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Income Taxes | 12 Months Ended
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Dec. 31, 2019
Income Taxes |
Income Taxes | 24.Income Taxes The income tax provision for the years ended December 31, 2019, 2018 and 2017 was comprised of:
|  | 2019 |  | 2018 |  | 2017 |
Income taxes, current (1) |  | Ps. | 5,267,157 |  | Ps. | 6,448,961 |  | Ps. | 5,382,865 |
Income taxes, deferred |  |  | (2,598,712) |  |  | (2,058,457) |  |  | (1,108,745) |
|  | Ps. | 2,668,445 |  | Ps. | 4,390,504 |  | Ps. | 4,274,120 |
| (1) |  | The current income tax of Mexican companies payable in Mexico represented 95%, 91% and 93% of total current income taxes in 2019, 2018 and 2017, respectively.
The Mexican corporate income tax rate was 30% in 2019, 2018 and 2017, and will be 30% in 2020. 2014 Tax Reform As a result of a 2014 Mexican Tax Reform (the “2014 Tax Reform”), which included the elimination of the tax consolidation regime allowed for Mexican controlling companies, beginning on January 1, 2014, the Company is no longer allowed to consolidate income or loss of its Mexican subsidiaries for income tax purposes and: (i) accounted for an additional income tax liability for the elimination of the tax consolidation regime in the aggregate amount of Ps.6,813,595 as of December 31, 2013; (ii) recognized a benefit from tax loss carryforwards of Mexican companies in the Group in the aggregate amount of Ps.7,936,044 as of December 31, 2013; and (iii) adjusted the carrying amount of deferred income taxes from temporary differences by recognizing such effects on a separate company basis by using the enacted corporate income tax rate as of December 31, 2013. The income tax payable as of December 31, 2019 and 2018, in connection with the 2014 Tax Reform, is as follows:
|  | 2019 |  | 2018
Tax losses of subsidiaries, net |  | Ps. | 3,230,248 |  | Ps. | 4,959,130
Less: Current portion (a) |  |  | 1,470,529 |  |  | 1,817,736
Non-current portion (b) |  | Ps. | 1,759,719 |  | Ps. | 3,141,394
| (a) |  | Accounted for as current income taxes payable in the consolidated statement of financial position as of December 31, 2019 and 2018.
| (b) |  | Accounted for as non-current income taxes payable in the consolidated statement of financial position as of December 31, 2019 and 2018.
Maturities of income tax payable as of December 31, 2019, in connection with the 2014 Mexican Tax Reform, are as follows:
2020 |  | Ps. | 1,470,529
2021 |  |  | 1,016,035
2022 |  |  | 623,545
2023 |  |  | 120,139
|  | Ps. | 3,230,248
The following items represent the principal differences between income taxes computed at the statutory rate and the Group’s provision for income taxes.
|  | % |  | % |  | %
|  | 2019 |  | 2018 |  | 2017
Statutory income tax rate |  | 30 |  | 30 |  | 30
Differences between accounting and tax bases, includes tax inflation gain that is not recognized for accounting purposes |  | 5 |  | 5 |  | 10
Asset tax |  | (2) |  | — |  | —
Tax loss carryforwards |  | (13) |  | (4) |  | (2)
2014 Tax Reform |  | 1 |  | 2 |  | 1
Foreign operations |  | 8 |  | 3 |  | 5
Disposition of investment |  | 3 |  | 2 |  | —
Share of income in associates and joint ventures, net |  | (2) |  | (1) |  | (5)
Effective income tax rate |  | 30 |  | 37 |  | 39
The Group has recognized the benefits from tax loss carryforwards of Mexican companies in the Group as of December 31, 2019 and 2018. The years of expiration of tax loss carryforwards as of December 31, 2019, are as follows:
|  | Tax Loss |
|  | Carryforwards |
|  | for Which |
|  | Deferred Taxes |
Year of Expiration |  | Were Recognized |
2020 |  | Ps. | 91,050 |
2021 |  |  | 174,278 |
2022 |  |  | 2,051,839 |
2023 |  |  | 233,434 |
2024 |  |  | 972,878 |
Thereafter |  |  | 24,806,403 |
|  | Ps. | 28,329,882 |
As of December 31, 2019, tax loss carryforwards of Mexican companies in the Group for which deferred tax assets were not recognized amounted to Ps.1,780,793, and will expire between 2020 and 2028. During 2019, 2018 and 2017, certain Mexican subsidiaries utilized operating tax loss carryforwards in the amounts of Ps.6,457,550, Ps.14,072,331 and Ps.5,806,602, respectively. In addition to the tax loss carryforwards of Mexican companies in the Group referred as of December 31, 2019, the Group has tax loss carryforwards derived from the disposal in 2014 of its former investment in GSF Telecom Holdings, S.A.P.I. de C.V. (“GSF”) in the amount of Ps.15,086,807. As of December 31, 2019, tax loss carryforwards derived from this disposal for which deferred taxes were recognized amounted to Ps.15,086,807, and will expire in 2025. As of December 31, 2019, tax loss carryforwards of subsidiaries in South America, the United States, and Europe amounted to Ps.2,496,982, and will expire between 2020 and 2037. The deferred income taxes as of December 31, 2019 and 2018, were principally derived from the following temporary differences and tax loss carryforwards:
|  | 2019 |  | 2018
Assets: |  |  |  |  |  |
Accrued liabilities |  | Ps. | 4,352,021 |  | Ps. | 3,619,288
Loss allowance |  |  | 1,550,482 |  |  | 1,344,425
Customer advances |  |  | 1,499,462 |  |  | 1,799,330
Derivative financial instruments |  |  | 273,210 |  |  | —
Property, plant and equipment, net |  |  | 1,650,860 |  |  | 1,570,890
Prepaid expenses and other items |  |  | 3,700,673 |  |  | 1,125,387
Tax loss carryforwards: |  |  |  |  |  |
Operating |  |  | 7,433,425 |  |  | 8,677,220
Capital(1) |  |  | 5,591,581 |  |  | 4,338,177
Liabilities: |  |  |  |  |  |
Investments |  |  | (6,676,401) |  |  | (7,812,896)
Derivative financial instruments |  |  | — |  |  | (248,547)
Intangible assets and transmission rights |  |  | (2,406,145) |  |  | (843,409)
Deferred income tax assets of Mexican companies |  |  | 16,969,168 |  |  | 13,569,865
Deferred income tax assets of certain foreign subsidiaries |  |  | 163,747 |  |  | 221,392
Deferred income tax assets, net |  | Ps. | 17,132,915 |  | Ps. | 13,791,257
| (1) |  | Net of the benefit from tax loss carryforwards derived from the disposal in 2014 of the Group’s investment in GSF, in the amount of Ps.4,526,042 and Ps.3,301,222 in 2019 and 2018, respectively.
The deferred tax assets are in tax jurisdictions in which the Group considers that based on financial projections of its cash flows, results of operations and synergies between subsidiaries, will generate taxable income in subsequent periods. The gross rollforward of deferred income tax assets, net, is as follows:
|  | 2019 |  | 2018
At January 1 |  | Ps. | 13,791,257 |  | Ps. | 12,317,531
Statement of income credit |  |  | 2,598,712 |  |  | 2,058,457
Other comprehensive income (“OCI”) credit |  |  | 1,154,097 |  |  | 336,689
Retained earnings charge |  |  | (342,420) |  |  | —
Charged to retained earnings in connection with the adoption of new IFRS Standards |  |  | — |  |  | (921,420)
Reclassification to current assets (liabilities) held for sale |  |  | (68,731) |  |  | —
At December 31 |  | Ps. | 17,132,915 |  | Ps. | 13,791,257
The rollforward of deferred income tax assets and liabilities for the year 2019, was as follows:
|  |  |  |  |  |  |  |  |  |  | Reclassification |  |  |
|  |  |  |  | Credit (Charge) to |  | Credit (Charge) to |  | to Current |  |  |
|  |  |  |  | Consolidated |  | OCI and |  | Assets |  |  |
|  | At January 1, |  | Statement of |  | Retained |  | (Liabilities) |  | At December 31,
|  | 2019 |  | Income |  | Earnings |  | Held for Sale |  | 2019
Assets: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Accrued liabilities |  | Ps. | 3,619,288 |  | Ps. | 732,733 |  | Ps. | — |  | Ps. | — |  | Ps. | 4,352,021
Loss allowance |  |  | 1,344,425 |  |  | 206,057 |  |  | — |  |  | — |  |  | 1,550,482
Customer advances |  |  | 1,799,330 |  |  | (299,868) |  |  | — |  |  | — |  |  | 1,499,462
Derivative financial instruments |  |  | — |  |  | (183,364) |  |  | 456,574 |  |  | — |  |  | 273,210
Property, plant and equipment, net |  |  | 1,570,890 |  |  | 79,970 |  |  | — |  |  | — |  |  | 1,650,860
Prepaid expenses and other items |  |  | 1,125,387 |  |  | 2,586,763 |  |  | 57,254 |  |  | (68,731) |  |  | 3,700,673
Tax loss carryforwards |  |  | 13,015,397 |  |  | 334,122 |  |  | (324,513) |  |  | — |  |  | 13,025,006
Deferred income tax assets of foreign subsidiaries |  |  | 221,392 |  |  | (57,645) |  |  | — |  |  | — |  |  | 163,747
Liabilities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Investments |  |  | (7,812,896) |  |  | 514,133 |  |  | 622,362 |  |  | — |  |  | (6,676,401)
Derivative financial instruments |  |  | (248,547) |  |  | 248,547 |  |  | — |  |  | — |  |  | —
Intangible assets and transmission rights |  |  | (843,409) |  |  | (1,562,736) |  |  | — |  |  | — |  |  | (2,406,145)
Deferred income tax assets, net |  | Ps. | 13,791,257 |  | Ps. | 2,598,712 |  | Ps. | 811,677 |  | Ps. | (68,731) |  | Ps. | 17,132,915
The rollforward of deferred income tax assets and liabilities for the year 2018, was as follows:
|  |  |  |  | Credit (Charge) to |  |  |  |  |  |
|  |  |  |  | Consolidated |  | Credit (Charge) to |  |  |
|  | At January 1, |  | Statement of |  | OCI and |  | At December 31,
|  | 2018 |  | Income |  | Equity |  | 2018
Assets: |  |  |  |  |  |  |  |  |  |  |  |
Accrued liabilities |  | Ps. | 3,388,289 |  | Ps. | 230,999 |  | Ps. | — |  | Ps. | 3,619,288
Loss allowance |  |  | 1,115,990 |  |  | 149,305 |  |  | 79,130 |  |  | 1,344,425
Customer advances |  |  | 2,230,958 |  |  | (431,628) |  |  | — |  |  | 1,799,330
Property, plant and equipment, net |  |  | 1,159,085 |  |  | 411,805 |  |  | — |  |  | 1,570,890
Prepaid expenses and other items |  |  | — |  |  | 1,785,820 |  |  | (660,433) |  |  | 1,125,387
Tax loss carryforwards |  |  | 15,558,120 |  |  | (2,542,723) |  |  | — |  |  | 13,015,397
Deferred income tax assets of foreign subsidiaries |  |  | 257,769 |  |  | 73,117 |  |  | (109,494) |  |  | 221,392
Liabilities: |  |  |  |  |  |  |  |  |  |  |  |
Investments |  |  | (7,117,306) |  |  | (854,016) |  |  | 158,426 |  |  | (7,812,896)
Derivative financial instruments |  |  | (355,051) |  |  | 158,864 |  |  | (52,360) |  |  | (248,547)
Intangible assets and transmission rights |  |  | (2,646,267) |  |  | 1,802,858 |  |  | — |  |  | (843,409)
Prepaid expenses and other items |  |  | (1,274,056) |  |  | 1,274,056 |  |  | — |  |  | —
Deferred income tax assets, net |  | Ps. | 12,317,531 |  | Ps. | 2,058,457 |  | Ps. | (584,731) |  | Ps. | 13,791,257
The tax (charge) credit relating to components of other comprehensive income is as follows:
|  | 2019
|  |  |  |  | Tax (Charge) |  |  |
|  | Before Tax |  | Credit |  | After Tax
Remeasurement of post-employment benefit obligations |  | Ps. | (247,092) |  | Ps. | 74,128 |  | Ps. | (172,964)
Remeasurement of post-employment benefit obligations of assets held for sale |  |  | (3,445) |  |  | 1,033 |  |  | (2,412)
Exchange differences on translating foreign operations |  |  | (98,422) |  |  | (101,323) |  |  | (199,745)
Derivative financial instruments cash flow hedges |  |  | (1,521,912) |  |  | 456,574 |  |  | (1,065,338)
Warrants exercisable for common stock of UHI |  |  | 257,306 |  |  | (77,192) |  |  | 180,114
Open Ended Fund |  |  | (351,202) |  |  | 112,590 |  |  | (238,612)
Other equity instruments |  |  | (794,624) |  |  | 238,387 |  |  | (556,237)
Other financial assets |  |  | 111 |  |  | (33) |  |  | 78
Share of loss of associates and joint ventures |  |  | (236,159) |  |  | — |  |  | (236,159)
Other comprehensive loss |  | Ps. | (2,995,439) |  | Ps. | 704,164 |  | Ps. | (2,291,275)
Current tax |  |  |  |  | Ps. | (449,933) |  |  |
Deferred tax |  |  |  |  |  | 1,154,097 |  |  |
|  |  |  |  | Ps. | 704,164 |  |  |
|  | 2018
|  |  |  |  | Tax (Charge) |  |  |
|  | Before Tax |  | Credit |  | After Tax
Remeasurement of post-employment benefit obligations (1) |  | Ps. | (97,086) |  | Ps. | 230,623 |  | Ps. | 133,537
Exchange differences on translating foreign operations |  |  | (859,032) |  |  | (587) |  |  | (859,619)
Derivative financial instruments cash flow hedges |  |  | 174,532 |  |  | (52,359) |  |  | 122,173
Warrants exercisable for common stock of UHI |  |  | (1,347,698) |  |  | 404,309 |  |  | (943,389)
Open Ended Fund |  |  | 215,957 |  |  | (64,787) |  |  | 151,170
Other equity instruments |  |  | 603,766 |  |  | (181,130) |  |  | 422,636
Other financial assets |  |  | (111) |  |  | 33 |  |  | (78)
Share of loss of associates and joint ventures |  |  | (47,313) |  |  | — |  |  | (47,313)
Other comprehensive loss |  | Ps. | (1,356,985) |  | Ps. | 336,102 |  | Ps. | (1,020,883)
Current tax |  |  |  |  | Ps. | (587) |  |  |
Deferred tax |  |  |  |  |  | 336,689 |  |  |
|  |  |  |  | Ps. | 336,102 |  |  |
| (1) |  | During 2018, the Group recognized a deferred income tax benefit of Ps.201,497, related to remeasurement of post-employment benefit obligations of prior years.
|  | 2017
|  |  |  |  | Tax (Charge) |  |  |
|  | Before Tax |  | Credit |  | After Tax
Remeasurement of post-employment benefit obligations |  | Ps. | (283,106) |  | Ps. | — |  | Ps. | (283,106)
Exchange differences on translating foreign operations |  |  | 334,097 |  |  | (78,040) |  |  | 256,057
Derivative financial instruments cash flow hedges |  |  | 231,758 |  |  | (69,527) |  |  | 162,231
Warrants exercisable for common stock of UHI |  |  | (280,447) |  |  | 84,134 |  |  | (196,313)
Open Ended Fund |  |  | 1,008,675 |  |  | (302,603) |  |  | 706,072
Share of loss of associates and joint ventures |  |  | (60,340) |  |  | — |  |  | (60,340)
Other comprehensive income |  | Ps. | 950,637 |  | Ps. | (366,036) |  | Ps. | 584,601
Current tax |  |  |  |  | Ps. | (78,040) |  |  |
Deferred tax |  |  |  |  |  | (287,996) |  |  |
|  |  |  |  | Ps. | (366,036) |  |  |
The Group does not recognize deferred income tax liabilities related to its investments in associates and joint ventures, as the Group is able to control the timing of the reversal of temporary differences arising from these investments, and it is probable that these temporary differences will not reverse in the foreseeable future. As of December 31, 2019 and 2018, the deferred tax liabilities in connection with the Group’s investments in associates and joint ventures amounted to an aggregate of Ps.1,029,209 and Ps.993,402, respectively. In December 2018 the Mexican Federal Congress approved the economic plan for 2019, which did not include relevant changes in the Mexican tax legislation, except for the limitation to use overpayments of taxes against the same kind of tax (Value Added Taxes (“VAT”) against VAT), and some incentives for taxpayers operating in the Northern border region of Mexico. Until December 2018, taxpayers were able to offset overpayments of different type of taxes against each other and against taxes withheld. With the tax reform, this ability was eliminated and taxpayers are only allowed to offset tax overpayments that derive from the same tax. This limitation may affect some of our subsidiaries that recurrently have VAT or Income Tax overpayments but could offset those overpayments against each other (i.e. VAT against Income Tax). Beginning on January 1, 2019, they will only be able to: (i) to request a refund of the overpayment or (ii) to offset tax overpayments against the same tax. In December 2019, the Mexican Federal Congress approved some additional reforms to the Economic Plan for 2020. These tax reforms include amendments to the Mexican Income Tax Law, Value Added Tax Law, Special Tax on Production and Services Law, and Federal Tax Code, and they became effective as of January 1, 2020. Some of the most relevant changes to the Mexican tax legislation incorporated some of the Actions included in the Base Erosion and Profit Shifting Final Report (BEPS) published by the OCDE in February 2013, such as: (i) limitations to the deduction of net interest paid by companies as well as to some other deductions, (ii) update of the Controlled Foreign Corporation (CFC) Rules, (iii) new provisions to tax transparent entities, (iv) modification of the definition of permanent establishment, and (v) incorporation of new rules to tax digital economy. Some other relevant amendments to avoid tax evasion include: (i) a new obligation of tax advisors and taxpayers to disclose reportable schemes, and (ii) inclusion of general anti-avoidance rule.

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