Income and Social Contribution Taxes (Tables)

12 Months Ended

Dec. 31, 2018

Deferred IRPJ and CSLL are recognized under the following main categories:


	12/31/2018			12/31/2017
				Restated (i)
Assets—Deferred income and social contribution taxes on:
Provision for impairment of assets		116,191			103,092
Provisions for tax, civil, and labor risks		154,516			145,767
Provision for post-employment benefits		85,575			81,199
Provision for differences between cash and accrual basis		147,376			40,755
Goodwill		12,258			14,234
Business combination – fiscal basis vs. accounting basis of goodwill		75,838			74,972
Provision for asset retirement obligation		15,801			19,111
Other provisions		144,354			158,952
Tax losses and negative basis for social contribution carryforwards (d)		208,036			201,471

Total		959,945			839,553

Offset the liabilities balance		(445,758	)		(225,492	)

Net balance of assets		514,187			614,061

Liabilities—Deferred income and social contribution taxes on:
Revaluation of property, plant, and equipment		1,981			2,109
Lease		2,858			3,361
Provision for differences between cash and accrual basis		138,332			44,440
Provision for goodwill		187,845			131,811
Business combination – fair value of assets		117,352			90,532
Temporary differences of foreign subsidiaries		—			955
Other provisions		6,687			35,926

Total		455,055			309,134

Offset the assets balance		(445,758	)		(225,492	)

Net balance of liabilities		9,297			83,642

Summary of Changes in Balances of Deferred Taxes

Changes in the net balance of deferred IRPJ and CSLL are as follows:


	2018			2017			2016
				Restated (i)			Restated (i)
Initial balance		507,087			409,699			292,989
IFRS 9 and 15 adoption		68,450			42,274			30,240
IRPJ and CSLL related to CBLSA goodwill – retrospective effect (i)		(45,118	)		—			—

Subtotal – Initial balance – restated (i)		530,419			451,973			323,229
Deferred IRPJ and CSLL recognized in income of the year		(162,417	)		109,204			112,539
Deferred IRPJ and CSLL recognized in other comprehensive income		133,124			13,389			18,938
Deferred IRPJ and CSLL recognized in business combination (see Notes 3.c and 3.d)		1,054			(45,728	)		—
Others		2,710			1,581			(2,733	)

Final balance		504,890			530,419			451,973

(i)	See Note 2.x.

Summary of Recovery of Deferred Tax Assets

The estimated recovery of deferred tax assets relating to IRPJ and CSLL is stated as follows:


Up to 1 Year			181,343
From 1 to 2 Years			117,990
From 2 to 3 Years			172,439
From 3 to 5 Years			169,119
From 5 to 7 Years			224,291
From 7 to 10 Years			94,763

Total of deferred tax assets relating to IRPJ and CSLL			959,945

Summary of Reconciliation of Taxes

IRPJ and CSLL are reconciled to the statutory tax rates as follows:


	2018			2017			2016
				Restated (vi)			Restated (vi)
Income (loss) before taxes and share of profit (loss) of joint ventures, and associates		1,785,818			2,318,446			2,227,298
Statutory tax rates - %		34			34			34

Income and social contribution taxes at the statutory tax rates		(607,178	)		(788,272	)		(757,281	)

Adjustments to the statutory income and social contribution taxes:
Nondeductible expenses (i)		(82,784	)		(105,017	)		(57,961	)
Nontaxable revenues (ii)		32,523			19,084			7,561
Adjustment to estimated income (iii)		9,706			10,844			14,218
Interest on equity (iv)		(538	)		(550	)		(364	)
Unrecorded deferred Income and Social Contribution Taxes Carryforwards deferred (v)		(95,480	)		—			—
Other adjustments		(2,634	)		2,059			6,957

Income and social contribution taxes before tax incentives		(746,385	)		(861,852	)		(786,870	)

Tax incentives—SUDENE		107,666			48,598			98,912

Income and social contribution taxes in the income statement		(638,719	)		(813,254	)		(687,958	)

Current		(476,302	)		(922,458	)		(800,497	)
Deferred		(162,417	)		109,204			112,539
Effective IRPJ and CSLL rates - %		35.8			35.1			30.9

(i)	Consist of certain expenses that cannot be deducted for tax purposes under applicable tax legislation, such as expenses with fines, donations, gifts, losses of assets, negative effects of foreign subsidiaries and certain provisions;

(ii)	Consist of certain gains and income that are not taxable under applicable tax legislation, such as the reimbursement of taxes and the reversal of certain provisions;

(iii)

Brazilian tax law allows for an alternative method of taxation for companies that generated gross revenues of up to R$ 78 million in their previous fiscal year. Certain subsidiaries of the Company adopted this alternative form of taxation, whereby income and social contribution taxes are calculated on a basis equal to 32% of operating revenues, as opposed to being calculated based on the effective taxable income of these subsidiaries. The adjustment to estimated income represents the difference between the taxation under this alternative method and the income and social contribution taxes that would have been paid based on the effective statutory rate applied to the taxable income of these subsidiaries;

(iv)

Interest on equity is an option foreseen in Brazilian corporate law to distribute profits to shareholders, calculated based on the long-term interest rate (“TJLP”), which does not affect the income statement, but is deductible for purposes of IRPJ and CSLL, being taxable to the beneficiary and deductible to the entity that pays.

(v)	See Note 9.d;

(vi)	See Note 2.x.

Summary of Tax Incentives

The following subsidiaries are entitled to federal tax benefits providing for IRPJ reduction under the program for development of northeastern Brazil operated by the Superintendence for the Development of the Northeast (“SUDENE”), as shown below:


Subsidiary	Units		Incentive - %		Expiration
Bahiana Distribuidora de Gás Ltda.		Aracaju base (1)		75		2028
		Suape base (2)		75		2018
		Mataripe base		75		2024
		Caucaia base		75		2025
		Juazeiro base (3)		75		2026
Terminal Químico de Aratu S.A. – Tequimar		Suape terminal		75		2020
		Aratu terminal		75		2022
		Itaqui terminal		75		2025
Oleoquímica Indústria e Comércio de Produtos Químicos Ltda.		Camaçari plant		75		2021
Oxiteno Nordeste S.A. Indústria e Comércio		Camaçari plant		75		2026
Empresa Carioca de Produtos Químicos S.A.		Camaçari plant		75		2026

⁽¹⁾

The subsidiary Bahiana Distribuidora de Gás Ltda. (“Bahiana”), obtained 75% income tax reduction incentive recognized by SUDENE, through an appraisal report on October 22, 2018, until 2028, due to the modernization for its Aracaju plant – Sergipe. On October 22, 2018, the constitutive benefit appraisal report was sent to the RFB for approval within a term of 120 days. As a result of the expiration of the statutes of limitation for the RFB to approve the constitutive benefit appraisal report setting the tacit approval of the application, the income tax reduction will be recognized by the subsidiary in the income statement in 2019.

⁽²⁾

The subsidiary Bahiana had the 75% income tax reduction incentive recognized by SUDENE, through an appraisal report on January 14, 2019, until 2028, due to the modernization for its Suape plant – Pernambuco. On January 23, 2019, the constitutive benefit appraisal report was sent to the RFB for approval within a term of 120 days.

⁽³⁾

The subsidiary Bahiana, obtained 75% income tax reduction incentive recognized by SUDENE, through an appraisal report on November 7, 2017, until 2026, due to productive unit implementation for its Juazeiro plant – Bahia. On November 27, 2017, the constitutive benefit appraisal report was sent to the RFB, for approval within a term of 120 days. As a result of the expiration of the statutes of limitation for the RFB to approve the constitutive benefit appraisal report setting the tacit approval of the application, the income tax reduction was recognized by the subsidiary in the income statement in 2018, in the total amount of R$ 149 with retroactive effect in January 2017.