Income Tax

12 Months Ended

Dec. 31, 2022

Major components of tax expense (income) [abstract]

32.

INCOME TAX

Income tax recognized in profit or loss

The major components of income tax expense were as follows:


	Year Ended December 31
	2020			2021			2022
	NT$			NT$			NT$
	(In Millions)
Current tax
Current tax expenses recognized for the year	$	8,172		$	8,490		$	8,863
Income tax on unappropriated earnings		8			181			137
Income tax adjustments on prior years		(22	)		(150	)		(141	)
Others		19			7			7
		8,177			8,528			8,866
Deferred tax
Deferred tax expense (benefits) recognized for the year		(81	)		489			318
Income tax adjustments on prior years		26			3			151
		(55	)		492			469
Income tax recognized in profit or loss	$	8,122		$	9,020		$	9,335

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


	Year Ended December 31
	2020			2021			2022
	NT$			NT$			NT$
	(In Millions)
Income before income tax	$	42,826		$	46,067		$	47,204
Income tax expense calculated at the statutory rate	$	8,565		$	9,213		$	9,441
Nondeductible income and expenses in determining taxable income		15			8			(20	)
Tax-exempt income		(367	)		(30	)		(3	)
Income tax on unappropriated earnings		8			181			137
Investment credits		(131	)		(217	)		(207	)
Effect of different tax rates of group entities operating in other jurisdictions		10			(10	)		(31	)
Income tax adjustments on prior years		4			(147	)		10
Others		18			22			8
Income tax expense recognized in profit or loss	$	8,122		$	9,020		$	9,335

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.

Income tax recognized in other comprehensive income


	Year Ended December 31
	2020		2021		2022
	NT$		NT$		NT$
	(In Millions)
Deferred tax
Remeasurement on defined benefit pension plans	$	239	$	78	$	231
Exchange differences arising from the translation of the foreign operations		—		—		—
Total income tax expense recognized in other comprehensive income	$	239	$	78	$	231

Current tax assets and liabilities


	December 31
	2021		2022
	NT$		NT$
	(In Millions)
Current tax assets
Tax refund receivable (included in other current assets - others)	$	5	$	2
Current tax liabilities
Income tax payable	$	6,530	$	6,999

Deferred income tax assets and liabilities

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

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
Allowance for doubtful receivables over quota		404			—			(39	)		—			365
Valuation loss on inventory		141			3			155			—			299
Unrealized foreign exchange loss, net		3			1			1			—			5
Estimated warranty liabilities		34			—			2			—			36
Deferred revenue		98			—			(25	)		—			73
Valuation loss on financial instruments		13			—			20			—			33
Valuation loss on onerous contracts		13			—			21			—			34
Accrued award credits liabilities		17			—			1			—			18
Share of profit or loss of associates and joint ventures accounted for using equity method		402			—			(1	)		—			401
Others		72			1			(40	)		—			33
		3,231			6			115			(239	)		3,113
Loss carryforwards		28			—			(8	)		—			20
	$	3,259		$	6		$	107		$	(239	)	$	3,133

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	)

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
Allowance for doubtful receivables over quota		365			(100	)		—			265
Valuation loss on inventory		299			(102	)		—			197
Unrealized foreign exchange loss, net		5			(3	)		—			2
Estimated warranty liabilities		36			7			—			43
Deferred revenue		73			(24	)		—			49
Valuation loss on financial instruments		33			(33	)		—			—
Valuation loss on onerous contracts		34			(8	)		—			26
Accrued award credits liabilities		18			(9	)		—			9
Share of profit or loss of associates and joint ventures accounted for using equity method		401			—			—			401
Others		33			5			—			38
		3,113			(261	)		(78	)		2,774
Loss carryforwards		20			(9	)		—			11
	$	3,133		$	(270	)	$	(78	)	$	2,785

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	)
Intangible assets		(27	)		3			—			(24	)
Others		(3	)		(43	)		—			(46	)
	$	(1,967	)	$	(222	)	$	—		$	(2,189	)

For the year ended December 31, 2022


	January 1, 2022			Recognized in Profit or Loss			Recognized in Other Comprehensive Income			December 31, 2022
	NT$			NT$			NT$			NT$
	(In Millions)
Deferred income tax assets
Temporary differences
Defined benefit pension plans	$	1,744		$	1		$	(231	)	$	1,514
Allowance for doubtful receivables over quota		265			(81	)		—			184
Valuation loss on inventory		197			(92	)		—			105
Unrealized foreign exchange loss, net		2			56			—			58
Estimated warranty liabilities		43			4			—			47
Deferred revenue		49			(19	)		—			30
Valuation loss on financial instruments		—			24			—			24
Valuation loss on onerous contracts		26			(8	)		—			18
Accrued award credits liabilities		9			3			—			12
Share of profit or loss of associates and joint ventures accounted for using equity method		401			(399	)		—			2
Others		38			(5	)		—			33
		2,774			(516	)		(231	)		2,027
Loss carryforwards		11			159			—			170
	$	2,785		$	(357	)	$	(231	)	$	2,197

Deferred income tax liabilities
Temporary differences
Defined benefit pension plans	$	(1,969	)	$	(145	)	$	—		$	(2,114	)
Land value incremental tax		(95	)		—			—			(95	)
Deferred revenue for award credits		(55	)		(15	)		—			(70	)
Intangible assets		(24	)		4			—			(20	)
Others		(46	)		44			—			(2	)
	$	(2,189	)	$	(112	)	$	—		$	(2,301	)

Items for which no deferred income tax assets have been recognized


	December 31
	2021		2022
	NT$		NT$
	(In Millions)
Loss carryforwards
Expire in 2022	$	—	$	—
Expire in 2023		—		—
Expire in 2024		1		1
Expire in 2025		15		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		—		—
Expire in 2032		—		—
	$	29	$	29

Information about unused loss carryforwards

As of December 31, 2022 unused loss carryforwards were as follows:


Remaining Creditable Amount		Expiry Year
NT$ (In Millions)
$	1	2023
	1	2024
	18	2025
	10	2026
	3	2027
	1	2028
	2	2029
	1	2030
	63	2031
	99	2032
$	199

Income tax examinations

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