Income and social contribution taxes

12 Months Ended

Jun. 30, 2019

Income and Social Contribution Taxes [Abstract]

Income and social contribution taxes

16. Income and social contribution taxes

16.1. Deferred taxes

Deferred income and social contribution tax assets and liabilities are offset when there is a legal right to offset tax credits against tax liabilities, and provided that they refer to the same tax authority and the same legal entity.

The fiscal year for income tax and social contribution calculation purposes is different from that adopted by the Company for the preparation of its consolidated financial statements, which ends June 30 of each year.

Deferred income tax and social contribution tax assets and liabilities as of June 30, 2019 and 2018 are as follows:

	2019		2018
Assets
Noncurrent
Tax loss carryforwards (NOL)		54,555		43,442
Biological assets		6,275		5,942
Financial lease		3,443		2,103
Contingency, bonuses and fair value		9,374		11,125
Derivative financial instruments		2,185		364
Allowance for expected credit losses		488		668
Difference in cost of farms		170		170
Provision of other accounts payable and receivable		2,468		1,794
		78,958		65,608
Liabilities
Noncurrent
Biological assets		11,546		13,386
Finance lease		58		548
Contingency, bonuses and fair value		-		3,574
Surplus on investment		1,733		1,733
Costs of transactions		526		499
Provision of residual value and useful life of PPE assets		1,880		1,633
Accelerated depreciation of assets for rural activity		42,705		11,493
		58,448		32,866
Net balance		20,510		32,742

The net change in deferred income tax is as follows:

At June 30, 2017	53,780
Tax losses	(15,016	)
Adjustments in biological assets and agricultural products	(7,543	)
Financial lease	1,555
Provisions for contingency and fair value	1,389
Derivative financial instruments	(271	)
Surplus on investment (Note 1.1)	(1,733	)
Costs of transactions	(499	)
Allowance for doubtful accounts	44
Provision for other accounts payable and receivable	(1,124	)
Accelerated depreciation	2,154
Total without effect from conversion	32,736
Effect of conversion	6

At June 30, 2018	32,742
Tax losses	11,113
Adjustments in biological assets and agricultural products	2,173
Financial lease	1,830
Provisions for contingency and fair value	1,823
Derivative financial instruments	1,821
Costs of transactions	(27	)
Allowance for doubtful accounts	(180	)
Provision for other accounts payable and receivable	674
Accelerated depreciation of assets for rural activity	(31,459	)
At June 30, 2019	20,510

The expected realization of deferred tax assets are as follows:

	2019
2020		23,700
2021		12,290
2022		9,793
2023		3,085
2024 to 2029		30,090
		78,958

16.2. Income and social contribution tax expenses

	2019			2018			2017
Income before income and social contribution taxes		199,798			152,257			33,259
Combined nominal rate of income tax and social contribution taxes – %		34	%		34	%		34	%
		(67,931	)		(51,767	)		(11,308	)
Share of loss in a Joint Venture		375			4,988			(1,504	)
Management bonus		(2,827	)		(2,331	)		(2,025	)
Share-based incentive plan - ILPA		(232	)		(208	)		-
Nondeductible expenses		(126	)		(135	)		(709	)
Profit or loss of joint venture abroad		(2,618	)		-			(378	)
Net effect of subsidiaries taxed whose profit is computed as a percentage of gross revenue (*)		51,126			19,121			10,320
Net effect of spin-off of joint venture abroad (Note 1.1)		-			4,778			-
Other permanent addition		(486	)		(365	)		(345	)
Income and social contribution taxes for the year		(22,719	)		(25,919	)		(5,949	)
Current		(10,487	)		(4,875	)		(4,135	)
Deferred		(12,232	)		(21,044	)		(1,814	)
		(22,719	)		(25,919	)		(5,949	)
Effective tax rate		-11	%		-17	%		-18	%

(*) For some of our real estate subsidiaries, profit tax is measured based on the regime whereby profit is computed as a percentage of gross revenue, i.e., income tax is determined on a simplified base to calculate the taxable profit (32% for lease revenues, 8% for sale of farms and 100% for other earnings). This results effectively in taxing the profit of subsidiaries at a rate lower than if taxable income were based on accounting records.