Annual and transition report of foreign private issuers pursuant to Section 13 or 15(d)

Income Taxes

v3.23.1
Income Taxes
 12 Months Ended
Dec. 31, 2022
Disclosure Of Income Tax Text Block Abstract  
Income Taxes
17. Income taxes

 

The subsidiaries of the Group in México and abroad are individually subject to the payment of income taxes. These taxes are not determined based on the consolidates figures of the Group, but are calculated individually at the level of each company declaration and each of these presents its taxes separately.

 

According to the specific requirements of each country, the statutory rates for 2022, 2021 and 2020 periods, were 30% for México, 25% for Guatemala and 21% for United States, and will continue as such in future periods.

 

Income tax recognized in profit or loss for the periods of 2022, 2021 and 2020 was comprised of the following:

 

    2022     2021     2020  
Current tax   Ps. 533,522       791,856       576,834  
Deferred tax (benefit) expense     (16,602 )     22,700       (51,173 )
    Ps. 516,920       814,556       525,661  

 

Income tax expense recognized at the effective ISR rate differs from income tax expense at the statutory tax rate. Reconciliation of income tax expense recognized from statutory to effective ISR rate is as follows:

 

    2022     2021     2020  
Profit before income tax   Ps. 1,386,884       2,542,495       824,105  
Tax rate     30 %     30 %     30 %
Income tax expense calculated at 30% statutory tax rate     416,065       768,749       247,232  
                         
Inflation effects, net     3,536       25,039       8,333  
Non-deductible expenses (1)     148,569       5,790       5,493  
Loss on valuation of warrants     -       -       255,456  
Share-based payments     1,780       1,744       8,275  
Other items, net     (53,030 )     13,234       872  
      516,920       814,556       525,661  
     Ps. 

37

 %    

32

 %    

64

 %

 

(1) Includes (i) certain payroll expenses which are partially deductible as grocery vouchers, help for transportation, life and major medical expenses insurance, among others; and (ii) certain cost of sales expenses as samples and obsolescence items.

 

Realization of deferred tax assets depends on the future generation of taxable income during the period in which the temporary differences will be deductible. Management considers the reversal of deferred tax liabilities and projections of future taxable income to make its assessment on the realization of deferred tax assets. Based on the results obtained in previous years and in future profit and tax projections, management has concluded that it is probable the deferred tax assets will be realized.

 

Composition of the deferred tax asset (liabilities) as well as the reconciliation of changes in deferred taxes balances as of December 31, 2022, December 31, 2021 and January 3, 2021 is presented below:

 

Temporary differences   As of
January 1,
2020		     Recognized in profit or loss     Recognized in other comprehensive income     As of
January 3,
2021		  
Deferred tax assets:                                
Expected credit loss   Ps. 5,217       3,102      
-
       8,319  
Accruals and provisions     25,937       43,232       360       69,529  
Derivative financial instruments    
-
       35,886      
-
       35,886  
Property, plant and equipment     4,579       (4,579 )    
-
      
-
  
                                 
Deferred tax liabilities:                                
Intangible assets     (85,820 )     1,920      
-
       (83,900 )
Inventories     (9,353 )     (24,881 )     -       (34,234 )
Derivative financial instruments     (89 )     89      
-
      
-
  
Property, plant and equipment    
-
       (10,888 )    
-
       (10,888 )
Other assets and prepaid expenses     (13,891 )     6,932      
-
       (6,959 )
Net deferred tax liability   Ps. (73,420 )     50,813       360       (22,247 )

  

Temporary differences   As of
January 3,
2021		     Accounting
effects from
changing
reporting
period		     Recognized
in profit or
loss		     Recognized in
other
comprehensive
income		     As of
December
31, 2021		  
Deferred tax assets:                              
Expected credit loss   Ps. 8,319       11,309       12,799               -       32,427  
Accruals and provisions     69,529       -       (31,422 )     -       38,107  
Derivative financial instruments     35,886       -       (35,886 )    
-
       -  
Property, plant and equipment    
-
       -       5,538       -       5,538  
                                         
Deferred tax liabilities:                                        
Intangible assets     (83,900 )    
-
       1,920       -       (81,980 )
Inventories     (34,234 )     (5,337 )     30,483       -       (9,088 )
Derivative financial instruments    
-
       -       (7,380 )     -       (7,380 )
Property, plant and equipment     (10,888 )     -       10,888      
-
       -  
Other assets and prepaid expenses     (6,959 )     -       (9,640 )     -       (16,599 )
Net deferred tax liability   Ps. (22,247 )     5,972       (22,700 )     -       (38,975 )

 

Temporary differences   As of
December31,
2021		     Liability
assumed for
subsidiaries’
acquisition		     Recognized
in profit or
loss		     Recognized in
other
comprehensive
income		     As of
December31,
2022		  
Deferred tax assets:                              
Expected credit loss   Ps. 32,427                 -       (3,085 )           -       29,342  
Accruals and provisions     38,107       256,433       99,556       -       394,096  
Prepaid expenses     -       4,752       351       -       5,103  
Property, plant and equipment     5,538       -       (5,538 )    
-
       -  
                                         
Deferred tax liabilities:                                        
Intangible assets     (81,980 )     (418,327 )     1,920       -       (498,387 )
Inventories     (9,088 )     -       (18,656 )     -       (27,744 )
Derivative financial instruments     (7,380 )     4,936       (1,471 )     -       (3,915 )
Property, plant and equipment     -       (350,521 )     (38,200 )     -       (388,721 )
Other assets and prepaid expenses     (16,599 )     10,700       (18,275 )     -       (24,174 )
Net deferred tax liability   Ps. (38,975 )     (492,027 )     16,602       -       (514,400 )

 

Unrecognized deferred tax assets:

 

As of December 31, 2022, derived from the acquisition of JAFRA, the Group did not recognize deferred tax assets in the consolidated statement of financial position with respect to the following items of the subsidiaries:

 

Originated loss’ year   Life year   Jafra Cosmetics
International, S.A.
de C.V.		     Jafrafin, S.A.
de C.V.		  
2019   2029   Ps. 27,861      
-
  
2020   2030     3,376      
-
  
2021   2031    
-
       2,659  
        Ps. 31,237       2,659  

 

The Group does not recognize taxes for deferred assets with respect to tax loss carryforwards to be amortized, on which it is not probable that future taxable profits will be generated against which the Group can use tax loss carryforwards.

 

As of December 31, 2021 and January 3, 2021, the Group had no tax loss carryforwards.