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Income Taxes

12 Months Ended

Dec. 31, 2018

Income tax expense (benefit) [Abstract]

Income Taxes

44.

Income Taxes

(1)

Income tax expense (benefit) for the years ended December 31, 2016, 2017 and 2018 are as follows:


		2016			2017			2018
		In millions of won
Current income tax expense
Payment of income tax	￦		2,689,640			881,583			378,715
Adjustment in respect of prior years due to change in estimate			231,113			4,484			(195,648	)
Current income tax directly recognized in equity			30,059			(56,098	)		101,528
Effect of change in accounting policy			—			—			1,780

			2,950,812			829,969			286,375

Deferred income tax expense
Generation and realization of temporary differences			509,762			1,283,012			(495,658	)
Changes of unrecognized tax losses, tax credit and temporary differences for prior periods			(86,845	)		44,573			(28,509	)
Changes in deferred tax on tax losses carryforwards			—			—			(572,305	)
Tax credit carryforwards			(8,588	)		15,270			(16,224	)

			414,329			1,342,855			(1,112,696	)

Income tax expense (benefit)	￦		3,365,141			2,172,824			(826,321	)

(2)

Reconciliation between actual income tax expense and amount computed by applying the statutory tax rate to income before income taxes for the years ended December 31, 2016, 2017 and 2018 are as follows:


		2016			2017			2018
		In millions of won
Income (loss) before income tax	￦		10,513,468			3,614,218			(2,000,819	)

Income tax expense (benefit) computed at applicable tax rate(*1)			2,544,259			874,641			(550,225	)
Adjustments
Effect of applying gradual tax rate			(5,082	)		(5,082	)		(1,408	)
Effect of non-taxable income			(29,554	)		(32,032	)		(1,705	)
Effect of non-deductible expenses			22,258			15,032			40,151
Effect of tax losses that are not recognized as deferred tax asset			—			—			2,086
Effects of tax credits and deduction			(194,731	)		(161,069	)		(39,471	)
Recognition (reversal) of unrecognized deferred tax asset, net			(86,845	)		44,573			(28,509	)
Effect of change in deferred tax due to change in tax rate			—			1,055,154			261
Deferred income tax related to investments in subsidiaries and associates			862,956			394,145			(52,618	)
Others, net			20,767			(17,022	)		765

			589,769			1,293,699			(80,448	)
Adjustment in respect of prior years due to change in estimate			231,113			4,484			(195,648	)

Income tax expense (benefit)	￦		3,365,141			2,172,824			(826,321	)

Effective tax rate			32	%		60	%		(*2	)

(*1)

Applicable tax rate is 24.2% as of December 31, 2016 and 2017, and 27.5% as of December 31, 2018.

(*2)

The effective tax rate for the year ended December 31, 2018 is not calculated for income tax benefit.

(3)

Income tax directly adjusted to shareholders’ equity (except for accumulated other comprehensive income (loss)) for the years ended December 31, 2016, 2017 and 2018 are as follows:


		2016			2017			2018
		In millions of won
Dividends of hybrid bond	￦		5,253			5,248			4,273
Gain on disposal of investments in subsidiaries			(7,006	)		—			—
Effect of change in effective tax rate			—			(25	)		—

	￦		(1,753	)		5,223			4,273

(4)

Income tax recognized as other comprehensive income (loss) for the years ended December 31, 2016, 2017 and 2018 are as follows:


		2016			2017			2018
		In millions of won
Income tax recognized as other comprehensive income (loss)
Gain on valuation of financial assets at fair value through other comprehensive income	￦		—			—			35,798
Loss on valuation of available-for-sale financial assets			(8,143	)		(2,551	)		—
Net change in the unrealized fair value of derivatives using cash flow hedge accounting, net of tax			(18,335	)		(11,016	)		6,639
Remeasurement of defined benefit obligations			49,986			(80,645	)		53,703
Investments in associates			7,731			8,649			6,592
Others			573			24,242			(5,477	)

	￦		31,812			(61,321	)		97,255

(5)

Changes in deferred income tax assets (liabilities) recognized in the statements of financial position for the years ended December 31, 2017 and 2018 are as follows:


		2017
		Beginning balance			Amounts recognized in profit or loss			Amount recognized in other comprehensive income (loss)			Amounts recognized directly in equity			Ending balance
		In millions of won
Deferred income tax on temporary differences
Employee benefits	￦		493,331			86,008			(80,645	)		—			498,694
Cash flow hedge			(53,583	)		130,044			(11,016	)		—			65,445
Investments in associates or subsidiaries			(7,166,345	)		(1,510,295	)		8,649			(25	)		(8,668,016	)
Property, plant and equipment			(5,527,318	)		(1,333,122	)		—			—			(6,860,440	)
Finance lease			(345,431	)		(81,518	)		—			—			(426,949	)
Intangible assets			8,987			(1,339	)		—			—			7,648
Financial assets at fair value through profit or loss			(62	)		952			—			—			890
Available-for-sale financial assets			(68,347	)		62,055			(2,551	)		—			(8,843	)
Deferred revenue			213,859			16,852			—			—			230,711
Provisions			3,583,371			1,239,462			—			—			4,822,833
Doubtful receivables			2,696			(2,637	)		—			—			59
Other finance liabilities			30,249			(2,742	)		—			5,248			32,755
Gains or losses on foreign exchange translation			138,938			(140,292	)		—			—			(1,354	)
Allowance for doubtful accounts			17,252			25,679			—			—			42,931
Accrued income			(5,367	)		3,542			—			—			(1,825	)
Special deduction for property, plant and equipment			(194,309	)		(6,618	)		—			—			(200,927	)
Reserve for research and human development			(12,883	)		9,842			—			—			(3,041	)
Others			695,870			232,642			24,242			—			952,754

			(8,189,092	)		(1,271,485	)		(61,321	)		5,223			(9,516,675	)

Deferred income tax on unused tax losses and tax credit
Tax losses			—			—			—			—			—
Tax credit			35,703			(15,272	)		—			—			20,431

			35,703			(15,272	)		—			—			20,431

	￦		(8,153,389	)		(1,286,757	)		(61,321	)		5,223			(9,496,244	)


		2018
		Beginning balance			Amounts recognized in profit or loss			Amount recognized in other comprehensive income (loss)			Amounts recognized directly in equity		Ending balance
		In millions of won
Deferred income tax on temporary differences
Employee benefits	￦		498,694			42,144			53,703			—		594,541
Cash flow hedge			65,445			(32,623	)		6,639			—		39,461
Investments in associates or subsidiaries			(8,668,016	)		(5,447	)		6,592			—		(8,666,871	)
Property, plant and equipment			(6,860,440	)		337,662			—			—		(6,522,778	)
Finance lease			(426,949	)		(26,125	)		—			—		(453,074	)
Intangible assets			7,648			(1,593	)		—			—		6,055
Financial assets at fair value through profit or loss			890			(871	)		—			—		19
Financial assets at fair value through other comprehensive income			(8,843	)		(1,379	)		35,798			—		25,576
Deferred revenue			230,711			(10,969	)		—			—		219,742
Provisions			4,822,833			(21,887	)		—			—		4,800,946
Doubtful receivables			59			—			—			—		59
Other finance liabilities			32,755			2,465			—			4,273		39,493
Gains or losses on foreign exchange translation			(1,354	)		28,434			—			—		27,080
Allowance for doubtful accounts			42,931			15,825			—			—		58,756
Accrued income			(1,825	)		(1,089	)		—			—		(2,914	)
Special deduction for property, plant and equipment			(200,927	)		(10,819	)		—			—		(211,746	)
Reserve for research and human development			(3,041	)		3,041			—			—		—
Others			952,754			105,869			(5,477	)		—		1,053,146

			(9,516,675	)		422,638			97,255			4,273		(8,992,509	)

Deferred income tax on unused tax losses and tax credit
Unused tax losses			—			554,457			—			—		554,457
Excess of donation limit			—			17,848			—			—		17,848
Tax credit			20,431			16,225			—			—		36,656

			20,431			588,530			—			—		608,961

	￦		(9,496,244	)		1,011,168			97,255			4,273		(8,383,548	)

(6)

Deferred income tax assets (liabilities) recognized in the statements of financial position as of December 31, 2017 and 2018 are as follows:


		2017			2018
		In millions of won
Deferred income tax assets	￦		919,153			1,233,761
Deferred income tax liabilities			(10,415,397	)		(9,617,309	)

	￦		(9,496,244	)		(8,383,548	)

(7)

Details of deductible temporary differences, tax losses and unused tax credits for which no deferred income tax assets were recognized as of December 31, 2017 and 2018 are as follows:

2017

2018

In millions of won

Deductible temporary differences

￦

444,426

442,391