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DEFERRED INCOME TAX
 12 Months Ended
Dec. 31, 2019
Deferred income tax [Abstract]  
DEFERRED INCOME TAX
INCOME TAX EXPENSE

Income tax expense for each of the years presented is as follows:
 
Year ended December 31,
 
2019
 
2018
 
2017
 
 
 
 
 
 
Current tax
(256,460
)
 
(588,773
)
 
(450,384
)
Effect of changes in tax law (1)
4,178

 
(28,596
)
 
—

 
 
 
 
 
 
Deferred tax (Note 20)
 
 
 
 
 
Deferred tax
38,785

 
232,485

 
106,047

Effect of changes in tax law (1)
16,979

 
—

 
7,455

Recovery of income tax (2)
—

 
15,449

 
—

 
 
 
 
 
 
Income tax expense
(196,519
)
 
(369,435
)
 
(336,882
)
(1) For 2019, it includes mainly the application of the new tax law in Argentina that enables the tax inflation adjustment. The reduction of the tax rate in Argentina enacted in 2017 was modified in 2019, setting the corporate income tax rate to 30% for the year 2020 and to 25% from the year 2021 going forward.
For 2018, it includes mainly the option exercised by the Company of the asset revaluation for tax purpose in Argentina, for which an amount of $28.6 millions was included.
For 2017, it includes the effects of the Argentine tax reform, which became effective starting January 1, 2018, including a reduction in the corporate income tax rate from 35% to 30% during the first two years (i.e., fiscal years starting on or after January 1, 2018 until December 31, 2019, inclusive) and to 25% going forward. Also, a one-time tax on an asset revaluation for tax purposes was approved.
It also includes the effects of the U.S. tax reform, which among other provisions, reduced the U.S. corporate tax rate from 35% to 21%, effective January 1, 2018. This required a revaluation of the deferred tax assets and liabilities and certain current tax payables to the newly enacted tax rates at the date of enactment. Consequently, the Company has recorded a net adjustment to deferred income tax benefit of $5.2 million for the year ended December 31, 2017.
(2) It includes the recovery of tax credits in Ternium Brasil Ltda.

Income tax expense for the years ended December 31, 2019, 2018 and 2017 differed from the amount computed by applying the statutory income tax rate in force in each country in which the company operates to pre-tax income as a result of the following:
 
Year ended December 31,
 
2019
 
2018
 
2017
 
 
 
 
 
 
Income before income tax
826,564

 
2,031,567

 
1,359,809

 
 
 
 
 
 
Income tax expense at statutory tax rate
(247,592
)
 
(604,493
)
 
(387,666
)
Non taxable income
71,101

 
102,870

 
16,232

Non deductible expenses
(476
)
 
(16,201
)
 
(24,070
)
Effect of currency translation on tax base (1)
33,133

 
161,536

 
51,167

Increase of unrecognized tax losses carried-forward
(73,842
)
 
—

 
—

Recovery of income tax
—

 
15,449

 
—

Effect of changes in tax law
21,157

 
(28,596
)
 
7,455

 
 
 
 
 
 
Income tax expense
(196,519
)
 
(369,435
)
 
(336,882
)
(1) Ternium applies the liability method to recognize deferred income tax on temporary differences between the tax bases of assets and their carrying amounts in the financial statements. By application of this method, Ternium recognizes gains and losses on deferred income tax due to the effect of the change in the value on the tax basis in subsidiaries, which have a functional currency different to their local currency, mainly Mexico.
Tax rates used to perform the reconciliation between tax expense (income) and accounting profit are those in effect at each relevant date or period in each applicable jurisdiction.
DEFERRED INCOME TAX
Deferred income taxes are calculated in full on temporary differences under the liability method using the tax rate of the applicable country.
Changes in deferred income tax are as follows:
 
As of December 31,
 
2019
 
2018
 
 
 
 
At the beginning of the year
(340,207
)
 
(392,265
)
 
 
 
 
Translation differences
25,166

 
(7,201
)
Effect of changes in tax law (Note 11)
16,979

 
—

Effect of initial inflation adjustment
—

 
(182,773
)
Credits (Charges) directly to other comprehensive income
19,537

 
9,547

Deferred tax (charge) credit (Note 11)
38,785

 
232,485

 
 
 
 
At the end of the year
(239,740
)
 
(340,207
)



20.
DEFERRED INCOME TAX (continued)

The changes in deferred tax assets and liabilities (prior to offsetting the balances within the same tax jurisdiction) during the year are as follows:
Deferred tax liabilities
 
PP&E
 
Inventories
 
Intangible
assets
 
Other
 
Total at December 31, 2019
 
 
 
 
 
 
 
 
 
 
 
At the beginning of the year
 
(522,455
)
 
(41,316
)
 
(15,926
)
 
(1,088
)
 
(580,785
)
 
 
 
 
 
 
 
 
 
 
 
Translation differences
 
27,077

 
2,604

 
316

 
—

 
29,997

Income statement credit (charge)
 
58,002

 
(24,748
)
 
(1,499
)
 
(101
)
 
31,654

 
 
 
 
 
 
 
 
 
 
 
At the end of the year
 
(437,376
)
 
(63,460
)
 
(17,109
)
 
(1,189
)
 
(519,134
)
Deferred tax assets
 
Provisions
 
Trade
receivables
 
Tax
losses (1)
 
Other
 
Total at December 31, 2019
 
 
 
 
 
 
 
 
 
 
 
At the beginning of the year
 
72,947

 
11,265

 
33,382

 
122,984

 
240,578

 
 
 
 
 
 
 
 
 
 
 
Translation differences
 
(572
)
 
(539
)
 
—

 
(3,720
)
 
(4,831
)
Credits (Charges) directly to other comprehensive income
 
—

 
—

 
—

 
19,537

 
19,537

Effect of changes in tax law
 
—

 
—

 
—

 
16,979

 
16,979

Income statement credit (charge)
 
(26,721
)
 
(526
)
 
9,384

 
24,994

 
7,131

 
 
 
 
 
 
 
 
 
 
 
At the end of the year
 
45,654

 
10,200

 
42,766

 
180,774

 
279,394

(1) As of December 31, 2019, the recognized deferred tax assets on tax losses amount to $42,766 and there are net unrecognized deferred tax assets of $0.4 billion and unrecognized tax losses amounting to $1.4 billion. These two last effects are connected to the acquisition of Ternium Brasil (see Note 3).
Deferred tax liabilities
 
PP&E
 
Inventories
 
Intangible
assets
 
Other
 
Total at December 31, 2018
 
 
 
 
 
 
 
 
 
 
 
At the beginning of the year
 
(539,839
)
 
(57,006
)
 
(18,692
)
 
(2,056
)
 
(617,593
)
 
 
 
 
 
 
 
 
 
 
 
Translation differences
 
9,726

 
527

 
497

 
(688
)
 
10,062

Effect of initial inflation adjustment
 
(161,044
)
 
(20,967
)
 
(762
)
 
—

 
(182,773
)
Income statement credit (charge)
 
168,702

 
36,130

 
3,031

 
1,656

 
209,519

 
 
 
 
 
 
 
 
 
 
 
At the end of the year
 
(522,455
)
 
(41,316
)
 
(15,926
)
 
(1,088
)
 
(580,785
)
Deferred tax assets
 
Provisions
 
Trade
receivables
 
Tax losses
(2)
 
Other
 
Total at December 31, 2018
 
 
 
 
 
 
 
 
 
 
 
At the beginning of the year
 
61,101

 
8,200

 
43,355

 
112,672

 
225,328

 
 
 
 
 
 
 
 
 
 
 
Translation differences
 
(6,036
)
 
(1,089
)
 
—

 
(10,137
)
 
(17,263
)
Charges directly to other comprehensive income
 
—

 
—

 
—

 
9,547

 
9,547

Income statement credit (charge)
 
17,882

 
4,154

 
(9,973
)
 
10,903

 
22,966

 
 
 
 
 
 
 
 
 
 
 
At the end of the year
 
72,947

 
11,265

 
33,382

 
122,984

 
240,578

(2) As of December 31, 2018, the recognized deferred tax assets on tax losses amount to $33,383 and there are net unrecognized deferred tax assets of $0.4 billion and unrecognized tax losses amounting to $1.3 billion. These two last effects are connected to the acquisition of Ternium Brasil (see note 3).

Deferred tax assets and liabilities are offset when the entity a) has a legally enforceable right to set off the recognized amounts; and b) intends to settle the tax on a net basis or to realize the asset and settle the liability simultaneously.
20.
DEFERRED INCOME TAX (continued)

The amounts shown in the statement of financial position (prior to offsetting the balances within the same tax jurisdiction) include the following:
 
As of December 31,
 
2019
 
2018
 
 
 
 
Deferred tax assets to be recovered after more than 12 months
203,607

 
153,681

Deferred tax assets to be recovered within 12 months
75,787

 
86,897

Deferred tax liabilities to be settled after more than 12 months
(454,763
)
 
(538,854
)
Deferred tax liabilities to be settled within 12 months
(64,371
)
 
(41,931
)
 
 
 
 
 
(239,740
)
 
(340,207
)