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Tax assets and liabilities (Tables)

12 Months Ended

Dec. 31, 2017

Tax assets and liabilities (Tables) [Abstract]

The total charge for the year can be reconciled to accounting profit

The total charge for the year can be reconciled to accounting profit as follows:


Thousand of reais												2017		2016		2015

Operating Profit Before Tax												14,513,684		16,383,902		(3,215,718)
Interest on capital ⁽¹⁾												(3,800,000)		(3,850,000)		(1,400,000)
Operating Profit Before Tax												10,713,684		12,533,902		(4,615,718)
Rates (25% income tax and 20% social contribution tax in 2015)												(4,821,158)		(5,640,256)		2,077,073
PIS and COFINS (net of income and social contribution taxes) ^{(2) (8)}												(1,427,960)		(1,641,181)		1,861,767
Non-taxable/Non-deductible:
Equity in affiliates												32,198		21,392		52,340
Goodwill⁽³⁾												(669,963)		(734,952)		(1,252,578)
Exchange variation - foreign branches ⁽⁴⁾												440,857		(3,561,133)		5,913,741
Net Indeductible Expenses of Non-Taxable Income ⁽⁸⁾												194,737		-		-
Adjustments:
Constitution of income and social contribution taxes on temporary differences⁽⁵⁾												1,138,005		605,058		1,266,588
Effects of change in rate of social contribution taxes ⁽⁶⁾⁽⁷⁾												(1,427,667)		(613,202)		52,145
Other adjustments ⁽⁷⁾												1,165,315		2,645,290		3,078,468
Income taxes												(5,375,636)		(8,918,984)		13,049,544
Of which:
Current tax ⁽⁸⁾												(4,969,241)		(3,575,099)		3,631,631
Deferred taxes												(406,395)		(5,343,885)		9,417,913
Taxes paid in the year												(3,280,230)		(4,240,115)		(1,170,020)

(1) Amount distributed to shareholders as interest attributable to shareholders' equity. For accounting purposes, although the interest should be reflected in the income statement for tax deduction, the charge is reversed before the calculation of the net income in the financial statements and deducted from the shareholders' equity since it is considered as dividend.

(2) PIS and COFINS are considered a profit-base component (net basis of certain revenues and expenses), therefore and accordingly to IAS 12 they are recorded as income taxes.

(3) The difference between the tax basis and accounting basis of goodwill on acquisition of Banco ABN Amro Real S.A. is a permanent and definitive difference. Administration in this case the possibility of loss on impairment or disposal is remote and only applies to the entity as a whole and according to the characteristics of the business combination performed, it is not possible to segregate and identify the business originally acquired. Therefore deferred tax liability is not record.

(4) Permanent difference related of foreign currency exchange variation on investments abroad nontaxable/ deductible (see details below).

(5) In 2015, includes the increase in CSLL tax rate

(6) Effect of the rate differential for other non-financial corporations, with a social contribution rate of 9%, as well as the effect of the additional 5% applicable to financial institutions, valid until the end of 2018.

(7) In 2016, includes the IAS 21 amounted to R$575.131 (see Hedge of Investments Abroad below) and non-taxable income/non-deductible expenses R$349.120.

(8) Includes mainly the tax effect on expenses with donations, revenues from judicial deposit updates and other income and expenses that do not qualify as temporary differences.

The effective tax rate

The effective tax rate is as follows:


Thousand of reais												2017		2016		2015

Operating Profit Before Tax												14,513,684		16,383,902		(3,215,718)
Income tax												5,375,636		8,918,984		(13,049,544)
Effective tax rate ⁽¹⁾												37.04%		54.44%		405.80%

(1) In 2017, 2016 and 2015, considering the tax effect of the exchange variation over foreign branches and the economic hedge, accounted in the Gains (losses) on financial assets and liabilities (net) the effective tax rate would have been 40.4%, 27.1% and -18.3%, respectively. In 2015 there were the gain on the Cofins lawsuit (see disclosure above), which excluding the effects the effective tax rate would be 19.1%.

The Bank recognized the following amounts in consolidated equity

In addition to the income tax recognized in the consolidated income statement, the Bank recognized the following amounts in consolidated equity:


Thousand of reais												2017		2016		2015

Tax credited to equity												3,373,984		2,955,552		4,943,957
Measurement of available-for-sale securities												1,016,121		963,990		2,743,797
Measurement of cash flow hedges												1,063		4,145		267,511
Measurement of investment hedges												562,353		562,353		1,137,484
Defined benefit plan												1,794,447		1,425,064		795,165
Tax charged to equity												(2,541,177)		(1,795,115)		(1,255,867)
Measurement of available-for-sale securities												(2,426,459)		(1,701,732)		(1,251,773)
Measurement of cash flow hedges												(111,134)		(87,929)		(2,250)
Defined benefit plan												(3,584)		(5,454)		(1,844)
Total												832,807		1,160,437		3,688,090

Balances of Tax assets - Deferred and Tax liabilities - Deferred

The detail of the balances of “Tax assets - Deferred” and “Tax liabilities - Deferred” is as follows:

Thousand of reais

2017

2016

2015

Tax assets:

24,778,078

24,437,112

30,575,504

Of which:

Temporary differences ⁽¹⁾

23,375,600

23,398,886

29,538,257

Tax loss carry forwards

866,579

382,867

381,888

Social contribution taxes 18%

535,899

655,359

655,359

Total deferred tax assets

24,778,078

24,437,112

30,575,504

Tax liabilities:

2,496,531

1,268,037

817,125

Of which:

Excess depreciation of leased assets

124,909

144,623

185,531

Adjustment to fair value of trading securities and derivatives

2,371,622

1,123,414

631,594

Total deferred tax liabilities

2,496,531

1,268,037

817,125

(1) Temporary differences relate mainly to impairment losses on loans and receivables and provisions for lawsuits and administrative proceedings, and the effect of the fair value of financial instruments.

Changes in the balances of Tax Assets - Deferred and Tax Liabilities - Deferred

The changes in the balances of “Tax Assets - Deferred” and “Tax Liabilities - Deferred” in the last three years were as follows:


Thousand of reais						Balances at December 31, 2016		Adjustment to Income		Valuation adjustments ⁽¹⁾		Other ⁽²⁾		Acquisition / Merger		Balances at December 31, 2017

Tax assets:						24,437,112		668,483		254,733		(620,401)		38,151		24,778,078
Temporary differences						23,398,886		304,231		254,733		(620,401)		38,151		23,375,600
Tax loss carry forwards						382,867		483,712		-		-		-		866,579
Social contribution taxes 18%						655,359		(119,460)		-		-		-		535,899
Tax liabilities:						1,268,037		262,088		582,363		378,693		5,350		2,496,531
Temporary differences						1,268,037		262,088		582,363		378,693		5,350		2,496,531
Total						23,169,075		406,395		(327,630)		(999,094)		32,801		22,281,547

Thousand of reais						Balances at December 31, 2015		Adjustment to Income		Valuation adjustments ⁽¹⁾		Other ⁽²⁾		Acquisition / Merger		Balances at December 31, 2016

Tax assets:						30,575,504		(5,318,219)		(1,580,025)		652,599		107,253		24,437,112
Temporary differences						29,538,257		(5,319,198)		(1,580,025)		652,599		107,253		23,398,886
Tax loss carry forwards						381,888		979		-		-		-		382,867
Social contribution taxes 18%						655,359		-		-		-		-		655,359
Tax liabilities:						817,125		25,666		947,628		(523,182)		800		1,268,037
Temporary differences						817,125		25,666		947,628		(523,182)		800		1,268,037
Total						29,758,379		(5,343,885)		(2,527,653)		1,175,781		106,453		23,169,075

Thousand of reais						Balances at December 31, 2014		Adjustment to Income		Valuation adjustments ⁽¹⁾		Other ⁽²⁾		Acquisition / Merger		Balances at December 31, 2015

Tax assets:						20,038,000		8,866,221		1,575,891		93,991		1,401		30,575,504
Temporary differences						18,333,315		9,535,994		1,575,891		93,991		(934)		29,538,257
Tax loss carry forwards						1,049,326		(669,773)		-		-		2,335		381,888
Social contribution taxes 18%						655,359		-		-		-		-		655,359
Tax liabilities:						312,420		(551,692)		962,406		93,991		-		817,125
Temporary differences						312,420		(551,692)		962,406		93,991		-		817,125
Total						19,725,580		9,417,913		613,485		-		1,401		29,758,379

(1) It relates to tax recognized in equity.

(2) In 2017, it mainly refers to net of deferred taxes amounted to R$(241,708) (2016 - R$129,147 and 2015 - R$93,991), which have the same counterparty and realization period.

Expected realization of deferred tax assets

e) Expected realization of deferred tax assets


Year												Temporary differences		Tax loss carry forwards		Social contribution taxes 18%

2018												2,061,152		650,509		535,899
2019												3,995,868		88,249		-
2020												4,807,491		59,473		-
2021												4,522,575		36,269		-
2022 to 2024												4,939,011		7,471		-
2025 to 2026												2,486,246		19,112		-
2026 to 2027												563,257		5,496		-
Total												23,375,600		866,579		535,899