Income Taxes

12 Months Ended

Dec. 31, 2023

41.	Income Taxes

(1)	Income tax expense (benefit) for the years ended December 31, 2021, 2022 and 2023 are as follows:


		2021			2022			2023

		In millions of won
Current income tax expense
Payment of income tax	￦		357,767			563,681			621,957
Adjustment in respect of prior years due to change in estimate			153,113			48,374			(32,100	)
Current income tax directly recognized in equity			(198,714	)		(350,348	)		93,705

			312,166			261,707			683,562

Deferred tax benefit
Generation and realization of temporary differences			(489,411	)		(564,801	)		(1,845,236	)
Reclassified from equity to profit (loss)			—			(4,964	)		—
Changes of unrecognized tax losses, tax credit and temporary differences for prior periods			(43,653	)		(38,708	)		(15,244	)
Changes in deferred tax on tax losses carryforwards			(1,641,823	)		(9,175,755	)		(1,650,017	)
Tax credit carryforwards			(12,199	)		34,019			(16,734	)
Amount due to change in tax rate or regulations			18,931			73,991			5,836

			(2,168,155	)		(9,676,218	)		(3,521,395	)

Income tax benefit	￦		(1,855,989	)		(9,414,511	)		(2,837,833)

(2)	Reconciliation between actual income tax benefit and amount computed by applying the statutory tax rate to loss before income taxes for the years ended December 31, 2021, 2022 and 2023 are as follows:


		2021			2022			2023

		In millions of won
L oss before income tax	￦		(7,071,570	)		(33,843,619	)		(7,553,977	)

Income tax benefit computed at applicable tax rate (*1)			(1,944,682	)		(9,306,995	)		(1,936,840	)
Adjustments
Effect of applying gradual tax rate			(10,362	)		(10,362	)		(10,362	)
Effect of non-taxable income			(4,983	)		(9,471	)		(26,993	)
Effect of non-deductible expenses			78,814			39,663			39,411
Effect of tax losses that are not recognized as deferred tax asset			1,351			19,275			—
Effects of tax credits and deduction			(43,931	)		(98,684	)		(53,724	)
Reversal of unrecognized deferred tax asset, net			(43,641	)		(38,708	)		(15,244	)
Effect of change in deferred tax due to change in tax rate			18,931			393,416			211,736
Deduction of deferred tax assets			73,887			(85,514	)		29,095
Deferred tax related to investments in subsidiaries, associates and joint ventures			(135,878	)		(375,064	)		(1,063,007	)
Others, net			1,392			9,559			20,195

			(64,420	)		(155,890	)		(868,893	)
Adjustment in respect of prior years due to change in estimate			153,113			48,374			(32,100	)

Income tax benefit	￦		(1,855,989	)		(9,414,511	)		(2,837,833	)

Effective tax rate			(*2	)		(*2	)		(*2	)

(*1)

Applicable tax rates are 27.5%,

26.5% and 25.64% as

of December 31, 2021, 2022 and 2023, respectively.

(*2)

The effective tax rate for the year ended December 31, 2021, 2022 and 2023 is not calculated due to income tax benefit.

(3)	Income tax directly adjusted to equity (except for accumulated other comprehensive income (loss)) for the years ended December 31, 2021, 2022 and 2023 are as follows:


		2021		2022		2023

		In millions of won
Dividends of hybrid bond	￦		4,736		4,149		—
Disposal of subsidiaries			—		406		—

	￦		4,736		4,555		—

(4)	Income tax recognized as other comprehensive income (loss) for the years ended December 31, 2021, 2022 and 2023 are as follows:


		2021			2022			2023

		In millions of won
Income tax recognized as other comprehensive income (loss)
L oss on valuation of financial assets at fair value through other comprehensive income	￦		(9,753	)		(31,416	)		(10,624	)
Net change in the unrealized fair value of derivatives using cash flow hedge accounting, net of tax			24,220			40,390			4,863
Remeasurement of defined benefit liability			(126,890	)		(322,489	)		133,134
Investments in associates			(53,672	)		(66,677	)		(40,213	)
Others			(37,355	)		25,289			6,545

	￦		(203,450	)		(354,903	)		93,705

(5)	Changes in deferred tax assets (liabilities) recognized in the consolidated statements of financial position for the years ended December 31, 2022 and 2023 are as follows:


		2022
		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 tax on temporary differences
Employee benefits	￦		558,383			(36,341	)		(322,489	)		—		199,553
Cash flow hedge			(49,947	)		(46,188	)		40,390			405		(55,340	)
Investments in subsidiaries, associates and joint ventures			(8,721,320	)		410,310			(66,677	)		—		(8,377,687	)
Property, plant and equipment			(7,430,461	)		(111,177	)		—			—		(7,541,638	)
Finance lease			(415,558	)		9,919			—			—		(405,639	)
Intangible assets			(31,481	)		6,550			—			—		(24,931	)
Financial assets at fair value through profit or loss			12			3,445			—			—		3,457
Financial assets at fair value through other comprehensive income			27,381			25,178			(31,416	)		—		21,143
Deferred revenue			186,391			(16,411	)		—			—		169,980
Provisions			6,494,314			595,030			—			—		7,089,344
Doubtful receivables			801			1,673			—			—		2,474
Other finance liabilities			31,410			(14,142	)		—			4,150		21,418
Gains or losses on foreign exchange translation			91,411			42,905			—			—		134,316
Allowance for doubtful accounts			64,264			(6,029	)		—			—		58,235
Accrued income			10,002			6,612			—			—		16,614
Special deduction for property, plant and equipment			(224,127	)		8,968			—			—		(215,159	)
Others			1,445,827			16,456			25,289			—		1,487,572

			(7,962,698	)		896,758			(354,903	)		4,555		(7,416,288	)

Deferred tax on unused tax losses and tax credit
Unused tax losses			2,559,877			9,102,228			—			—		11,662,105
Excess of donation limit			69,185			11,861			—			—		81,046
Tax credit			134,690			15,719			—			—		150,409

			2,763,752			9,129,808			—			—		11,893,560

	￦		(5,198,946	)		10,026,566			(354,903	)		4,555		4,477,272


		2023
		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 tax on temporary differences
Employee benefits	￦		199,553			6,597			133,134			—		339,284
Cash flow hedge			(55,340	)		29,622			4,863			—		(20,855	)
Investments in subsidiaries, associates and joint ventures			(8,377,687	)		1,300,263			(40,213	)		—		(7,117,637	)
Property, plant and equipment			(7,541,638	)		534,361			—			—		(7,007,277	)
Finance lease			(405,639	)		179,943			—			—		(225,696	)
Intangible assets			(24,931	)		1,526			—			—		(23,405	)
Financial assets at fair value through profit or loss			3,457			(5,199	)		—			—		(1,742	)
Financial assets at fair value through other comprehensive income			21,143			16,839			(10,624	)		—		27,358
Deferred revenue			169,980			(13,580	)		—			—		156,400
Provisions			7,089,344			(47,684	)		—			—		7,041,660
Doubtful receivables			2,474			(74	)		—			—		2,400
Other finance liabilities			21,418			(3,426	)		—			—		17,992
Gains or losses on foreign exchange translation			134,316			(6,306	)		—			—		128,010
Allowance for doubtful accounts			58,235			(2,492	)		—			—		55,743
Accrued income			16,614			17,321			—			—		33,935
Special deduction for property, plant and equipment			(215,159	)		3,299			—			—		(211,860	)
Others			1,487,572			(277,889	)		6,545			—		1,216,228

			(7,416,288	)		1,733,121			93,705			—		(5,589,462	)

Deferred tax on unused tax losses and tax credit
Unused tax losses			11,662,105			1,676,638			—			—		13,338,743
Excess of donation limit			81,046			(34,724	)		—			—		46,322
Tax credit			150,409			52,665			—			—		203,064

			11,893,560			1,694,569			—			—		13,588,129


	￦		4,477,272			3,427,690			93,705			—		7,998,667

(6)	Deferred tax assets (liabilities) recognized in the consolidated statements of financial position as of December 31, 2022 and 2023 are as follows:


		2022			2023

		In millions of won
Deferred tax assets	￦		10,934,375			13,161,802
Deferred tax liabilities			(6,457,103	)		(5,163,135	)

	￦		4,477,272			7,998,667

The Company changed the average tax rate used to measure deferred tax for the current year in accordance with the Korea Accounting Standards Board’s inquiry response.

(7)	Details of deductible temporary differences, tax losses and unused tax credits for which no deferred tax assets were recognized as of December 31, 2022 and 2023 are as follows:


		2022		2023

		In millions of won
Deductible temporary differences and others	￦		1,381,532		1,811,062

(8)	Pillar Two Model Rules

Pillar Two Model Rules legislation has been enacted or substantively enacted in certain jurisdictions where the Company operates. The legislation will be effective for the Company’s fiscal year beginning on January 1, 2024. The Company is currently assessing the potential exposure arising from the Pillar Two legislation. The assessment currently carried out is based on the tax filing documents for the recent period and the financial information for 2022 and 2023. In certain jurisdictions, the assessment is not yet completed since information required for the assessment is not collected enough. Based on the assessment carried out so far, the Company has identified potential exposure to Pillar Two income taxes on profits earned in Jordan, Laos and others where the expected Pillar Two effective tax rate is likely to be lower than 15%. Although the potential exposure is expected to arise from the constituent entities (mainly operating subsidiaries) in these jurisdictions, exposure may also arise from other jurisdictions where the assessment is not completed. The Company expects that the potential exposure to the Pillar Two income taxes is not significant. The Company continues to proceed the assessment and expects to complete the assessment in the first of half of 2024.