Income Tax

12 Months Ended

Dec. 31, 2023

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
	2021			2022			2023
	NT$			NT$			NT$
	(In Millions)
Current tax
Current tax expenses recognized for the year	$	8,490		$	8,863		$	8,875
Income tax on unappropriated earnings		181			137			(31	)
Income tax adjustments on prior years		(150	)		(141	)		(128	)
Others		7			7			4
		8,528			8,866			8,720
Deferred tax
Deferred tax expense recognized for the year		489			318			218
Income tax adjustments on prior years		3			151			9
		492			469			227
Income tax recognized in profit or loss	$	9,020		$	9,335		$	8,947

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


	Year Ended December 31
	2021			2022			2023
	NT$			NT$			NT$
	(In Millions)
Income before income tax	$	46,067		$	47,204		$	47,008
Income tax expense calculated at the statutory rate	$	9,213		$	9,441		$	9,401
Nondeductible income and expenses in determining taxable income		8			(20	)		28
Tax-exempt income		(30	)		(3	)		(9	)
Income tax on unappropriated earnings		181			137			(31	)
Investment credits		(217	)		(207	)		(209	)
Effect of different tax rates of group entities operating in other jurisdictions		(10	)		(31	)		(7	)
Income tax adjustments on prior years		(147	)		10			(119	)
Others		22			8			(107	)
Income tax expense recognized in profit or loss	$	9,020		$	9,335		$	8,947

The applicable tax rate used by the entities subject to the Income Tax Act of the Republic of China is 20%. 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
	2021		2022		2023
	NT$		NT$		NT$
	(In Millions)
Deferred tax
Remeasurement on defined benefit pension plans	$	78	$	231	$	31

Current tax assets and liabilities


	December 31
	2022		2023
	NT$		NT$
	(In Millions)
Current tax assets
Tax refund receivable (included in other current assets - others)	$	2	$	4
Current tax liabilities
Income tax payable	$	6,999	$	6,613

Deferred income tax assets and liabilities

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

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
Seniority bonus		4			1			—			5
Impairment loss on assets		4			(4	)		—			—
Estimated warranty liabilities		36			7			—			43
Valuation loss on financial assets		33			(33	)		—			—
Valuation loss on onerous contracts		34			(8	)		—			26
Accrued award credits liabilities		18			(9	)		—			9
Deferred revenue		73			(24	)		—			49
Share of profit or loss of associates and joint ventures accounted for using equity method		401			—			—			401
Unrealized foreign exchange loss, net		5			(3	)		—			2
Others		25			8			—			33
		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	)
Unrealized foreign exchange gain, net		—			(27	)		—			(27	)
Others		(3	)		(16	)		—			(19	)
	$	(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
Seniority bonus		5			—			—			5
Impairment loss on assets		—			—			—			—
Estimated warranty liabilities		43			4			—			47
Valuation loss on financial assets		—			24			—			24
Valuation loss on onerous contracts		26			(8	)		—			18
Accrued award credits liabilities		9			3			—			12
Deferred revenue		49			(19	)		—			30
Share of profit or loss of associates and joint ventures accounted for using equity method		401			(399	)		—			2
Unrealized foreign exchange loss, net		2			56			—			58
Others		33			(5	)		—			28
		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	)
Unrealized foreign exchange gain, net		(27	)		26			—			(1	)
Others		(19	)		18			—			(1	)
	$	(2,189	)	$	(112	)	$	—		$	(2,301	)

For the year ended December 31, 2023


	January 1, 2023			Recognized in Profit or Loss			Recognized in Other Comprehensive Income			December 31, 2023
	NT$			NT$			NT$			NT$
	(In Millions)
Deferred income tax assets
Temporary differences
Defined benefit pension plans	$	1,514		$	1		$	(31	)	$	1,484
Allowance for doubtful receivables over quota		184			(41	)		—			143
Valuation loss on inventory		105			(29	)		—			76
Seniority bonus		5			64			—			69
Impairment loss on assets		—			60			—			60
Estimated warranty liabilities		47			1			—			48
Valuation loss on financial assets		24			21			—			45
Valuation loss on onerous contracts		18			19			—			37
Accrued award credits liabilities		12			5			—			17
Deferred revenue		30			(15	)		—			15
Share of profit or loss of associates and joint ventures accounted for using equity method		2			6			—			8
Unrealized foreign exchange loss, net		58			(55	)		—			3
Others		28			(3	)		—			25
		2,027			34			(31	)		2,030
Loss carryforwards		170			(101	)		—			69
	$	2,197		$	(67	)	$	(31	)	$	2,099

Deferred income tax liabilities
Temporary differences
Defined benefit pension plans	$	(2,114	)	$	(146	)	$	—		$	(2,260	)
Land value incremental tax		(95	)		—			—			(95	)
Deferred revenue for award credits		(70	)		4			—			(66	)
Intangible assets		(20	)		2			—			(18	)
Unrealized foreign exchange gain, net		(1	)		(11	)					(12	)
Others		(1	)		(9	)		—			(10	)
	$	(2,301	)	$	(160	)	$	—		$	(2,461	)

Items for which no deferred income tax assets have been recognized


	December 31
	2022		2023
	NT$		NT$
	(In Millions)
Loss carryforwards
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		—		5
Expire in 2033		—		13
	$	29	$	47

Investment credits - research and development expenditures
Expire in 2025	$	—	$	8

Deductible temporary differences	$	13	$	10

Information about unused investment credits and loss carryforwards

As of December 31, 2023, information about unused investment credits - research and development expenditures was as follows:


Remaining Creditable Amount		Expiry Year
NT$ (In Millions)
$	8	2025

As of December 31, 2023, information about unused loss carryforwards was as follows:


Remaining Creditable Amount		Expiry Year
NT$ (In Millions)
$	1	2024
	18	2025
	10	2026
	3	2027
	1	2028
	2	2029
	1	2030
	1	2031
	63	2032
	16	2033
$	116

Income tax examinations

Income tax returns of Chunghwa have been examined by the tax authorities through 2021, except for 2020. Income tax returns of CHYP, CHSI, CHST, SENAO, ISPOT, Youth, Youyi, Aval, Wiin, SENYOUNG, Senaolife, CHI, CHPT, CHIEF, Unigate, SFD, SHE, CLPT, CHTSC, LED, HHI, IISI and UTC have been examined by the tax authorities through 2021.

h. Pillar Two Model Rules

The application of the Pillar Two rules does not have a material impact on the Company’s consolidated financial statements. The Company will continue to review the possible impact on the Company’s future financial performance.