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

Income Taxes

v3.24.1.u1
Income Taxes
12 Months Ended
Dec. 31, 2023
Income Taxes [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 2023, 2022 and 2021 years, were 30% for México, 25% for Guatemala and 21% for United States, and will continue as such in future years.

 

Income tax recognized in profit or loss for the years of 2023, 2022 and 2021 was comprised of the following:

 

    2023     2022     2021  
                   
Current tax   Ps. 645,521       533,522       791,856  
Deferred tax (benefit) expense     (261,137 )     (16,602 )     22,700  
                         
    Ps. 384,384       516,920       814,556  

 

The subsidiary in Guatemala generated an ISR of Ps.55 in 2023, a loss in 2022 and ISR of Ps.636 in 2021, while the subsidiaries in the United State had losses in 2023 and 2022.

 

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:

 

    2023     2022     2021  
                   
Profit before income tax   Ps. 1,431,122       1,386,884       2,562,495  
Tax rate     30 %     30 %     30 %
Income tax expense calculated at 30% statutory tax rate     429,337       416,065       768,749  
                         
Inflation effects, net     17,730       3,536       25,039  
Non-deductible expenses (1)     65,978       148,569       5,790  
Share-based payments     1,403       1,780       1,744  
Other items, net     (94,604 )     (53,030 )     13,234  
    Ps. 384,384       516,920       814,556  
   

27

%     

37

%     

32

% 

 

(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, 2023, 2022 and 2021 are presented below:

 

Temporary differences  

As of
January 1,
2021

    Accounting effects
from changing
reporting period
    Recognized in profit or loss     As of
December 31,
2021
 
                         
Deferred tax assets:                        
Expected credit loss   Ps. 8,319       11,309       12,799       32,427  
Accruals and provisions     69,681       -       (31,723 )     37,958  
Derivative financial instruments     35,886       -       (35,886 )     -  
Property, plant and equipment     -       -       5,538       5,538  
Leases     7,313       -       (1,949 )     5,364  
                                 
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       -  
Right-of-use assets     (7,465 )     -       2,250       (5,215 )
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
December 31,
2021
    Liability assumed
for subsidiaries’
acquisition
   

 

Recognized in profit or loss

    As of
December 31,
2022
 
                         
Deferred tax assets:                                
Expected credit loss   Ps. 32,427       -       (3,085 )     29,342  
Accruals and provisions     37,958       256,433       99,850       394,241  
Prepaid expenses     -       4,752       351       5,103  
Property, plant and equipment     5,538       -       (5,538 )     -  
Leases     5,364       -       83,103       88,467  
                                 
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 )
Right-of-use assets     (5,215 )     -       (83,397 )     (88,612 )
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 )

 

Temporary differences   As of
December 31,
2022
    Recognized in profit or loss     As of
December 31,
2023
 
                   
Deferred tax assets:                  
Expected credit loss   Ps. 29,342       70,801       100,143  
Accruals and provisions     394,241       (92,620 )     301,621  
Costumers’ prepayments     87       1       88  
Non-deductible interest     -       120,236       120,236  
Leases     88,467       27,137       115,604  
                         
Deferred tax liabilities:                        
Intangible assets     (498,387 )     1,920       (496,467 )
Inventories     (27,744 )     10,040       (17,704 )
Derivative financial instruments     (3,915 )     (6,442 )     (10,357 )
Property, plant and equipment     (388,721 )     145,561       (243,160 )
Right-of-use assets     (88,612 )     (18,999 )     (107,611 )
Suppliers’ prepayments     5,016       (12,260 )     (7,244 )
Other assets and prepaid expenses     (24,174 )     9,424       (14,750 )
                         
Net deferred tax liability   Ps. (514,400 )     254,799       (259,601 )

 

Unrecognized deferred tax assets:

 

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 tax loss carryforwards of the subsidiaries:

 

As of December 31, 2023  
Originated loss’ year     Life year     Jafra Cosmetics
International, S.A.
de C.V.
    Jafrafin, S.A. de C.V.  
                     
2019     2029   Ps. 8,210     -  
2020     2030     3,547     -  
2021     2031     -     2,793  
2022     2032     9,102     5,722  
          Ps. 20,859     8,515  

 

As of December 31, 2022  
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, the Group had no tax loss carryforwards.

 

As of December 31, 2023, 2022 and 2021, the tax balances to be recovered mainly consist of favor balances of ISR pending application.

 

Temporary differences related to investments in subsidiaries for which deferred income tax liabilities have not been recognized:

 

The Company has undistributed profits for the years 2023 and 2022 of Ps.241,977 and Ps.231,203 which generate unrecognized deferred income tax liabilities of Ps.72,593 and Ps.69,361, respectively, since the Company is able to control the timing of distributions to its subsidiaries and is not expected to distribute these benefits in the foreseeable future. For the year 2021, the Group did not have any undistributed profits from subsidiaries that were subject to any tax payable by the beneficiary.