Income tax expense

12 Months Ended

Dec. 31, 2019

9.	Income tax expense

Income tax expense

(a)

Components of income tax expense:


	2017		2018			2019
	NT$000		NT$000			NT$000
Current income tax:
Current income tax on profits for the period		125,376		326,057			408,788
Income tax on unappropriated retained earnings		246,684		28,165			74,540
Prior year income tax under (over) estimation		67,885		3,729			(5,016	)

Total current income tax		439,945		357,951			478,312

Deferred income tax:
Relating to origination and reversal of temporary differences		110,542		101,441			35,367
Impact of change in tax rate		—		(2,774	)		—

Total deferred income tax		110,542		98,667			35,367

Income tax expense		550,487		456,618			513,679

(b)

The income tax (charge)/credit relating to components of other comprehensive income is as follows:


	2017		2018			2019
	NT$000		NT$000			NT$000
Unrealized gain (loss) on valuation of financial assets at fair value through other comprehensive income		—		17,005			(7,016	)
Remeasurement of defined benefit obligations		8,642		(11,992	)		4,183
Impact of change in tax rate		—		(887	)		—

		8,642		4,126			(2,833	)

Reconciliation of income tax expense and the accounting profit:


	2017			2018			2019
	NT$000			NT$000			NT$000
Tax calculated based on profit before tax and statutory tax rate		566,649			356,488			606,917
Expenses disallowed by tax regulation		10,185			14,689			3,055
Tax exempted (income) expenses by tax regulation		(256,788	)		66,353			(165,979	)
Temporary differences not recognized as deferred tax assets		(85,168	)		(10,951	)		(608	)
Prior year income tax under (over) estimation		67,885			3,729			(5,016	)
Income tax on unappropriated retained earnings		246,684			28,165			74,540
Impact of change in tax rate		—			(2,774	)		—
Effect of different tax rates in countries in which the Group operates		1,040			919			770

Income tax expense		550,487			456,618			513,679

The amounts of deferred tax assets or liabilities resulting from temporary differences and investment tax credits are as follows:


	2018
	January 1			Effects on initial application of IFRS 9 and IFRS 15			Recognized in profit or loss			Recognized in other comprehensive income			December 31
	NT$000			NT$000			NT$000			NT$000			NT$000
Deferred tax assets
Loss on inventories		9,132			(770	)		(1,130	)		—			7,232
Property, plant and equipment		55,494			—			8,689			—			64,183
Provisions		21,643			—			(9,247	)		—			12,396
Deferred revenue		39,485			—			(5,329	)		—			34,156
Net defined benefit liability		78,451			—			7,889			14,403			100,743
Unrealized exchange losses		8,167			144			(4,736	)		—			3,575
Investment tax credit		—			—			4,420			—			4,420
Others		—			—			11			—			11

Total		212,372			(626	)		567			14,403			226,716

Deferred tax liabilities
Property, plant and equipment		(174,293	)		—			(107,301	)		—			(281,594	)
Contract assets		—			(8,067	)		8,067			—			—
Financial assets at fair value through other comprehensive income		—			(8,636	)		—			(18,529	)		(27,165	)

Total		(174,293	)		(16,703	)		(99,234	)		(18,529	)		(308,759	)

Information presented on statements of financial position:
Deferred tax assets		212,372												226,716

Deferred tax liabilities		(174,293	)											(308,759	)


	2019
	January 1			Recognized in profit or loss			Recognized in other comprehensive income			December 31
	NT$000			NT$000			NT$000			NT$000
Deferred tax assets
Loss on inventories		7,232			5,468			—			12,700
Property, plant and equipment		64,183			(25,515	)		—			38,668
Provisions		12,396			(6,796	)		—			5,600
Deferred revenue		34,156			(6,506	)		—			27,650
Net defined benefit liability		100,743			(3,948	)		(4,183	)		92,612
Unrealized exchange losses		3,575			13,721			—			17,296
Investment tax credit		4,420			(4,420	)		—			—
Others		11			15			—			26

Total		226,716			(27,981	)		(4,183	)		194,552

Deferred tax liabilities
Property, plant and equipment		(281,594	)		(7,386	)		—			(288,980	)
Financial assets at fair value through other comprehensive income		(27,165	)		—			7,016			(20,149	)

Total		(308,759	)		(7,386	)		7,016			(309,129	)

Information presented on statements of financial position
Deferred tax assets		226,716									194,552

Deferred tax liabilities		(308,759	)								(309,129	)

The Company has not recognized deductible and taxable temporary differences associated with investments as deferred tax assets and liabilities. As of December 31, 2018 and 2019, the amount of taxable temporary differences not recognized as deferred tax liability were NT$495,154 thousand and NT$180,395 thousand, respectively.

The Company’s income tax returns through 2016 have been assessed and approved by the Tax Authority.

The amendment to the Income Tax Act in ROC has been approved and promulgated in February 2018 to raise the profit-seeking enterprise income tax rate from 17% to 20%, decrease the tax rate on unappropriated retained earnings from 10% to 5%, and abandon the imputation tax credit account effective from fiscal year starting January 1, 2018.

On October 31, 2016, the Company merged with its former parent company, ChipMOS TECHNOLOGIES (Bermuda) LTD. (“ChipMOS Bermuda”) and as a result, the Company recognized its own shares originally held by former parent company as treasury stock. Subsequently, the Company deducted unappropriated retained earnings by NT$5,052,343 thousand to reflect the loss due from the cancellation of treasury stock. In January 2017, the Company has filed an application to the National Taxation Bureau of the Northern Area, Ministry of Finance to apply the accumulated deficit amount, derived from subtracting the aforementioned amount from unappropriated retained earnings generated prior to year 2015 (not including 2015 unappropriated retained earnings), as a deduction in the calculation of years 2016 and 2015 additional 10% tax on unappropriated retained earnings. On August 26, 2019, the Ministry of Finance issued Interpretation No.10804006760 and agreed the aforementioned deduction of unappropriated retained earnings to reflect the loss due from the cancellation of treasury stock as a result of the merger. As of the issue date of this report, the Company has not received the Notice for Assessment of Tax approved by the National Taxation Bureau of the Northern Area, Ministry of Finance.