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Income Tax | 12 Months Ended
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Dec. 31, 2019
Major Components Of Tax Expense Income [Abstract] |
Income Tax |
3 1. | INCOME TAX
| a. | Income tax recognized in profit or loss
The major components of income tax expense were as follows:
|  | Year Ended December 31 |
|  | 2017 |  |  | 2018 |  |  | 2019 |
|  | NT$ |  |  | NT$ |  |  | NT$ |
|  | (In Millions) |
Current tax |  |  |  |  |  |  |  |  |  |  |  |
Current tax expenses recognized for the year |  | $ | 7,996 |  |  | $ | 8,271 |  |  | $ | 8,109 |
Income tax on unappropriated earnings |  |  | (60 | ) |  |  | (2,070 | ) |  |  | (20 | )
Income tax adjustments on prior years |  |  | (2 | ) |  |  | 7 |  |  |  | (91 | )
Others |  |  | 10 |  |  |  | 8 |  |  |  | 12 |
|  |  | 7,944 |  |  |  | 6,216 |  |  |  | 8,010 |
Deferred tax |  |  |  |  |  |  |  |  |  |  |  |
Deferred tax expense recognized for the year |  |  | (101 | ) |  |  | 208 |  |  |  | (63 | )
Income tax adjustments on prior years |  |  | 6 |  |  |  | 19 |  |  |  | (1 | )
Change in tax rate |  |  | — |  |  |  | (38 | ) |  |  | — |
|  |  | (95 | ) |  |  | 189 |  |  |  | (64 | )
Income tax expense recognized in profit or loss |  | $ | 7,849 |  |  | $ | 6,405 |  |  | $ | 7,946 |
Reconciliation of accounting profit and income tax expense was as follows:
|  | Year Ended December 31 |
|  | 2017 |  |  | 2018 |  |  | 2019 |
|  | NT$ |  |  | NT$ |  |  | NT$ |
|  | (In Millions) |
Income before income tax |  | $ | 48,009 |  |  | $ | 44,986 |  |  | $ | 41,867 |
Income tax expense calculated at the statutory rate (17% in 2017, and 20% in 2018 and 2019) |  | $ | 8,162 |  |  | $ | 8,997 |  |  | $ | 8,373 |
Nondeductible income and expenses in determining taxable income |  |  | 34 |  |  |  | 227 |  |  |  | 18 |
Unrecognized deductible temporary differences |  |  | (1 | ) |  |  | 1 |  |  |  | 3 |
Unrecognized loss carryforwards |  |  | 10 |  |  |  | 21 |  |  |  | 7 |
Tax-exempt income |  |  | (87 | ) |  |  | (580 | ) |  |  | (148 | )
Additional income tax under Alternative Minimum Tax Act |  |  | — |  |  |  | 46 |  |  |  | — |
Income tax on unappropriated earnings |  |  | (60 | ) |  |  | (2,070 | ) |  |  | (20 | )
Investment credits |  |  | (212 | ) |  |  | (204 | ) |  |  | (203 | )
Change in tax rate |  |  | — |  |  |  | (38 | ) |  |  | — |
Effect of different tax rates of group entities operating in other jurisdictions |  |  | (2 | ) |  |  | (15 | ) |  |  | (9 | )
Income tax adjustments on prior years |  |  | 4 |  |  |  | 26 |  |  |  | (92 | )
Others |  |  | 1 |  |  |  | (6 | ) |  |  | 17 |
Income tax expense recognized in profit or loss |  | $ | 7,849 |  |  | $ | 6,405 |  |  | $ | 7,946 |
In 2017, the applicable tax rate used above is the corporate tax rate of 17% payable by the entities subject to the Income Tax Act of the Republic of China. Income Tax Act in the ROC was amended in February 2018 and the corporate income tax rate is adjusted from 17% to 20%. Such amendment is effective from 2018. In addition, the rate of the corporate surtax applicable to 2018 unappropriated earnings is reduced from 10% to 5%. The applicable tax rate used by subsidiaries in China is 25%, and tax rates used by other entities in the Company operating in other jurisdictions are based on the tax laws in those jurisdictions. In July 2019, the President of the ROC announced of the amendments to Article 23-3 of the Statute of Industrial Innovation, which stipulate that the unappropriated earnings in 2018 and thereafter that are reinvested in certain assets or technologies are allowed as deduction when computing the income tax on unappropriated earnings.
| b. | Income tax recognized in other comprehensive income
|  | Year Ended December 31 |
|  | 2017 |  |  | 2018 |  |  | 2019 |
|  | NT$ |  |  | NT$ |  |  | NT$ |
|  |  |  |  |  | (In Millions) |  |  |  |  |
Deferred tax |  |  |  |  |  |  |  |  |  |  |  |
Remeasurement on defined benefit plan |  | $ | (344 | ) |  | $ | (243 | ) |  | $ | 305 |
Change in tax rate - defined benefit plan |  |  | — |  |  |  | (207 | ) |  |  | — |
Unrealized gain or loss on available-for-sale financial assets |  |  | (3 | ) |  |  | — |  |  |  | — |
Total income tax expense (benefit) recognized in other comprehensive income |  | $ | (347 | ) |  | $ | (450 | ) |  | $ | 305 |
| c. | Current tax assets and liabilities
|  | December 31 |
|  | 2018 |  |  | 2019 |
|  | NT$ |  |  | NT$ |
|  | (In Millions) |
Current tax assets |  |  |  |  |  |  |  |
Tax refund receivable (included in other current assets - other) |  | $ | — |  |  | $ | 1 |
Current tax liabilities |  |  |  |  |  |  |  |
Income tax payable |  | $ | 6,221 |  |  | $ | 5,812 |
| d. | Deferred income tax assets and liabilities
The movements of deferred income tax assets and liabilities were as follows: For the year ended December 31, 2017
|  | January 1, 2017 |  |  | Recognized in Profit or Loss |  |  | Recognized in Other Comprehensive Income |  |  | December 31, 2017 |
|  | NT$ |  |  | NT$ |  |  | NT$ |  |  | NT$ |
|  | (In Millions) |
Deferred income tax assets |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Temporary differences |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Defined benefit obligation |  | $ | 1,374 |  |  | $ | 5 |  |  | $ | 344 |  |  | $ | 1,723 |
Allowance for doubtful receivables over quota |  |  | 230 |  |  |  | 59 |  |  |  | — |  |  |  | 289 |
Share of profits of associates and joint ventures accounted for using equity method |  |  | 330 |  |  |  | 1 |  |  |  | — |  |  |  | 331 |
Valuation loss on inventory |  |  | 20 |  |  |  | 3 |  |  |  | — |  |  |  | 23 |
Deferred revenue |  |  | 117 |  |  |  | (11 | ) |  |  | — |  |  |  | 106 |
Estimated warranty liabilities |  |  | 19 |  |  |  | 3 |  |  |  | — |  |  |  | 22 |
Impairment loss on property, plant and equipment |  |  | 122 |  |  |  | (10 | ) |  |  | — |  |  |  | 112 |
Accrued award credits liabilities |  |  | 20 |  |  |  | (5 | ) |  |  | — |  |  |  | 15 |
Unrealized foreign exchange loss, net |  |  | — |  |  |  | 17 |  |  |  | — |  |  |  | 17 |
Property, plant and equipment |  |  | 2 |  |  |  | — |  |  |  | — |  |  |  | 2 |
Trade-in right |  |  | — |  |  |  | 15 |  |  |  | — |  |  |  | 15 |
Others |  |  | 34 |  |  |  | (5 | ) |  |  | — |  |  |  | 29 |
|  |  | 2,268 |  |  |  | 72 |  |  |  | 344 |  |  |  | 2,684 |
Loss carryforwards |  |  | 54 |  |  |  | (8 | ) |  |  | — |  |  |  | 46 |
|  | $ | 2,322 |  |  | $ | 64 |  |  | $ | 344 |  |  | $ | 2,730 |
|  | January 1, 2017 |  |  | Recognized in Profit or Loss |  |  | Recognized in Other Comprehensive Income |  |  | December 31, 2017 |
|  | NT$ |  |  | NT$ |  |  | NT$ |  |  | NT$ |
|  | (In Millions) |
Deferred income tax liabilities |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Temporary differences |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Defined benefit obligation |  | $ | (1,269 | ) |  | $ | 4 |  |  | $ | — |  |  | $ | (1,265 | )
Land value incremental tax |  |  | (95 | ) |  |  | — |  |  |  | — |  |  |  | (95 | )
Intangible assets |  |  | (40 | ) |  |  | 1 |  |  |  | — |  |  |  | (39 | )
Deferred revenue for award credits |  |  | (46 | ) |  |  | 17 |  |  |  | — |  |  |  | (29 | )
Unrealized foreign exchange gain or loss, net |  |  | (10 | ) |  |  | 10 |  |  |  | — |  |  |  | — |
Valuation gain or loss on financial instruments, net |  |  | (3 | ) |  |  | (1 | ) |  |  | 3 |  |  |  | (1 | )
Others |  |  | (1 | ) |  |  | — |  |  |  | — |  |  |  | (1 | )
|  | $ | (1,464 | ) |  | $ | 31 |  |  | $ | 3 |  |  | $ | (1,430 | )
For the year ended December 31, 2018
|  | January 1, 2018 |  |  | Effect of Retrospective Application of IFRS 9 |  |  | Recognized in Profit or Loss |  |  | Recognized in Other Comprehensive Income |  |  | December 31, 2018 |
|  | NT$ |  |  | NT$ |  |  | NT$ |  |  | NT$ |  |  | NT$ |
|  | (In Millions) |
Deferred income tax assets |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Temporary differences |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Defined benefit obligation |  | $ | 1,723 |  |  | $ | — |  |  | $ | 134 |  |  | $ | 450 |  |  | $ | 2,307 |
Allowance for doubtful receivables over quota |  |  | 289 |  |  |  | — |  |  |  | 146 |  |  |  | — |  |  |  | 435 |
Share of profits of associates and joint ventures accounted for using equity method |  |  | 331 |  |  |  | — |  |  |  | 58 |  |  |  | — |  |  |  | 389 |
Valuation loss on inventory |  |  | 23 |  |  |  | — |  |  |  | 65 |  |  |  | — |  |  |  | 88 |
Deferred revenue |  |  | 106 |  |  |  | — |  |  |  | 5 |  |  |  | — |  |  |  | 111 |
Estimated warranty liabilities |  |  | 22 |  |  |  | — |  |  |  | 4 |  |  |  | — |  |  |  | 26 |
Impairment loss on property, plant and equipment |  |  | 112 |  |  |  | — |  |  |  | (19 | ) |  |  | — |  |  |  | 93 |
Accrued award credits liabilities |  |  | 15 |  |  |  | — |  |  |  | (1 | ) |  |  | — |  |  |  | 14 |
Unrealized foreign exchange loss, net |  |  | 17 |  |  |  | — |  |  |  | (16 | ) |  |  | — |  |  |  | 1 |
Property, plant and equipment |  |  | 2 |  |  |  | — |  |  | - |  |  |  | — |  |  |  | 2 |
Trade-in right |  |  | 15 |  |  |  | — |  |  |  | (5 | ) |  |  | — |  |  |  | 10 |
Others |  |  | 29 |  |  |  | — |  |  |  | 8 |  |  |  | — |  |  |  | 37 |
|  |  | 2,684 |  |  |  | — |  |  |  | 379 |  |  |  | 450 |  |  |  | 3,513 |
Loss carryforwards |  |  | 46 |  |  |  | — |  |  |  | (5 | ) |  |  | — |  |  |  | 41 |
|  | $ | 2,730 |  |  | $ | — |  |  | $ | 374 |  |  | $ | 450 |  |  | $ | 3,554 |
|  | January 1, 2018 |  |  | Effect of Retrospective Application of IFRS 9 |  |  | Recognized in Profit or Loss |  |  | Recognized in Other Comprehensive Income |  |  | December 31, 2018 |
|  | NT$ |  |  |  |  |  |  | NT$ |  |  | NT$ |  |  | NT$ |
|  | (In Millions) |
Deferred income tax liabilities |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Temporary differences |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Defined benefit obligation |  | $ | (1,265 | ) |  | $ | — |  |  | $ | (567 | ) |  | $ | — |  |  | $ | (1,832 | )
Land value incremental tax |  |  | (95 | ) |  |  | — |  |  | - |  |  |  | — |  |  |  | (95 | )
Intangible assets |  |  | (39 | ) |  |  | — |  |  |  | 7 |  |  |  | — |  |  |  | (32 | )
Deferred revenue for award credits |  |  | (29 | ) |  |  | — |  |  |  | (2 | ) |  |  | — |  |  |  | (31 | )
Unrealized foreign exchange gain, net |  |  | — |  |  |  | — |  |  |  | (1 | ) |  |  | — |  |  |  | (1 | )
Valuation gain or loss on financial instruments, net |  |  | (1 | ) |  |  | 1 |  |  |  | — |  |  |  | — |  |  |  | — |
Others |  |  | (1 | ) |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (1 | )
|  | $ | (1,430 | ) |  | $ | 1 |  |  | $ | (563 | ) |  | $ | — |  |  | $ | (1,992 | )
For the year ended December 31, 2019
|  | January 1, 2019 |  |  | Effect of Retrospective Application of IFRS 16 |  |  | Recognized in Profit or Loss |  |  | Recognized in Other Comprehensive Income |  |  | December 31, 2019 |
|  | NT$ |  |  | NT$ |  |  | NT$ |  |  | NT$ |  |  | NT$ |
|  | (In Millions) |
Deferred income tax assets |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Temporary differences |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Defined benefit obligation |  | $ | 2,307 |  |  | $ | — |  |  | $ | 32 |  |  | $ | (305 | ) |  | $ | 2,034 |
Allowance for doubtful receivables over quota |  |  | 435 |  |  |  | — |  |  |  | (31 | ) |  |  | — |  |  |  | 404 |
Share of profits of associates and joint ventures accounted for using equity method |  |  | 389 |  |  |  | — |  |  |  | 13 |  |  |  | — |  |  |  | 402 |
Valuation loss on inventory |  |  | 88 |  |  |  | — |  |  |  | 53 |  |  |  | — |  |  |  | 141 |
Deferred revenue |  |  | 111 |  |  |  | — |  |  |  | (13 | ) |  |  | — |  |  |  | 98 |
Estimated warranty liabilities |  |  | 26 |  |  |  | — |  |  |  | 8 |  |  |  | — |  |  |  | 34 |
Impairment loss on property, plant and equipment |  |  | 93 |  |  |  | — |  |  |  | (75 | ) |  |  | — |  |  |  | 18 |
Accrued award credits liabilities |  |  | 14 |  |  |  | — |  |  |  | 3 |  |  |  | — |  |  |  | 17 |
Unrealized foreign exchange loss, net |  |  | 1 |  |  |  | — |  |  |  | 2 |  |  |  | — |  |  |  | 3 |
Property, plant and equipment |  |  | 2 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 2 |
Trade-in right |  |  | 10 |  |  |  | — |  |  |  | (9 | ) |  |  | — |  |  |  | 1 |
Others |  |  | 37 |  |  |  | 26 |  |  |  | 14 |  |  |  | — |  |  |  | 77 |
|  |  | 3,513 |  |  |  | 26 |  |  |  | (3 | ) |  |  | (305 | ) |  |  | 3,231 |
Loss carryforwards |  |  | 41 |  |  |  | — |  |  |  | (13 | ) |  |  | — |  |  |  | 28 |
|  | $ | 3,554 |  |  | $ | 26 |  |  | $ | (16 | ) |  | $ | (305 | ) |  | $ | 3,259 |
|  | January 1, 2019 |  |  | Effect of Retrospective Application of IFRS 16 |  |  | Recognized in Profit or Loss |  |  | Recognized in Other Comprehensive Income |  |  | December 31, 2019 |
|  | NT$ |  |  | NT$ |  |  | NT$ |  |  | NT$ |  |  | NT$ |
|  | (In Millions) |
Deferred income tax liabilities |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Temporary differences |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Defined benefit obligation |  | $ | (1,832 | ) |  | $ | — |  |  | $ | 74 |  |  | $ | — |  |  | $ | (1,758 | )
Land value incremental tax |  |  | (95 | ) |  |  | — |  |  | - |  |  |  | — |  |  |  | (95 | )
Intangible assets |  |  | (32 | ) |  |  | — |  |  |  | 3 |  |  |  | — |  |  |  | (29 | )
Deferred revenue for award credits |  |  | (31 | ) |  |  | — |  |  |  | 2 |  |  |  | — |  |  |  | (29 | )
Unrealized foreign exchange gain, net |  |  | (1 | ) |  |  | — |  |  | - |  |  |  | — |  |  |  | (1 | )
Valuation gain or loss on financial instruments, net |  |  | — |  |  |  | — |  |  | - |  |  |  | — |  |  |  | — |
Others |  |  | (1 | ) |  |  | — |  |  |  | 1 |  |  |  | — |  |  |  | — |
|  | $ | (1,992 | ) |  | $ | — |  |  | $ | 80 |  |  | $ | — |  |  | $ | (1,912 | )
| e. | Items for which no deferred income tax assets have been recognized
|  | December 31 |
|  | 2018 |  |  | 2019 |
|  | NT$ |  |  | NT$ |
|  | (In Millions) |
Loss carryforwards |  |  |  |  |  |  |  |
Expire in 2020 |  | $ | 41 |  |  | $ | 23 |
Expire in 2021 |  |  | 12 |  |  |  | 13 |
Expire in 2022 |  |  | 10 |  |  |  | 10 |
Expire in 2023 |  |  | 9 |  |  |  | 8 |
Expire in 2024 |  |  | 2 |  |  |  | 8 |
Expire in 2025 |  |  | 15 |  |  |  | 15 |
Expire in 2026 |  |  | 8 |  |  |  | 8 |
Expire in 2027 |  |  | 3 |  |  |  | 3 |
Expire in 2028 |  |  | 1 |  |  |  | 1 |
Expire in 2029 |  |  | — |  |  |  | — |
|  | $ | 101 |  |  | $ | 89 |
Deductible temporary differences |  | $ | 1 |  |  | $ | 1 |
| f. | Information about unused loss carryforwards
As of December 31, 2019, unused loss carryforwards was as follows:
Remaining Creditable Amount |  |  | Expiry Year
NT$ (In Millions) |  |  |
$ | 23 |  |  | 2020
| 19 |  |  | 2021
| 11 |  |  | 2022
| 9 |  |  | 2023
| 8 |  |  | 2024
| 26 |  |  | 2025
| 12 |  |  | 2026
| 3 |  |  | 2027
| 4 |  |  | 2028
| 2 |  |  | 2029
$ | 117 |  |  |
| g. | Income tax examinations
Income tax returns of Chunghwa, CHSI, CHST, SENAO, CHIEF, CHI, CHPT, LED, Unigate, CLPT, SFD, SHE, ISPOT, Youth, Youyi, SENYOUNG, Aval and HHI have been examined by the tax authorities through 2017. Income tax returns of CHYP and CHTSC have been examined by the tax authorities through 2018.

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