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Income taxes
 12 Months Ended
Dec. 31, 2020
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 2020, 2019 and 2018 is as follows:

 

  2 0 2 0   2 0 1 9   2 0 1 8
                 
Income tax of the year for Mexican companies $ 1,460,057   $ 3,177,506   $ 67,745
Income tax year for foreign companies     370,860     301,263     444,104
Deferred tax for Mexican companies   (94,604)     12,978     408,141
Deferred tax for foreign companies      341,531           (215,473)     (167,528)
  $ 2,077,844   $ 3,276,274   $ 752,462

 

The amount of income tax of Mexican companies includes $554,435 and $2,323,662 in 2020 and 2019 respectively, which correspond to taxes and expenses of previous years, that were covered by several corporations of the Group; these taxes were determined by tax authorities, corresponding to fiscal years 2013 to 2017, which are indicated in Note 23 (j); The Companies that covered the taxes subscribed Reparatory Agreements with the Service of Tax Administration (SAT), in relation with the audits for fiscal years 2013 to 2017, with the objective of reaching a fair agreement and in that way solve the disputes that were in the Courts indicated in Note 23 (j). With the $554,435 amount were solved, totally, the disputes that were in the Courts with tax authorities mentioned in Note 23 (j).

 

During 2020 and 2019, 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 items shown below:

  2 0 2 0   2 0 1 9   2 0 1 8
                 
Expected benefit, expense $       1,462,776   $ 490,925   $ 1,308,828
Increase (decrease) as a result of:                
Inflation effect, net   (139,134)     (417,960)     (114,419)
Impact of the nominal rate differences between the USA and Mexico   11,075     (23,368)     (35,914)
Benefit from utilization of tax loss carry-forwards and others (1)   16,173     (987,135)     (1,238,444)
Others, net (includes permanent items)    172,519     1,890,150     832,411
Income tax expense (2) $ 1,523,409   $ 952,612   $ 752,462
Effective tax rate   31.24%     58.21%     17.92%
             
(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 to 2020, 2019 and 2018, less the effect of tax losses incurred by some subsidiaries for which no deferred tax asset was recorded.

 

(2)For the purpose of determining the effective tax rate, the payments corresponding to taxes from previous years and expenses that were paid by various group companies derived from repair agreements during 2020 and 2019 fiscal years were not considered within the income tax expense.

 

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 over the following ten years. Tax losses can be updated following certain procedures established in the law.

 

As of December 31, 2020, 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  
2011   2021     7,832,672 (1)
2012   2022     13  
2013   2023     4,944  
2014   2024     14,231  
2015   2025     8,395  
2016   2026     356,102  
2017   2027     348,058  
2018   2028     100,674  
2019   2029     1,119,822  
2020   2030     846,324  
        $ 10,631,235  

 

 

(1)This amount includes $ 7,832,647 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, 2020, Republic had USD$ 281.0 million of tax losses pending to amortize for federal tax purposes, of those USD $80.7 million are undefined and USD $200.3 million expire between 2033 and 2038; USD$ 313.6 million of tax losses for state and local purposes that expire between 2021 and 2040 and approximately USD$ 6.1 million of tax losses at the subsidiary located in Canada, which expire between 2032 and 2040.

 

As of December 31, 2020, and 2019, GV do Brasil Industria e Comercio of Aço LTDA, a subsidiary established in Brazil, had 203.346 million Brazilian Reals ($ 985 million of Mexican pesos) and 210.525 million Brazilian Reals ($ 1,025 million of Mexican pesos) respectively of tax losses pending to amortize for federal tax purposes, which do not have an expiration date.

 

As of December 31, 2020, Companhia Siderúrgica do Espirito Santo S.A., a subsidiary established in Brazil, had 6.082 million Brazilian Reals (94 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 2 0   2 0 1 9
           

Deferred tax assets:

 

          
    Allowance for doubtful accounts $ (61,536)   $ (50,476)
    Advances from customers   283,846     182,635
           
Deferred tax assets   222,310     132,159
           
Deferred tax liabilities:          
           
    Property, plant and equipment   3,321,941     3,159,719
    Intangible assets from Grupo San   329,600     318,768
    Provisions   202,407     30,641
    Prepaid expenses   6,883     33,137
           
Total deferred liabilities   3,860,831     3,542,265
           
Deferred tax liabilities, net $ 3,638,521   $ 3,410,106