Income Tax

12 Months Ended

Dec. 31, 2024

26.	INCOME TAX

Income tax expense recognized in profit or loss

Income tax expense consisted of the following:


	Years Ended December 31
	2022				2023				2024
	NT$ (In Millions)				NT$ (In Millions)				NT$ (In Millions)

Current income tax expense
Current tax expense recognized in the current year		$	190,022.2			$	156,684.0			$	275,726.3
Income tax adjustments for prior years			(19,413.0	)			(32,775.5	)			(29,968.0	)
Other income tax adjustments			206.1				244.3				371.4

			170,815.3				124,152.8				246,129.7

Deferred income tax expense
The origination and reversal of temporary differences			(20,037.8	)			4,136.0				916.0
Income tax adjustments for prior years			-				-				3,925.3
Operating loss carryforward			-				-				(2,654.9	)

			(20,037.8	)			4,136.0				2,186.4


Income tax expense recognized in profit or loss		$	150,777.5			$	128,288.8			$	248,316.1

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


	Years Ended December 31
	2022				2023				2024
	NT$ (In Millions)				NT$ (In Millions)				NT$ (In Millions)

Income before tax		$	1,144,072.2			$	979,316.5			$	1,405,840.0


Income tax expense at the statutory rate		$	231,776.1			$	197,935.7			$	280,827.9
Tax effect of adjusting items:
Adjusting items in determining taxable income			12,309.8				(7,642.2	)			(5,647.5	)
Tax-exempt income			(157,955.9	)			-				-


	Years Ended December 31
	2022				2023				2024
	NT$ (In Millions)				NT$ (In Millions)				NT$ (In Millions)
Additional income tax under the Alternative Minimum Tax Act		$	61,578.0			$	-			$	-
Additional income tax on unappropriated earnings			42,336.8				29,221.8				44,131.1
Unrecognized deductible temporary differences			-				-				729.2
Unrecognized operating loss carryforward			-				-				2,263.1
The origination and reversal of temporary differences			(24,714.5	)			3,210.1				916.0
Operating loss carryforward			-				-				(2,654.9	)
Income tax credits			4,654.1				(61,905.4	)			(46,577.5	)

			169,984.4				160,820.0				273,987.4
Income tax adjustments for prior years			(19,413.0	)			(32,775.5	)			(26,042.7	)
Other income tax adjustments			206.1				244.3				371.4


Income tax expense recognized in profit or loss		$	150,777.5			$	128,288.8			$	248,316.1

The income tax adjustments for prior years were primarily due to the difference between the actual and estimated income tax on unappropriated earnings.

For the years ended December 31, 2022, 2023 and 2024, the Company applied a tax rate of 20% for entities subject to the R.O.C. Income Tax Law; for other jurisdictions, taxes are calculated using the applicable tax rate for each individual jurisdiction.

Deferred income tax balance

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


	December 31, 2023			December 31, 2024
	NT$ (In Millions)			NT$ (In Millions)

Deferred income tax assets

Temporary differences
Depreciation		$	41,094.7		$	33,319.8
Refund liability			9,415.0			13,274.4
Unrealized exchange losses			7,100.0			9,078.2
Unrealized loss on inventories			2,771.2			2,749.3
Net defined benefit liability			1,729.7			1,416.0
Deferred compensation cost			489.6			588.8
Others			1,575.6			2,902.4
Operating loss carryforward			-			2,614.4


		$	64,175.8		$	65,943.3


	December 31, 2023				December 31, 2024
	NT$ (In Millions)				NT$ (In Millions)

Deferred income tax liabilities

Temporary differences
Subsidiary’s projected earnings distribution		$	-			$	(3,925.3	)
Others			(53.8	)			(63.2	)


		$	(53.8	)		$	(3,988.5	)


	Year Ended December 31, 2022
					Recognized in
	Balance, Beginning of Year				Profit or Loss				Other Comprehensive Income			Effect of Exchange Rate Changes				Balance, End of Year
		NT$ (In Millions)				NT$ (In Millions)				NT$ (In Millions)			NT$ (In Millions)				NT$ (In Millions)

Deferred income tax assets

Temporary differences
Depreciation		$	34,720.7			$	10,552.2			$	-		$	26.4			$	45,299.3
Refund liability			5,986.2				6,100.8				-			2.5				12,089.5
Unrealized exchange losses			-				5,782.4				-			-				5,782.4
Unrealized loss on inventories			899.0				1,402.2				-			4.1				2,305.3
Net defined benefit liability			1,237.1				(249.1	)			734.0			-				1,722.0
Deferred compensation cost			374.0				(48.2	)			-			35.4				361.2
Others			5,936.9				(4,341.8	)			-			31.1				1,626.2


		$	49,153.9			$	19,198.5			$	734.0		$	99.5			$	69,185.9


Deferred income tax liabilities

Temporary differences
Unrealized exchange gains		$	(706.3	)		$	706.3			$	-		$	-			$	-
Others			(1,167.6	)			133.0				6.0			(2.8	)			(1,031.4	)


		$	(1,873.9	)		$	839.3			$	6.0		$	(2.8	)		$	(1,031.4	)


	Year Ended December 31, 2023
					Recognized in
	Balance, Beginning of Year				Profit or Loss				Other Comprehensive Income			Effect of Exchange Rate Changes				Balance, End of Year
		NT$ (In Millions)				NT$ (In Millions)				NT$ (In Millions)			NT$ (In Millions)				NT$ (In Millions)

Deferred income tax assets

Temporary differences
Depreciation		$	45,299.3			$	(4,197.2	)		$	-		$	(7.4	)		$	41,094.7
Refund liability			12,089.5				(2,673.5	)			-			(1.0	)			9,415.0
Unrealized exchange losses			5,782.4				1,317.6				-			-				7,100.0
Unrealized loss on inventories			2,305.3				466.2				-			(0.3	)			2,771.2
Net defined benefit liability			1,722.0				(116.9	)			124.6			-				1,729.7
Deferred compensation cost			361.2				129.9				-			(1.5	)			489.6
Others			1,626.2				(38.9	)			-			(11.7	)			1,575.6


		$	69,185.9			$	(5,112.8	)		$	124.6		$	(21.9	)		$	64,175.8


Deferred income tax liabilities

Temporary differences
Others		$	(1,031.4	)		$	976.8			$	-		$	0.8			$	(53.8	)


	Year Ended December 31, 2024
					Recognized in
	Balance, Beginning of Year				Profit or Loss				Other Comprehensive Income				Effect of Exchange Rate Changes				Balance, End of Year
		NT$ (In Millions)				NT$ (In Millions)				NT$ (In Millions)				NT$ (In Millions)				NT$ (In Millions)

Deferred income tax assets

Temporary differences
Depreciation		$	41,094.7			$	(7,787.6	)		$	-			$	12.7			$	33,319.8
Refund liability			9,415.0				3,856.8				-				2.6				13,274.4
Unrealized exchange losses			7,100.0				1,978.2				-				-				9,078.2
Unrealized loss on inventories			2,771.2				(25.9	)			-				4.0				2,749.3
Net defined benefit liability			1,729.7				(284.8	)			(28.9	)			-				1,416.0
Deferred compensation cost			489.6				66.0				-				33.2				588.8
Others			1,575.6				1,289.8				(10.0	)			47.0				2,902.4
Operating loss carryforward			-				2,654.9				-				(40.5	)			2,614.4


		$	64,175.8			$	1,747.4			$	(38.9	)		$	59.0			$	65,943.3


Deferred income tax liabilities

Temporary differences
Subsidiary’s projected earnings distribution		$	-			$	(3,925.3	)		$	-			$	-			$	(3,925.3	)
Others			(53.8	)			(8.5	)			-				(0.9	)			(63.2	)


		$	(53.8	)		$	(3,933.8	)		$	-			$	(0.9	)		$	(3,988.5	)

The operating loss carryforward and deductible temporary differences for which no deferred income tax assets have been recognized


	December 31, 2023			December 31, 2024
		NT$ (In Millions)			NT$ (In Millions)
Operating loss carryforward
No expiry date		$	640.0		$	11,896.9

Expire in succession after 2032		$	2,781.4		$	-


Deductible temporary differences		$	52,686.2		$	83,705.6

The information of unrecognized deferred income tax liabilities associated with investments

As of December 31, 2023 and 2024, the aggregate taxable temporary differences associated with investments in subsidiaries not recognized as deferred income tax liabilities amounted to NT$254,182.9 million and NT$327,787.5 million, respectively.

Income tax examination

The tax authorities have examined income tax returns of TSMC through 2022. All investment tax credit adjustments assessed by the tax authorities have been recognized accordingly.