965
Deferred tax for Mexican companies   408,141     656,060     660,916
Deferred tax for foreign companies      (167,528)           421,979     207,762
  $ 752,462   $ 1,122,809   $ 936,394

 

During 2018 and 2017, the income tax expense (benefit) attributable to income was different from the one that will result for applying 30% (tax rate in Mexico) before these provisions, as a result of the losses shown below:

 

  2 0 1 8   2 0 1 7   2 0 1 6
                 
Expected benefit, expense $       1,308,828   $ 890,249   $ 1,591,129
Increase (decrease) as a result of:                
Inflation effects, net   (114,419)     (217,249)     (62,708)
Effect between nominal rate from USA and Mexico   (35,914)     (16,572)     157,366
Benefit from utilization of tax loss carry-forward and others (1)   (1,238,444)     (115,068)     (1,165,805)
Others, net (includes permanent items)    832,411     581,449     416,412
Income tax expense $ 752,462   $ 1,122,809   $ 936,394
Effective tax rate (2)   17.92%     37.21%     17.68%
             
(1)This amount corresponds to the income tax benefit obtained by those companies that used tax loss carry-forwards in the years presented that were generated previously , less the effect of tax losses incurred by some subsidiaries for which no deferred tax asset was recorded.

 

The Company has tax losses in some Mexican subsidiaries which, according to the ISR law in Mexico, can be amortized to reduce taxable income generated in the next ten years. Tax losses can be updated following certain procedures established in the law.

 

As of November 18, 2015, the Finance Ministry (SHCP) issued a decree in which a fiscal incentive is given to those who pay income tax (ISR) under terms of the Titles II or IV, Chapter II, Section I of the Law of ISR. Taxpayers who had business income of up to 100 million pesos, could write off up to 82% of 2016 and 85% for 2017 of investment in new fixed assets. This incentive that was used by Aceros Especiales Simec Tlaxcala, S.A. de C.V. and Fundiciones de Acero Estructural, S.A. de C.V. Likewise, on January 18, 2017, a decree was issued in which similar benefits were granted but only 69% authorized as an immediate deduction, which was used by the company Simec International, S.A. de C.V.

 

As of December 31, 2018, Grupo Simec, S.A.B. de C.V. and certain of its Mexican subsidiaries have updated tax losses pending of amortize as follows:

 

Origin

Date

  

Expiration

Date

   Tax losses  available  
2010   2020     18,568  
2011   2021     9,050,488 (1)
2012   2022     46  
2013   2023     81,169  
2014   2024     38,287  
2015   2025     38,213  
2016   2026     239,593  
2017   2027     721,839  
2018   2028     584,243  
        $ 10,772,446  

 

(1)This amount includes $ 9,014,364 corresponding to a tax loss from the sale of shares which, according to the Income Tax Law, can only be applied against taxable profits on the sale of shares generated in the future.

 

As of December 31, 2018, Republic had USD$ 240.2 million of tax losses pending of amortize for federal tax purposes, which expire between 2033 and 2038; USD$ 338 million of tax losses for state and local purposes that expire between 2019 and 2038 and approximately USD$ 4.7 million of tax losses at the subsidiary located in Canada, which expire between 2032 and 2037.

 

As of December 31, 2018, and 2017, GV do Brasil Industria e Comercio of Aço LTDA, a subsidiary established in Brazil, had 202.008 million Brazilian Reals ($ 1,025 million of Mexican pesos) of tax losses pending of amortize for federal tax purposes, which do not have an expiration date.

 

Below is a summary of the effects of the main temporary differences comprising the deferred income tax liability included in the consolidated statements of financial position.

 

  December 31,
  2 0 1 8   2 0 1 7
           

Deferred tax assets:

 

          
Allowance for doubtful accounts $ 1,045   $ 64,434
Provisions         977
Advances from customers   113,224     79,874
           
Deferred tax assets   114,269     145,285
           
Deferred tax liabilities:          
           
Property, plant and equipment   3,224,295     3,161,272
Intangible assets from Grupo San   310,025     298,566
Provisions   57,816      
Prepaid expenses   29,879     53,423
           
Total deferred liabilities   3,622,015     3,513,261
           
Deferred tax liabilities, net $ 3,507,746   $ 3,367,976