Deferred income tax assets and liabilities and income tax expense

12 Months Ended

Dec. 31, 2022

Text Block [Abstract]

Deferred income tax assets and liabilities and income tax expense

Note 16. Deferred income tax assets and liabilities, and income tax expense

Deferred income tax assets and liabilities break down as follows:

	As of January 1, 2022			Profit (loss)			Other comprehensive income (loss)		As of December 31, 2022
Tax losses and other unused tax credits (1)		6,972			(2,255	)		—		4,717
Provisions		7,265			(2,559	)		—		4,706
Employee benefit		2,913			(467	)		1,463		3,909
Right-of-use assets, net		161			877			—		1,038
Other		(501	)		1,948			—		1,447
Assets for deferred income tax		16,810			(2,456	)		1,463		15,817
Property, plant and equipment		(150,786	)		4,632			—		(146,154	)
Tax inflation adjustment		(36,038	)		(72,325	)		—		(108,363	)
Trade and other receivables		1,784			(3,131	)		—		(1,347	)
Short-term investments		(1,925	)		715			—		(1,210	)
Borrowings		(1,225	)		304			—		(921	)
Inventories		(1,269	)		371			—		(898	)
Liabilities for deferred income tax		(189,459	)		(69,434	)		—		(258,893	)
Deferred income tax, net		(172,649	)		(71,890	)		1,463		(243,076	)

	As of January 1, 2021			Profit (loss)			Other comprehensive income (loss)		As of December 31, 2021
Tax losses and other unused tax credits (1)		37,479			(30,507	)		—		6,972
Provisions		2,473			4,792			—		7,265
Employee benefit		865			—			2,048		2,913
Trade and other receivables		(561	)		2,345			—		1,784
Right-of-use assets, net		264			(103	)		—		161
Assets for deferred income tax		40,520			(23,473	)		2,048		19,095
Property, plant and equipment		(133,911	)		(16,875	)		—		(150,786	)
Tax inflation adjustment		(39,439	)		3,401			—		(36,038	)
Short-term investments		(135	)		(1,790	)		—		(1,925	)
Inventories		(822	)		(447	)		—		(1,269	)
Borrowings		(1,212	)		(13	)		—		(1,225	)
Other		(3	)		(498	)		—		(501	)
Liabilities for deferred income tax		(175,522	)		(16,222	)		—		(191,744	)
Deferred income tax, net		(135,002	)		(39,695	)		2,048		(172,649	)

(1) As of December 31, 2022 and 2021, the Company has recognized Net Operating Loss (“NOL”) based on a the analysis of expected future taxable income in the following years, generated in Argentina and Mexico.

Deferred income tax assets and liabilities are offset in the following cases: (i) when there is a legally enforceable right to offset tax assets and liabilities; and (ii) when deferred income tax charges are related to the same tax authority. The following amounts, are disclosed in the consolidated statement of financial position:

	As of December 31, 2022		As of December 31, 2021
Deferred income tax assets, net		335		2,771
Deferred income tax liabilities, net		243,411		175,420

Income tax breaks down as follows:

	Year ended December 31, 2022			Year ended December 31, 2021			Year ended December 31, 2020
Income tax
Current income tax		(92,089	)		(62,419	)		(184	)
Deferred income tax		(71,890	)		(39,695	)		10,297
Income tax (expense) disclosed in the statement of profit or loss		(163,979	)		(102,114	)		10,113
Deferred income tax charged to other comprehensive income		1,463			2,048			(114	)
Total income tax (expense) benefit		(162,516	)		(100,066	)		9,999

For the years ended December 31, 2022, 2021 and 2020, the Company’s effective rate was 38%, 67% and 9%, respectively.

Below is the reconciliation between income tax expense and the amount resulting from the application of the tax rate to profit (loss) before income tax:

	Year ended December 31, 2022			Year ended December 31, 2021			Year ended December 31, 2020
Profit (loss) before income tax		433,514			152,764			(112,862	)
Statutory income tax rate		30	%		30	%		30	%
Income tax at the current tax rate pursuant to effective tax regulations		(130,054	)		(45,829	)		33,859
Items that adjust income tax (expense) / benefit:
Nondeductible expenses		(18,735	)		(6,600	)		(2,449	)
Inflation adjustment		(153,517	)		(98,348	)		(32,086	)
Effect on the measurement of monetary and nonmonetary items at functional currency		169,058			86,724			24,628
Unrecognized tax losses and other assets		(15,568	)		(4,047	)		(7,039	)
Effect of tax losses (1)		—			31,232			(179	)
Effect related to statutory income tax rate change (2)		—			(67,312	)		(6,384	)
Difference in income tax estimate prior year		6,358			—			—
Application of tax credits		6,229			9,710			—
Effect related to the difference in tax rate other than Mexican statutory rate		(25,762	)		(7,637	)		—
Other		(1,988	)		(7	)		(237	)
Total income tax benefit (expense)		(163,979	)		(102,114	)		10,113

(1) For the year ended December 31, 2021, see Note 16.1.

(2) For the year ended December 31, 2021, mainly include effects in Note 33.1.

As of December 31, 2022 and 2021, the Company and some subsidiaries in Mexico carry accumulated tax losses not recognized for which no deferred tax asset has been recognized. According to Mexican legislation, these accumulated tax losses not recognized shall be adjusted annually by the applicable index. Below are the updated accumulated tax losses not recognized and their due dates:

	As of December 31, 2022		As of December 31, 2021
2027		5,166		4,499
2028		60,727		51,618
2029		27,113		13,781
As from 2030		36,203		7,903
Total accumulated tax losses not recognized		129,209		77,801

Income tax liabilities break down as follows:

	As of December 31, 2022		As of December 31, 2021
Current
Income tax, net of withholdings and prepayments		58,770		44,625
Total current		58,770		44,625

16.1 Current income tax

The reform introduced by Law No. 27,541 in Argentina set forth that, for fiscal years beginning January 1, 2021, 100% of the adjustment for inflation be deducted or levied in the year in which it is determined (see Note 31.1).

For the fiscal year ended December 31, 2021, such adjustment for inflation generated a significant increase in the income tax base of Vista Argentina, a Company subsidiary, due to the disparity between the changes in the Consumer Price Index (“IPC”, by Spanish acronym) and the exchange rate during such period.

The Company considers that the application of this adjustment for inflation violates constitutional rights, principles and guarantees, as it levies fictitious profit, thus increasing the tax burden in a way which is constitutionally inadmissible pursuant to case law issued by the Argentine Supreme Court of Justice.

In addition, in this context, Vista Argentina recognized the effects of inflation upon applying accumulated tax losses to the income tax base for 2021.