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Income Tax

12 Months Ended

Dec. 31, 2021

Major Components Of Tax Expense Income [Abstract]

Income Tax

33. INCOME TAX

a. Income tax recognized in profit or loss

The major components of income tax expense were as follows:

		Year Ended December 31
		2019				2020				2021
		NT$				NT$				NT$
		(In Millions)
Current tax
Current tax expenses recognized for the year		$	8,109			$	8,172			$	8,490
Income tax on unappropriated earnings			(20	)			8				181
Income tax adjustments on prior years			(91	)			(22	)			(150	)
Others			12				19				7
			8,010				8,177				8,528
Deferred tax
Deferred tax expense (benefits) recognized for the year			(63	)			(81	)			489
Income tax adjustments on prior years			(1	)			26				3
			(64	)			(55	)			492
Income tax expense recognized in profit or loss		$	7,946			$	8,122			$	9,020

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

		Year Ended December 31
		2019				2020				2021
		NT$				NT$				NT$
		(In Millions)
Income before income tax		$	41,867			$	42,826			$	46,067
Income tax expense calculated at the statutory rate		$	8,373			$	8,565			$	9,213
Nondeductible income and expenses in determining    taxable income			18				15				8
Unrecognized loss carryforwards			7				4				(1	)
Tax-exempt income			(148	)			(367	)			(30	)
Income tax on unappropriated earnings			(20	)			8				181
Investment credits			(203	)			(131	)			(217	)
Effect of different tax rates of group entities operating in    other jurisdictions			(9	)			10				(10	)
Income tax adjustments on prior years			(92	)			4				(147	)
Others			20				14				23
Income tax expense recognized in profit or loss		$	7,946			$	8,122			$	9,020

The applicable tax rate used by the entities subject to the Income Tax Act of the Republic of China is 20%, while the applicable tax rate used by subsidiaries in China is 25%.  Tax rates used by other entities of 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.

b. Income tax recognized in other comprehensive income

		Year Ended December 31
		2019				2020				2021
		NT$				NT$				NT$
		(In Millions)
Deferred tax
Remeasurement on defined benefit pension plans		$	305			$	239			$	78
Exchange differences arising from the translation of    the foreign operations			—				—				—
Total income tax expense recognized in other    comprehensive income		$	305			$	239			$	78

c. Current tax assets and liabilities

		December 31
		2020				2021
		NT$				NT$
		(In Millions)
Current tax assets
Tax refund receivable (included in other current assets - others)		$	1			$	5
Current tax liabilities
Income tax payable		$	6,157			$	6,530

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, 2019

		January 1, 2019				Recognized in Profit or Loss				Recognized in Other Comprehensive Income				December 31, 2019
		NT$				NT$				NT$				NT$
		(In Millions)
Deferred income tax assets
Temporary differences
Defined benefit pension plans		$	2,307			$	32			$	(305	)		$	2,034
Share of profit or loss of associates and joint      ventures accounted for      using equity method			389				13				—				402
Allowance for doubtful receivables over quota			435				(31	)			—				404
Valuation loss on inventory			88				53				—				141
Deferred revenue			111				(13	)			—				98
Estimated warranty liabilities			26				8				—				34
Valuation loss on financial instruments			5				8				—				13
Others			178				(73	)			—				105
			3,539				(3	)			(305	)			3,231
Loss carryforwards			41				(13	)			—				28
		$	3,580			$	(16	)		$	(305	)		$	3,259

		January 1, 2019				Recognized in Profit or Loss				Recognized in Other Comprehensive Income				December 31, 2019
		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	)
Deferred revenue for award credits			(31	)			2				—				(29	)
Unrealized foreign exchange gain, net			(1	)			—				—				(1	)
Intangible assets			(32	)			3				—				(29	)
Others			(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 profit or loss 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
Valuation loss on financial instruments			13				—				20				—				33
Others			105				2				(17	)			—				90
			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	)
Unrealized foreign exchange gain, net			(1	)			—				1				—				—
Intangible assets			(29	)			—				2				—				(27	)
Others			—				(3	)			—				—				(3	)
		$	(1,912	)		$	(3	)		$	(52	)		$	—			$	(1,967	)

For the year ended December 31, 2021

		January 1, 2021				Recognized in Profit or Loss				Recognized in Other Comprehensive Income				December 31, 2021
		NT$				NT$				NT$				NT$
		(In Millions)
Deferred income tax assets
Temporary differences
Defined benefit pension plans		$	1,816			$	6			$	(78	)		$	1,744
Share of profit or loss of associates and joint      ventures accounted for      using equity method			401				—				—				401
Allowance for doubtful receivables over quota			365				(100	)			—				265
Valuation loss on inventory			299				(102	)			—				197
Deferred revenue			73				(24	)			—				49
Estimated warranty liabilities			36				7				—				43
Valuation loss on financial instruments			33				(33	)			—				—
Others			90				(15	)			—				75
			3,113				(261	)			(78	)			2,774
Loss carryforwards			20				(9	)			—				11
		$	3,133			$	(270	)		$	(78	)		$	2,785

		January 1, 2021				Recognized in Profit or Loss				Recognized in Other Comprehensive Income				December 31, 2021
		NT$				NT$				NT$				NT$
		(In Millions)
Deferred income tax liabilities
Temporary differences
Defined benefit pension plans		$	(1,812	)		$	(157	)		$	—			$	(1,969	)
Land value incremental tax			(95	)			—				—				(95	)
Deferred revenue for award credits			(30	)			(25	)			—				(55	)
Unrealized foreign exchange gain, net			—				(26	)			—				(26	)
Intangible assets			(27	)			3				—				(24	)
Valuation gain on financial instruments			—				(16	)			—				(16	)
Others			(3	)			(1	)			—				(4	)
		$	(1,967	)		$	(222	)		$	—			$	(2,189	)

e. Items for which no deferred income tax assets have been recognized

		December 31
		2020				2021
		NT$				NT$
		(In Millions)
Loss carryforwards
Expire in 2022		$	10			$	—
Expire in 2023			8				—
Expire in 2024			8				1
Expire in 2025			19				15
Expire in 2026			8				8
Expire in 2027			3				3
Expire in 2028			1				1
Expire in 2029			1				1
Expire in 2030			—				—
Expire in 2031			—				—
		$	58			$	29

f. Information about unused loss carryforwards

As of December 31, 2021 unused loss carryforwards were as follows:

Remaining Creditable Amount				Expiry Year
NT$ (In Millions)
$	1			2022
	1			2023
	1			2024
	18			2025
	10			2026
	3			2027
	1			2028
	2			2029
	2			2030
	2			2031
$	41

g. Income tax examinations

Income tax returns of Chunghwa, SENAO, ISPOT, Youth, Youyi, Aval, Wiin, SENYOUNG, Senaolife, CHYP, CHSI, CHI, CHPT, SFD, CLPT, CHTSC, CHIEF, Unigate, SHE, CHST, HHI, IISI and UTC have been examined by the tax authorities through 2019.  Income tax returns of LED has been examined by the tax authorities through 2020.

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- Definition

The entire disclosure for income taxes.

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