Income Tax

12 Months Ended

Dec. 31, 2020

Major Components Of Tax Expense Income [Abstract]

33.	INCOME TAX

Income tax recognized in profit or loss

The major components of income tax expense were as follows:

	Year Ended December 31
	2018			2019			2020
	NT$			NT$			NT$
	(In Millions)
Current tax
Current tax expenses recognized for the year	$	8,271		$	8,109		$	8,172
Income tax on unappropriated earnings		(2,070	)		(20	)		8
Income tax adjustments on prior years		7			(91	)		(22	)
Others		8			12			19
		6,216			8,010			8,177
Deferred tax
Deferred tax expense (benefits) recognized for the year		208			(63	)		(81	)
Income tax adjustments on prior years		19			(1	)		26
Change in tax rate		(38	)		—			—
		189			(64	)		(55	)
Income tax expense recognized in profit or loss	$	6,405		$	7,946		$	8,122

Reconciliation of accounting profit and income tax expense was as follows:

	Year Ended December 31
	2018			2019			2020
	NT$			NT$			NT$
	(In Millions)
Income before income tax	$	44,986		$	41,867		$	42,826
Income tax expense calculated at the statutory rate	$	8,997		$	8,373		$	8,565
Nondeductible income and expenses in determining taxable income		227			18			15
Unrecognized deductible temporary differences		1			3			(5	)
Unrecognized loss carryforwards		21			7			4
Tax-exempt income		(580	)		(148	)		(367	)
Additional income tax under Alternative Minimum Tax Act		46			—			—
Income tax on unappropriated earnings		(2,070	)		(20	)		8
Investment credits		(204	)		(203	)		(131	)
Change in tax rate		(38	)		—			—
Effect of different tax rates of group entities operating in other jurisdictions		(15	)		(9	)		10
Income tax adjustments on prior years		26			(92	)		4
Others		(6	)		17			19
Income tax expense recognized in profit or loss	$	6,405		$	7,946		$	8,122

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 the amendments to the Statute of Industrial Innovation, which stipulate that the unappropriated earnings in 2018 and thereafter that are used to build or acquire certain assets or technologies are allowed as deduction when computing the income tax on unappropriated earnings. The Company has deducted the reinvested capital expenditure while calculating income tax on unappropriated earnings.

Income tax recognized in other comprehensive income

	Year Ended December 31
	2018			2019		2020
	NT$			NT$		NT$
	(In Millions)
Deferred tax
Remeasurement on defined benefit pension plans	$	(243	)	$	305	$	239
Change in tax rate - defined benefit pension plans		(207	)		—		—
Total income tax expense (benefit) recognized in other comprehensive income	$	(450	)	$	305	$	239

Current tax assets and liabilities

	December 31
	2019		2020
	NT$		NT$
	(In Millions)
Current tax assets
Tax refund receivable (included in other current assets - others)	$	1	$	1
Current tax liabilities
Income tax payable	$	5,812	$	6,157

Deferred income tax assets and liabilities

The movements of deferred income tax assets and liabilities were as follows:

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 pension plans	$	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
Accrued award credits liabilities		15		—		(1	)		—		14
Others		175		—		(32	)		—		143
		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 pension plans	$	(1,265	)	$	—	$	(567	)	$	—	$	(1,832	)
Land value incremental tax		(95	)		—		—			—		(95	)
Intangible assets		(39	)		—		7			—		(32	)
Deferred revenue for award credits		(29	)		—		(2	)		—		(31	)
Others		(2	)		1		(1	)		—		(2	)
	$	(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 pension plans	$	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
Accrued award credits liabilities		14		—		3			—			17
Others		143		26		(68	)		—			101
		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 pension plans	$	(1,832	)	$	—	$	74	$	—	$	(1,758	)
Land value incremental tax		(95	)		—		—		—		(95	)
Intangible assets		(32	)		—		3		—		(29	)
Deferred revenue for award credits		(31	)		—		2		—		(29	)
Others		(2	)		—		1		—		(1	)
	$	(1,992	)	$	—	$	80	$	—	$	(1,912	)

For the year ended December 31, 2020

	January 1, 2020		Acquired by business combinations (Note 14)		Recognized in Profit or Loss			Recognized in Other Comprehensive Income			December 31, 2020
	NT$		NT$		NT$			NT$			NT$
	(In Millions)
Deferred income tax assets
Temporary differences
Defined benefit pension plans	$	2,034	$	1	$	20		$	(239	)	$	1,816
Share of profits of associates and joint ventures accounted for using equity method		402		—		(1	)		—			401
Allowance for doubtful receivables over quota		404		—		(39	)		—			365
Valuation loss on inventory		141		3		155			—			299
Deferred revenue		98		—		(25	)		—			73
Estimated warranty liabilities		34		—		2			—			36
Accrued award credits liabilities		17		—		1			—			18
Others		101		2		2			—			105
		3,231		6		115			(239	)		3,113
Loss carryforwards		28		—		(8	)		—			20
	$	3,259	$	6	$	107		$	(239	)	$	3,133

	January 1, 2020			Acquired by business combinations (Note 14)			Recognized in Profit or Loss			Recognized in Other Comprehensive Income		December 31, 2020
	NT$			NT$			NT$			NT$		NT$
	(In Millions)
Deferred income tax liabilities
Temporary differences
Defined benefit pension plans	$	(1,758	)	$	—		$	(54	)	$	—	$	(1,812	)
Land value incremental tax		(95	)		—			—			—		(95	)
Deferred revenue for award credits		(29	)		—			(1	)		—		(30	)
Intangible assets		(29	)		—			2			—		(27	)
Others		(1	)		(3	)		1			—		(3	)
	$	(1,912	)	$	(3	)	$	(52	)	$	—	$	(1,967	)

Items for which no deferred income tax assets have been recognized

	December 31
	2019		2020
	NT$		NT$
	(In Millions)
Loss carryforwards
Expire in 2021	$	13	$	12
Expire in 2022		10		10
Expire in 2023		8		8
Expire in 2024		8		8
Expire in 2025		15		19
Expire in 2026		8		8
Expire in 2027		3		3
Expire in 2028		1		1
Expire in 2029		—		1
Expire in 2030		—		—
	$	66	$	70
Deductible temporary differences	$	1	$	—

Information about unused loss carryforwards

As of December 31, 2020, unused loss carryforwards were as follows:

Remaining Creditable Amount		Expiry Year
NT$ (In Millions)
$	14	2021
	11	2022
	9	2023
	8	2024
	22	2025
	16	2026
	3	2027
	4	2028
	2	2029
	2	2030
$	91

Income tax examinations

Income tax returns of Chunghwa have been examined by the tax authorities through 2017. Income tax returns of SENAO, ISPOT, Youth, Youyi, SENYOUNG, Aval, CHIEF, CHSI, SHE, CHI, CHPT, SFD, CLPT, CHTSC, HHI, IISI and UTC have been examined by the tax authorities through 2018. Income tax returns of CHYP, LED, Unigate and CHST have been examined by the tax authorities through 2019.