Income Tax (Tables)

12 Months Ended

Dec. 31, 2017

Income tax expense consisted of the following:


	Years Ended December 31
	2015			2016			2017
	NT$			NT$			NT$
	(In Millions)			(In Millions)			(In Millions)
Current income tax expense
Current tax expense recognized in the current year	$	61,297.7		$	72,405.0		$	73,851.4
Income tax adjustments on prior years		(12,661.2	)		(16,628.1	)		(19,107.0	)
Other income tax adjustments		247.8			122.5			152.8

		48,884.3			55,899.4			54,897.2

Deferred income tax expense (benefit)
Effect of tax rate changes		—			—			561.8
The origination and reversal of temporary differences		(1,542.8	)		(1,775.0	)		(4,336.1	)
Investment tax credits and operating loss carryforward		303.2			—			—

		(1,239.6	)		(1,775.0	)		(3,774.3	)


Income tax expense recognized in profit or loss	$	47,644.7		$	54,124.4		$	51,122.9

A reconciliation of income before income tax and income tax expense recognized in profit or loss was as follows:


	Years Ended December 31
	2015			2016			2017
	NT$			NT$			NT$
	(In Millions)			(In Millions)			(In Millions)
Income before tax	$	350,477.6		$	385,921.7		$	396,161.9

Income tax expense at the statutory rate	$	60,674.4		$	66,938.7		$	69,613.5
Tax effect of adjusting items:
Deductible items in determining taxable income		(6,340.4	)		(44.9	)		(1,415.9	)
Tax-exempt income		(22,144.3	)		(19,595.0	)		(16,901.1	)
Additional income tax under the Alternative Minimum Tax Act		6,041.6			—			—
Additional income tax on unappropriated earnings		27,543.6			30,046.8			28,183.5
Effect of tax rate changes on deferred income tax		—			—			561.8


	Years Ended December 31
	2015			2016			2017
	NT$			NT$			NT$
	(In Millions)			(In Millions)			(In Millions)
The origination and reversal of temporary differences	$	(1,542.8	)	$	(1,775.0	)	$	(4,336.1	)
Income tax credits		(4,243.6	)		(4,940.2	)		(5,628.6	)
Remeasurement of operating loss carryforward		69.6			(0.4	)		—

		60,058.1			70,630.0			70,077.1
Income tax adjustments on prior years		(12,661.2	)		(16,628.1	)		(19,107.0	)
Other income tax adjustments		247.8			122.5			152.8


Income tax expense recognized in profit or loss	$	47,644.7		$	54,124.4		$	51,122.9

Income tax expense recognized in other comprehensive income


	Years Ended December 31
	2015			2016			2017
	NT$			NT$			NT$
	(In Millions)			(In Millions)			(In Millions)
Deferred income tax benefit (expense)
Related to remeasurement of defined benefit obligation	$	99.3		$	126.9		$	30.6
Related to unrealized gain/loss on available-for-sale financial assets		(16.0	)		(61.2	)		(2.9	)
Related to gain/loss on cash flow hedges		—			—			(0.6	)


	$	83.3		$	65.7		$	27.1

The analysis of deferred income tax assets and liabilities was as follows:


	December 31, 2016			December 31, 2017
	NT$			NT$
	(In Millions)			(In Millions)
Deferred income tax assets
Temporary differences
Depreciation	$	4,244.2		$	8,401.3
Provision for sales returns and allowance		1,512.1			1,637.7
Net defined benefit liability		939.5			975.3
Unrealized loss on inventories		737.3			629.5
Deferred compensation cost		378.7			266.5
Others		445.1			195.2
Operating loss carryforward		14.5			—


	$	8,271.4		$	12,105.5


Deferred income tax liabilities
Temporary differences
Unrealized exchange gains	$	(48.7	)	$	(169.5	)
Available-for-sale financial assets		(92.5	)		(95.4	)
Others		—			(37.3	)


	$	(141.2	)	$	(302.2	)


	Year Ended December 31, 2015
				Recognized in
	Balance, Beginning of Year			Profit or Loss			Other Comprehensive Income			Effect of Acquisition of Subsidiary		Effect of Exchange Rate Changes		Balance, End of Year
	NT$			NT$			NT$			NT$		NT$		NT$
	(In Millions)			(In Millions)			(In Millions)			(In Millions)		(In Millions)		(In Millions)
Deferred income tax assets
Temporary differences
Depreciation	$	1,011.1		$	1,808.7		$	—		$	11.9	$	21.3	$	2,853.0
Provision for sales returns and allowance		1,230.8			(104.4	)		—			13.8		1.3		1,141.5
Net defined benefit liability		787.4			8.8			99.3			—		—		895.5
Unrealized loss on inventories		591.9			25.1			—			4.1		1.7		622.8
Deferred compensation cost		255.6			49.4			—			—		11.3		316.3
Goodwill from business combination		195.4			(185.8	)		—			—		0.4		10.0
Others		749.6			(243.4	)		—			0.2		25.0		531.4
Operating loss carryforward		317.0			(303.2	)		—			—		0.7		14.5


	$	5,138.8		$	1,055.2		$	99.3		$	30.0	$	61.7	$	6,385.0


Deferred income tax liabilities
Temporary differences
Available-for-sale financial assets	$	(15.3	)	$	—		$	(16.0	)	$	—	$	—	$	(31.3	)
Unrealized exchange gains		(184.4	)		184.4			—			—		—		—


	$	(199.7	)	$	184.4		$	(16.0	)	$	—	$	—	$	(31.3	)


	Year Ended December 31, 2016
				Recognized in
	Balance, Beginning of Year			Profit or Loss			Other Comprehensive Income			Effect of Exchange Rate Changes			Balance, End of Year
	NT$			NT$			NT$			NT$			NT$
	(In Millions)			(In Millions)			(In Millions)			(In Millions)			(In Millions)
Deferred income tax assets
Temporary differences
Depreciation	$	2,853.0		$	1,437.6		$	—		$	(46.4	)	$	4,244.2
Provision for sales returns and allowance		1,141.5			371.5			—			(0.9	)		1,512.1
Net defined benefit liability		895.5			(82.9	)		126.9			—			939.5
Unrealized loss on inventories		622.8			115.5			—			(1.0	)		737.3
Deferred compensation cost		316.3			69.3			—			(6.9	)		378.7
Goodwill from business combination		10.0			(9.8	)		—			(0.2	)		—
Others		531.4			(77.5	)		—			(8.8	)		445.1
Operating loss carryforward		14.5			—			—			—			14.5

	$	6,385.0		$	1,823.7		$	126.9		$	(64.2	)	$	8,271.4

Deferred income tax liabilities
Temporary differences
Available-for-sale financial assets	$	(31.3	)	$	—		$	(61.2	)	$	—		$	(92.5	)
Unrealized exchange gains		—			(48.7	)		—			—			(48.7	)

	$	(31.3	)	$	(48.7	)	$	(61.2	)	$	—		$	(141.2	)


	Year Ended December 31, 2017
				Recognized in
	Balance, Beginning of Year			Profit or Loss			Other Comprehensive Income			Effect of Disposal of Subsidiary			Effect of Exchange Rate Changes			Balance, End of Year
	NT$			NT$			NT$			NT$			NT$			NT$
	(In Millions)			(In Millions)			(In Millions)			(In Millions)			(In Millions)			(In Millions)
Deferred income tax assets
Temporary differences
Depreciation	$	4,244.2		$	4,207.2		$	—		$	—		$	(50.1	)	$	8,401.3
Provision for sales returns and allowance		1,512.1			130.0			—			—			(4.4	)		1,637.7
Net defined benefit liability		939.5			5.2			30.6			—			—			975.3
Unrealized loss on inventories		737.3			(105.1	)		—			—			(2.7	)		629.5
Deferred compensation cost		378.7			(83.1	)		—			—			(29.1	)		266.5
Others		445.1			(222.4	)		—			—			(27.5	)		195.2
Operating loss carryforward		14.5			—			—			(14.5	)		—			—

	$	8,271.4		$	3,931.8		$	30.6		$	(14.5	)	$	(113.8	)	$	12,105.5

Deferred income tax liabilities
Temporary differences
Unrealized exchange gains	$	(48.7	)	$	(120.8	)	$	—		$	—		$	—		$	(169.5	)
Available-for-sale financial assets		(92.5	)		—			(2.9	)		—			—			(95.4	)
Others		—			(36.7	)		(0.6	)		—			—			(37.3	)

	$	(141.2	)	$	(157.5	)	$	(3.5	)	$	—		$	—		$	(302.2	)

The information of the operating loss carryforward for which no deferred tax assets have been recognized was as follows:

As of December 31, 2017, the profits generated from the following projects of TSMC are exempt from income tax for a five-year period:


	Tax-exemption Period
Construction and expansion of 2007 by TSMC		2014 to 2018
Construction and expansion of 2008 by TSMC		2015 to 2019
Construction and expansion of 2009 by TSMC		2018 to 2022

Integrated income tax information