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Income Taxes | 12 Months Ended
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Dec. 31, 2023
Income Taxes [Abstract] |
Income Taxes | 7. Income Taxes Corporate Income Tax The major components of consolidated net deferred income tax assets and liabilities recognized in our consolidated statements of financial position as at December 31, 2023 and 2022 are as follows:
|  | 2023 |  |  | 2022 |
|  | (in million pesos) |
Net deferred income tax assets |  |  | 18,172 |  |  |  | 17,636 |
Net deferred income tax liabilities |  |  | 165 |  |  |  | 204 |
The components of our consolidated net deferred income tax assets and liabilities as at December 31, 2023 and 2022 are as follows:
|  | 2023 |  |  | 2022 |
|  | (in million pesos) |
Net deferred income tax assets: |  |  |  |  |  |
Unearned revenues |  |  | 5,192 |  |  |  | 6,305 |
Accumulated provision for expected credit losses |  |  | 3,667 |  |  |  | 2,814 |
Lease liability over ROU assets under IFRS 16 |  |  | 3,448 |  |  |  | 3,733 |
Fixed asset impairment/depreciation due to shortened life of property and equipment |  |  | 2,875 |  |  |  | 115 |
Unamortized past service pension costs |  |  | 2,629 |  |  |  | 3,229 |
Unrealized foreign exchange gains |  |  | 1,157 |  |  |  | 1,509 |
Accumulated write-down of inventories to net realizable values |  |  | 393 |  |  |  | 544 |
Pension and other employee benefits |  |  | 2,224 |  |  |  | 1,304 |
Derivative financial instruments |  |  | 215 |  |  |  | 248 |
NOLCO |  |  | 199 |  |  |  | 165 |
Excess MCIT over RCIT |  |  | — |  |  |  | 103 |
Taxes and duties capitalized |  |  | (147 | ) |  |  | (129 | )
Customer list and trademark |  |  | (272 | ) |  |  | (197 | )
Capitalized charges and others |  |  | (3,408 | ) |  |  | (2,107 | )
Total deferred income tax assets – net |  |  | 18,172 |  |  |  | 17,636 |
Net deferred income tax liabilities: |  |  |  |  |  |
Investment property |  |  | 240 |  |  |  | 240 |
Unrealized foreign exchange gains |  |  | 21 |  |  |  | 10 |
Others |  |  | (96 | ) |  |  | (46 | )
Total deferred income tax liabilities |  |  | 165 |  |  |  | 204 |
As at December 31, 2023 and 2022, the deferred tax asset on lease liability amounted to Php 11,909 million and Php 11,294 million, respectively while the deferred tax liability on right of use asset amounted to Php 8,461 million and Php 7,561 million, respectively. Changes in our consolidated net deferred income tax assets (liabilities) as at December 31, 2023 and 2022 are as follows:
|  | 2023 |  |  | 2022 |
|  | (in million pesos) |
Net deferred income tax assets – balances at beginning of the year |  |  | 17,636 |  |  |  | 13,385 |
Net deferred income tax liabilities – balances at beginning of the year |  |  | (204 | ) |  |  | (169 | )
Net balances at beginning of the year |  |  | 17,432 |  |  |  | 13,216 |
Movement charged directly to other comprehensive income (loss) |  |  | 2,226 |  |  |  | (148 | )
Benefit from (provision for) deferred income tax |  |  | (1,648 | ) |  |  | 4,175 |
Others |  |  | (3 | ) |  |  | 189 |
Net balances at end of the year |  |  | 18,007 |  |  |  | 17,432 |
Net deferred income tax assets – balances at end of the year |  |  | 18,172 |  |  |  | 17,636 |
Net deferred income tax liabilities – balances at end of the year |  |  | (165 | ) |  |  | (204 | )
The impact of the change in tax rates in our deferred income tax assets and liabilities under the CREATE law is included in the deferred income tax assets charged directly to other comprehensive income and provision for deferred income tax. The analysis of our consolidated net deferred income tax assets as at December 31, 2023 and 2022 are as follows:
|  | 2023 |  |  | 2022 |
|  | (in million pesos) |
Deferred income tax assets: |  |  |  |  |  |
Deferred income tax assets to be recovered after 12 months |  |  | 15,423 |  |  |  | 15,336 |
Deferred income tax assets to be recovered within 12 months |  |  | 2,749 |  |  |  | 2,300 |
Net deferred income tax assets |  |  | 18,172 |  |  |  | 17,636 |
The analysis of our consolidated net deferred income tax liabilities as at December 31, 2023 and 2022 are as follows:
|  | 2023 |  |  | 2022 |
|  | (in million pesos) |
Deferred income tax liabilities: |  |  |  |  |  |
Deferred income tax liabilities to be settled after 12 months |  |  | 165 |  |  |  | 221 |
Deferred income tax liabilities to be settled within 12 months |  |  | — |  |  |  | (17 | )
Net deferred income tax liabilities |  |  | 165 |  |  |  | 204 |
Provision for (benefit from) income tax for the years ended December 31, 2023, 2022 and 2021 consist of:
|  | 2023 |  |  | 2022 |  |  | 2021 |
|  |  |  | (in million pesos) |  |
Current |  |  | 7,964 |  |  |  | 6,949 |  |  |  | 5,130 |
Deferred (Note 3) |  |  | 1,648 |  |  |  | (4,175 | ) |  |  | 2,348 |
|  |  | 9,612 |  |  |  | 2,774 |  |  |  | 7,478 |
The impact of the application of MCIT amounting to Php 103 million, Php 5 million and Php 2 million for the years ended December 31, 2023, 2022 and 2021, respectively, was considered in the provisions for current and deferred income taxes. The reconciliation between the provision for income tax at the applicable statutory tax rate and the actual provision for corporate income tax for the years ended December 31, 2023, 2022 and 2021 are as follows:
|  | 2023 |  |  | 2022 |  |  | 2021 |
|  |  |  | (in million pesos) |  |
Provision for income tax at the applicable statutory tax rate |  |  |  |  |  |  |  |  |
Continuing operations |  |  | 9,119 |  |  |  | 3,377 |  |  |  | 8,538 |
Discontinued operations (Note 2) |  |  | (10 | ) |  |  | — |  |  |  | — |
|  |  | 9,109 |  |  |  | 3,377 |  |  |  | 8,538 |
Tax effects of: |  |  |  |  |  |  |  |  |
Equity share in net loss (income) of associates and joint ventures |  |  | 701 |  |  |  | 427 |  |  |  | (284 | )
Nondeductible expenses |  |  | 326 |  |  |  | 145 |  |  |  | 558 |
NOLCO/MCIT expiration |  |  | 25 |  |  |  | 3 |  |  |  | 248 |
Loss (income) not subject to income tax |  |  | (97 | ) |  |  | 16 |  |  |  | (50 | )
Special deductible items and income subject to lower tax rate |  |  | (163 | ) |  |  | (141 | ) |  |  | (204 | )
Income subject to final tax |  |  | (251 | ) |  |  | (185 | ) |  |  | (186 | )
Difference between Optional Standard Deduction (OSD) and itemized deductions |  |  | (376 | ) |  |  | (765 | ) |  |  | (610 | )
Tax adjustment due to CREATE |  |  | — |  |  |  | — |  |  |  | 94 |
Net movement in unrecognized deferred income tax assets and other adjustments |  |  | 338 |  |  |  | (103 | ) |  |  | (626 | )
|  |  | 9,612 |  |  |  | 2,774 |  |  |  | 7,478 |
Actual provision for income tax: |  |  |  |  |  |  |  |  |
Continuing operations |  |  | 9,612 |  |  |  | 2,774 |  |  |  | 7,478 |
Discontinued operations (Note 2) |  |  | — |  |  |  | (77 | ) |  |  | (19 | )
|  |  | 9,612 |  |  |  | 2,697 |  |  |  | 7,459 |
The breakdown of our consolidated deductible temporary differences, carryforward benefits of unused tax credits from excess of MCIT over RCIT, and NOLCO (excluding those not recognized due to the adoption of the OSD method) for which no deferred income tax assets were recognized and the equivalent amount of unrecognized deferred income tax assets as at December 31, 2023 and 2022 are as follows:
|  | 2023 |  |  | 2022 |
|  | (in million pesos) |
NOLCO |  |  | 1,541 |  |  |  | 592 |
Accumulated provision for expected credit losses |  |  | 1,294 |  |  |  | 1,042 |
Fixed asset impairment |  |  | 192 |  |  |  | 1,271 |
Provisions |  |  | 72 |  |  |  | (114 | )
Customer list and trademark |  |  | 49 |  |  |  | — |
Derivative financial instruments |  |  | 44 |  |  |  | — |
Accumulated write-down of inventories to net realizable values |  |  | 22 |  |  |  | 13 |
Unrealized foreign exchange losses |  |  | 37 |  |  |  | (25 | )
Unearned revenues |  |  | 9 |  |  |  | 16 |
Excess MCIT over RCIT |  |  | 2 |  |  |  | 15 |
Lease liability over ROU assets under IFRS 16 |  |  | 1 |  |  |  | 38 |
Pension and other employee benefits |  |  | (3 | ) |  |  | 101 |
|  |  | 3,260 |  |  |  | 2,949 |
Unrecognized deferred income tax assets |  |  | 817 |  |  |  | 748 |
DMPI and ePLDT availed of the OSD method in computing their taxable income. This assessment is based on projected taxable profits at a level where it is favorable to use OSD method. These companies are also expected to avail of the OSD method in the foreseeable future. Thus, certain deferred income tax assets of DMPI and ePLDT amounting to Php 208 million and Php 135 million as at December 31, 2023 and 2022, respectively, were not recognized. Our consolidated deferred income tax assets have been recorded to the extent that such consolidated deferred income tax assets are expected to be utilized against sufficient future taxable profit. Deferred income tax assets shown in the preceding table were not recognized as we believe that future taxable profit will not be sufficient to realize these deductible temporary differences and carryforward benefits of unused tax credits from excess of MCIT over RCIT, and NOLCO in the future. The breakdown of our consolidated excess MCIT and NOLCO as at December 31, 2023 are as follows:
Date Incurred |  | Expiry Date |  | MCIT |  |  | NOLCO |
|  |  |  | (in million pesos) |
December 31, 2021 |  | December 31, 2024 |  |  | 1 |  |  |  | — |
December 31, 2021 |  | December 31, 2026 |  |  | — |  |  |  | 76 |
December 31, 2022 |  | December 31, 2025 |  |  | — |  |  |  | 973 |
December 30, 2023 |  | December 31, 2026 |  |  | 1 |  |  |  | 1,263 |
|  |  |  |  | 2 |  |  |  | 2,312 |
NOLCO incurred by foreign affiliates which can be carried over indefinitely |  |  |  |  | — |  |  |  | 26 |
|  |  |  |  | 2 |  |  |  | 2,338 |
Consolidated tax benefits |  |  |  |  | 2 |  |  |  | 584 |
Consolidated unrecognized deferred income tax assets |  |  |  |  | (2 | ) |  |  | (385 | )
Consolidated recognized deferred income tax assets |  |  |  |  | — |  |  |  | 199 |
The excess MCIT totaling Php 2 million as at December 31, 2023 can be deducted against future RCIT liability. The excess MCIT that was deducted against RCIT amounted to Php 103 million, Php 5 million and Php 2 million for the years ended December 31, 2023, 2022 and 2021, respectively. The amount of expired MCIT amounted to Php 14 million, Php 3 million and nil for the years ended December 31, 2023, 2022 and 2021, respectively. NOLCO totaling Php 2,338 million as at December 31, 2023 can be claimed as deduction against future taxable income. The NOLCO claimed as deduction against taxable income amounted to Php 129 million, Php 42 million and Php 556 million for the years ended December 31, 2023, 2022 and 2021, respectively. The amount of expired NOLCO amounted to Php 47 million, Php 225 thousand and Php 990 million for the years ended December 31, 2023, 2022 and 2021, respectively. Republic Act No. 11494 Bayanihan to Recover as One Act, or Bayanihan II Republic Act No. 11494, otherwise known as the Bayanihan to Recover as One Act, or Bayanihan II, was signed by the President on September 11, 2020. It contains the government’s second wave of relief measures to address the health and economic crises stemming from the COVID-19 outbreak. As part of mitigating the costs and losses stemming from the disruption of economic activities, Bayanihan II extends the carry-over of the NOLCO incurred in 2021 as deductions from gross income for the next five consecutive taxable years immediately following the year of the loss. Hence, NOLCO incurred in 2021 amounting to Php 76 million, which ordinarily can be carried over until December 31, 2024, is extended until December 31, 2026. Registration with Clark Special Economic Zone ClarkTel is registered with Clark Special Economic Zone, or Economic Zones, under Republic Act No. 7227 otherwise known as the Bases Conversion and Development Act of 1992. As registrant, ClarkTel is entitled to all the rights, privileges and benefits established thereunder including tax and duty-free importation of capital equipment and a special income tax rate of 5% of gross income, as defined in Republic Act No. 7227. Our consolidated income derived from non-registered activities within the Economic Zones is subject to the RCIT rate at the end of the reporting period.

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