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v3.22.4

Current and deferred tax | 12 Months Ended
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Dec. 31, 2022
Text Block [Abstract] |
Current and deferred tax |
11 | Current and deferred tax
11.1 | Deferred tax assets
The balance comprises temporary differences attributable to:
|  | December 31, 2022 |  |  | December 31, 2021 |
Loss allowances for financial assets |  |  | 270 |  |  |  | 75 |
Bonus provision |  |  | 1,712 |  |  |  | 750 |
Lease |  |  | 392 |  |  |  | 366 |
Share-based compensation (i) |  |  | 3,130 |  |  |  | 3,224 |
Hyperinflationary adjustments |  |  | 37 |  |  |  | 89 |
Tax loss (ii) |  |  | 10,513 |  |  |  | 6,445 |
Others (iii) |  |  | 1,656 |  |  |  | 1,623 |
Total deferred tax assets |  |  | 17,710 |  |  |  | 12,572 |
(i) | Mainly related to RSU amounts that are treated as temporary differences until the instrument is vested.
(ii) | Tax losses increase is driven mainly by the current investment position of the Brazilian operations. These amounts are expected to be offset in the foreseeable future. In Brazil, tax losses are not subject to statute of limitation and ought to be used observing the limits established by the local tax legislation.
(iii) | Most of the amounts appointed as Others in the deferred tax assets reconciliation correspond to temporary differences arising from operations carried out in Brazil. It refers to provision for sales commission, unrealized exchange variation, adjustments for operations marked to market (MTM), and provision for payment of suppliers. The remainder portion refers to a miscellaneous of items scattered in concepts determined by local tax laws in Argentina, Brazil, Chile, and Colombia.
As the Group has investments in subsidiaries in which the parent holds more than 50% of voting power, the parent controls the subsidiaries’ financial and operating policies, including its dividend policy. As a result, the parent can control the timing of the reversal of the temporary differences arising from an investment. Therefore, where the Group has determined that the subsidiaries’ profits and reserves will not be distributed in the foreseeable future and that the subsidiaries will not be disposed of, the Group did not recognize a deferred tax asset in relation to the cumulative translation adjustment on its investment. As at December 31, 2022, the expected tax impact of the aggregate amount of temporary differences for which no deferred tax asset has been recognized is US$24 (December 31, 2021 it was a US$119 unrecognized deferred tax asset). The movement on deferred tax assets balance is as follows:
Movements |  | Loss allowances for financial assets |  |  | Bonus provision |  |  | Lease |  |  | Share-based compensation |  |  | Hyperinflationary adjustments |  |  | Tax Loss |  |  | Other |  |  | Total |
At December 31, 2020 |  |  | 124 |  |  |  | 655 |  |  |  | 108 |  |  |  | 185 |  |  |  | 99 |  |  |  | 427 |  |  |  | 576 |  |  |  | 2,174 |
(Charged)/Credited to profit and loss (i) |  |  | (49 | ) |  |  | 95 |  |  |  | 258 |  |  |  | 2,852 |  |  |  | (10 | ) |  |  | 6,018 |  |  |  | 1,047 |  |  |  | 10,211 |
To equity |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 187 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 187 |
At December 31, 2021 |  |  | 75 |  |  |  | 750 |  |  |  | 366 |  |  |  | 3,224 |  |  |  | 89 |  |  |  | 6,445 |  |  |  | 1,623 |  |  |  | 12,572 |
(Charged)/Credited to profit and loss (i) |  |  | 195 |  |  |  | 962 |  |  |  | 26 |  |  |  | (152 | ) |  |  | (52 | ) |  |  | 4,068 |  |  |  | 33 |  |  |  | 5,080 |
To equity |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 58 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 58 |
At December 31, 2022 |  |  | 270 |  |  |  | 1,712 |  |  |  | 392 |  |  |  | 3,130 |  |  |  | 37 |  |  |  | 10,513 |  |  |  | 1,656 |  |  |  | 17,710 |
(i) | The differences between the amounts shown in the table above and the statements of profit or loss correspond to exchange rate variation.
11.2 | Deferred tax liabilities
The balance comprises temporary differences attributable to:
|  | December 31, 2022 |  |  | December 31, 2021 |
Acquisition of subsidiaries |  |  | 1,409 |  |  |  | 1,687 |
Temporary differences |  |  | 827 |  |  |  | 283 |
Others |  |  | 228 |  |  |  | 75 |
Total deferred tax liabilities |  |  | 2,464 |  |  |  | 2,045 |
The movement on deferred tax liabilities balance is as follows:
Movements |  | Goodwill |  |  | Customer relationship |  |  | Intellectual property |  |  | Others |  |  | Total |
At December 31, 2020 |  |  | 187 |  |  |  | 325 |  |  |  | 219 |  |  |  | — |  |  |  | 731 |
Acquisition of subsidiaries (i) |  |  | — |  |  |  | 1,424 |  |  |  | 65 |  |  |  | 59 |  |  |  | 1,548 |
Charged/(Credited) to profit and loss |  |  | 96 |  |  |  | (285 | ) |  |  | (61 | ) |  |  | 16 |  |  |  | (234 | )
At December 31, 2021 |  |  | 283 |  |  |  | 1,464 |  |  |  | 223 |  |  |  | 75 |  |  |  | 2,045 |
Charged/(Credited) to profit and loss |  |  | 544 |  |  |  | (218 | ) |  |  | (60 | ) |  |  | 153 |  |  |  | 419 |
At December 31, 2022 |  |  | 827 |  |  |  | 1,246 |  |  |  | 163 |  |  |  | 228 |  |  |  | 2,464 |
(i) | The impact of deferred tax liabilities due to acquisition of subsidiaries increases the goodwill on the acquisition date.
11.3 | Income Tax expense
|  | December 31, 2022 |  |  | December 31, 2021 |  |  | December 31, 2020 |
Current tax |  |  |  |  |  |  |  |  |  |  |  |
Current tax on profits for the year |  |  | (877 | ) |  |  | (1,646 | ) |  |  | (4,904 | )
|  |  | (877 | ) |  |  | (1,646 | ) |  |  | (4,904 | )
Deferred income tax |  |  |  |  |  |  |  |  |  |  |  |
Decrease in deferred tax |  |  | 4,902 |  |  |  | 11,118 |  |  |  | 616 |
|  |  | 4,902 |  |  |  | 11,118 |  |  |  | 616 |
Income tax |  |  | 4,025 |  |  |  | 9,472 |  |  |  | (4,288 | )
11.4 | Reconciliation of benefit (expenses) of income tax and social contribution
|  | December 31, 2022 |  |  | December 31, 2021 |  |  | December 31, 2020 |
Profit (Loss) before income tax |  |  | (56,444 | ) |  |  | (69,986 | ) |  |  | 3,463 |
Tax at the Brazilian tax rate of 34% (i) |  |  | 19,191 |  |  |  | 23,795 |  |  |  | (1,177 | )
Tax effect of amounts which are not deductible (taxable) in calculating taxable income: |  |  |  |  |  |  |  |  |  |  |  |
Technological innovation incentive law ( Lei do bem ) (ii) |  |  | — |  |  |  | — |  |  |  | 661 |
Restricted stock units |  |  | 1,398 |  |  |  | 451 |  |  |  | — |
Equity result |  |  | 329 |  |  |  | (1,232 | ) |  |  | 1,122 |
Difference to presumed tax regime |  |  | — |  |  |  | (1,047 | ) |  |  | (317 | )
Stock option |  |  | (53 | ) |  |  | (87 | ) |  |  | (598 | )
Unrecognized deferred tax assets (iii) |  |  | (9,465 | ) |  |  | (8,438 | ) |  |  | (1,753 | )
Tax rate reconciliation (i) |  |  | (6,381 | ) |  |  | (3,945 | ) |  |  | (1,050 | )
Other net differences |  |  | (994 | ) |  |  | (25 | ) |  |  | (1,176 | )
Income tax and social contribution for the year |  |  | 4,025 |  |  |  | 9,472 |  |  |  | (4,288 | )
Effective rate - % |  |  | (7.13 | %) |  |  | (13.53 | %) |  |  | (123.82 | %)
(i) | The tax expense was determined based on the Brazilian corporate income tax (CIT) rate considering that, currently, the Group’s biggest operation is in Brazil. This table reconciles the expected income tax expense, computed by applying the combined Brazilian tax rate of 34 %, to the actual income tax expense. The Group’s combined Brazilian tax rate includes the corporate income tax at a 25% rate and the social contribution on net profits at a 9% rate. Differences between local income tax rates to the Brazilian income tax rate were allocated to “Tax rate reconciliation”. Apart from Brazil, the Group’s biggest operations are in Argentina, the US and Colombia, which CIT rates in 2022 were 35%, 21% and 35%, respectively. Nonetheless, the result represents an incremental tax expense because some of non-Brazilian operations were loss making, therefore reducing the consolidated earnings before income tax.
(ii) | Benefit related to the inclusion of research and development (technological innovation) expenses in the income tax basis for year 2020 as provided for by Law No. 11.196/05 - known as Lei do Bem . For 2021 and 2022, considering that VTEX Brasil was in a loss position, the R&D benefit did not apply.
(iii) | Unrecognized deferred tax assets correspond to the tax benefit related to future utilization of net operating losses of certain operations, mainly the United States and the United Kingdom. In those cases, the deferred tax asset was not recognized due to the lack of expectation of utilization of such net operating losses in the foreseeable future. The balance of the accumulated net operating losses of the Group’s US operations totaled US$55,780 on December 31, 2022 and US$25,963 on December 31, 2021, or a total tax benefit of approximately US$11,714 and US$5,452, respectively, taking into account the current US corporate income tax rate of 21 %. The balance of the accumulated net operating losses of the Group’s UK operation totaled US$46,463 on December 31, 2022 and US$21,889 on December 31, 2021, or a total tax benefit of approximately US$9,398 and US$4,159 , respectively , taking into account the current UK corporate income tax rate of 19%.

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