|
32. |
INCOME TAX |
|
|
a. |
Income tax recognized in profit or loss |
The major components of income tax expense were as follows:
|
|
|
Year Ended December 31 |
|
|||||||||
|
|
|
2015 |
|
|
2016 |
|
|
2017 |
|
|||
|
|
|
NT$ |
|
|
NT$ |
|
|
NT$ |
|
|||
|
|
|
(In Millions) |
|
|||||||||
|
Current tax |
|
|
|
|
|
|
|
|
|
|
|
|
|
Current tax expenses recognized for the year |
|
$ |
8,570 |
|
|
$ |
6,736 |
|
|
$ |
7,996 |
|
|
Tax on unappropriated earnings |
|
|
821 |
|
|
|
(346 |
) |
|
|
(60 |
) |
|
Income tax adjustments on prior years |
|
|
(83 |
) |
|
|
(22 |
) |
|
|
(2 |
) |
|
Others |
|
|
15 |
|
|
|
15 |
|
|
|
10 |
|
|
|
|
|
9,323 |
|
|
|
6,383 |
|
|
|
7,944 |
|
|
Deferred tax |
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred tax expense recognized for the year |
|
|
(222 |
) |
|
|
1,404 |
|
|
|
(101 |
) |
|
Income tax adjustments on prior years |
|
|
— |
|
|
|
— |
|
|
|
6 |
|
|
|
|
|
(222 |
) |
|
|
1,404 |
|
|
|
(95 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax recognized in profit or loss |
|
$ |
9,101 |
|
|
$ |
7,787 |
|
|
$ |
7,849 |
|
Reconciliation of accounting profit and income tax expense was as follows:
|
|
|
Year Ended December 31 |
|
|||||||||
|
|
|
2015 |
|
|
2016 |
|
|
2017 |
|
|||
|
|
|
NT$ |
|
|
NT$ |
|
|
NT$ |
|
|||
|
|
|
(In Millions) |
|
|||||||||
|
Income before income tax |
|
$ |
51,953 |
|
|
$ |
49,413 |
|
|
$ |
48,009 |
|
|
Income tax expense calculated at the statutory rate (17%) |
|
$ |
8,832 |
|
|
$ |
8,400 |
|
|
$ |
8,162 |
|
|
Nondeductible revenues and expenses in determining taxable income |
|
|
28 |
|
|
|
5 |
|
|
|
34 |
|
|
Imputed income on tax |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Unrecognized deductible temporary differences |
|
|
11 |
|
|
|
(9 |
) |
|
|
(1 |
) |
|
Unrecognized loss carryforwards |
|
|
83 |
|
|
|
12 |
|
|
|
10 |
|
|
Tax-exempt income |
|
|
(183 |
) |
|
|
(25 |
) |
|
|
(87 |
) |
|
Income tax on unappropriated earnings |
|
|
821 |
|
|
|
(346 |
) |
|
|
(60 |
) |
|
Investment credits |
|
|
(329 |
) |
|
|
(234 |
) |
|
|
(212 |
) |
|
Effect of different tax rates of group entities operating in other jurisdictions |
|
|
(94 |
) |
|
|
(8 |
) |
|
|
(2 |
) |
|
Income tax adjustments on prior years |
|
|
(83 |
) |
|
|
(22 |
) |
|
|
4 |
|
|
Others |
|
|
15 |
|
|
|
14 |
|
|
|
1 |
|
|
Income tax expense recognized in profit or loss |
|
$ |
9,101 |
|
|
$ |
7,787 |
|
|
$ |
7,849 |
|
The applicable tax rate used above is the corporate tax rate of 17% payable by the entities subject to the Income Tax Act of the Republic of China, while the applicable tax rate used by subsidiaries in China is 25%. Tax rates used by other entities in the Company operating in other jurisdictions are based on the tax laws in those jurisdictions.
In February 2018, it was announced by the President that the Income Tax Act in the ROC was amended and starting from 2018, the corporate income tax rate will be adjusted from 17% to 20%. In addition, the tax rate applicable to 2018 unappropriated earnings will be reduced from 10% to 5%. Deferred tax assets and deferred tax liabilities recognized as at December 31, 2017 are expected to increase by $480 million and $236 million, respectively, as a result of the aforementioned tax rate changes in 2018.
|
|
b. |
Income tax expense (benefit) recognized in other comprehensive income |
|
|
|
Year Ended December 31 |
|
|||||||||
|
|
|
2015 |
|
|
2016 |
|
|
2017 |
|
|||
|
|
|
NT$ |
|
|
NT$ |
|
|
NT$ |
|
|||
|
|
|
|
|
|
|
(In Millions) |
|
|
|
|
|
|
|
Deferred tax |
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized gain or loss on available-for-sale financial assets |
|
$ |
2 |
|
|
$ |
(2 |
) |
|
$ |
(3 |
) |
|
Remeasurement on defined benefit plan |
|
|
(39 |
) |
|
|
(347 |
) |
|
|
(344 |
) |
|
Total income tax benefit recognized in other comprehensive income |
|
$ |
(37 |
) |
|
$ |
(349 |
) |
|
$ |
(347 |
) |
|
|
c. |
Current tax assets and liabilities |
|
|
|
December 31 |
|
|||||
|
|
|
2016 |
|
|
2017 |
|
||
|
|
|
NT$ |
|
|
NT$ |
|
||
|
|
|
(In Millions) |
|
|||||
|
Current tax assets |
|
|
|
|
|
|
|
|
|
Tax refund receivable (included in other current assets - other) |
|
$ |
5 |
|
|
$ |
2 |
|
|
Current tax liabilities |
|
|
|
|
|
|
|
|
|
Income tax payable |
|
$ |
6,522 |
|
|
$ |
8,674 |
|
|
|
d. |
Deferred income tax assets and liabilities |
The movements of deferred income tax assets and liabilities were as follows:
For the year ended December 31, 2015
|
|
|
January 1, 2015 |
|
|
Recognized in Profit or Loss |
|
|
Recognized in Other Comprehensive Income |
|
|
From Business Combination |
|
|
December 31, 2015 |
|
|||||
|
|
|
NT$ |
|
|
NT$ |
|
|
NT$ |
|
|
NT$ |
|
|
NT$ |
|
|||||
|
|
|
(In Millions) |
|
|||||||||||||||||
|
Deferred Income Tax Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Temporary differences |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Defined benefit obligation |
|
$ |
1,096 |
|
|
$ |
71 |
|
|
$ |
39 |
|
|
$ |
— |
|
|
$ |
1,206 |
|
|
Share of the profit of associates and joint ventures accounted for using equity method |
|
|
277 |
|
|
|
48 |
|
|
|
— |
|
|
|
— |
|
|
|
325 |
|
|
Allowance for doubtful receivables over quota |
|
|
114 |
|
|
|
55 |
|
|
|
— |
|
|
|
— |
|
|
|
169 |
|
|
Impairment loss on property, plant and equipment |
|
|
32 |
|
|
|
12 |
|
|
|
— |
|
|
|
— |
|
|
|
44 |
|
|
Deferred revenue |
|
|
156 |
|
|
|
(20 |
) |
|
|
— |
|
|
|
— |
|
|
|
136 |
|
|
Valuation loss on inventory |
|
|
41 |
|
|
|
(8 |
) |
|
|
— |
|
|
|
— |
|
|
|
33 |
|
|
Estimated warranty liabilities |
|
|
19 |
|
|
|
(1 |
) |
|
|
— |
|
|
|
— |
|
|
|
18 |
|
|
Unrealized foreign exchange loss, net |
|
|
— |
|
|
|
18 |
|
|
|
— |
|
|
|
— |
|
|
|
18 |
|
|
Accrued award credits liabilities |
|
|
28 |
|
|
|
(6 |
) |
|
|
— |
|
|
|
— |
|
|
|
22 |
|
|
Property, plant and equipment |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
2 |
|
|
|
2 |
|
|
Others |
|
|
34 |
|
|
|
6 |
|
|
|
— |
|
|
|
— |
|
|
|
40 |
|
|
|
|
|
1,797 |
|
|
|
175 |
|
|
|
39 |
|
|
|
2 |
|
|
|
2,013 |
|
|
Loss carryforwards |
|
|
29 |
|
|
|
17 |
|
|
|
— |
|
|
|
2 |
|
|
|
48 |
|
|
|
|
$ |
1,826 |
|
|
$ |
192 |
|
|
$ |
39 |
|
|
$ |
4 |
|
|
$ |
2,061 |
|
|
|
|
January 1, 2015 |
|
|
Recognized in Profit or Loss |
|
|
Recognized in Other Comprehensive Income |
|
|
From Business Combination |
|
|
December 31, 2015 |
|
|||||
|
|
|
NT$ |
|
|
NT$ |
|
|
NT$ |
|
|
NT$ |
|
|
NT$ |
|
|||||
|
|
|
(In Millions) |
|
|||||||||||||||||
|
Deferred Income Tax Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Temporary differences |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Defined benefit obligation |
|
$ |
— |
|
|
$ |
(1 |
) |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
(1 |
) |
|
Land value incremental tax |
|
|
(95 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(95 |
) |
|
Intangible assets |
|
|
— |
|
|
|
1 |
|
|
|
— |
|
|
|
(44 |
) |
|
|
(43 |
) |
|
Deferred revenue for award credits |
|
|
(5 |
) |
|
|
3 |
|
|
|
— |
|
|
|
— |
|
|
|
(2 |
) |
|
Valuation gain or loss on financial instruments, net |
|
|
(3 |
) |
|
|
— |
|
|
|
(2 |
) |
|
|
— |
|
|
|
(5 |
) |
|
Unrealized foreign exchange gain, net |
|
|
(29 |
) |
|
|
28 |
|
|
|
— |
|
|
|
— |
|
|
|
(1 |
) |
|
Others |
|
|
— |
|
|
|
(1 |
) |
|
|
— |
|
|
|
— |
|
|
|
(1 |
) |
|
|
|
$ |
(132 |
) |
|
$ |
30 |
|
|
$ |
(2 |
) |
|
$ |
(44 |
) |
|
$ |
(148 |
) |
For the year ended December 31, 2016
|
|
|
January 1, 2016 |
|
|
Recognized in Profit or Loss |
|
|
Recognized in Other Comprehensive Income |
|
|
December 31, 2016 |
|
||||
|
|
|
NT$ |
|
|
NT$ |
|
|
NT$ |
|
|
NT$ |
|
||||
|
|
|
(In Millions) |
|
|||||||||||||
|
Deferred Income Tax Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Temporary differences |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Defined benefit obligation |
|
$ |
1,206 |
|
|
$ |
(179 |
) |
|
$ |
347 |
|
|
$ |
1,374 |
|
|
Share of profits of associates and joint ventures accounted for using equity method |
|
|
325 |
|
|
|
5 |
|
|
|
— |
|
|
|
330 |
|
|
Allowance for doubtful receivables over quota |
|
|
169 |
|
|
|
61 |
|
|
|
— |
|
|
|
230 |
|
|
Impairment loss on property, plant and equipment |
|
|
44 |
|
|
|
78 |
|
|
|
— |
|
|
|
122 |
|
|
Deferred revenue |
|
|
136 |
|
|
|
(19 |
) |
|
|
— |
|
|
|
117 |
|
|
Valuation loss on inventory |
|
|
33 |
|
|
|
(13 |
) |
|
|
— |
|
|
|
20 |
|
|
Estimated warranty liabilities |
|
|
18 |
|
|
|
1 |
|
|
|
— |
|
|
|
19 |
|
|
Unrealized foreign exchange loss, net |
|
|
18 |
|
|
|
(18 |
) |
|
|
— |
|
|
|
— |
|
|
Accrued award credits liabilities |
|
|
22 |
|
|
|
(2 |
) |
|
|
— |
|
|
|
20 |
|
|
Property, plant and equipment |
|
|
2 |
|
|
|
— |
|
|
|
— |
|
|
|
2 |
|
|
Others |
|
|
40 |
|
|
|
(6 |
) |
|
|
— |
|
|
|
34 |
|
|
|
|
|
2,013 |
|
|
|
(92 |
) |
|
|
347 |
|
|
|
2,268 |
|
|
Loss carryforwards |
|
|
48 |
|
|
|
6 |
|
|
|
— |
|
|
|
54 |
|
|
|
|
$ |
2,061 |
|
|
$ |
(86 |
) |
|
$ |
347 |
|
|
$ |
2,322 |
|
|
|
|
January 1, 2016 |
|
|
Recognized in Profit or Loss |
|
|
Recognized in Other Comprehensive Income |
|
|
December 31, 2016 |
|
||||
|
|
|
NT$ |
|
|
NT$ |
|
|
NT$ |
|
|
NT$ |
|
||||
|
|
|
(In Millions) |
|
|||||||||||||
|
Deferred Income Tax Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Temporary differences |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Defined benefit obligation |
|
$ |
(1 |
) |
|
$ |
(1,268 |
) |
|
$ |
— |
|
|
$ |
(1,269 |
) |
|
Land value incremental tax |
|
|
(95 |
) |
|
|
— |
|
|
|
— |
|
|
|
(95 |
) |
|
Intangible assets |
|
|
(43 |
) |
|
|
3 |
|
|
|
— |
|
|
|
(40 |
) |
|
Deferred revenue for award credits |
|
|
(2 |
) |
|
|
(44 |
) |
|
|
— |
|
|
|
(46 |
) |
|
Valuation gain or loss on financial instruments, net |
|
|
(5 |
) |
|
|
— |
|
|
|
2 |
|
|
|
(3 |
) |
|
Unrealized foreign exchange gain, net |
|
|
(1 |
) |
|
|
(9 |
) |
|
|
— |
|
|
|
(10 |
) |
|
Others |
|
|
(1 |
) |
|
|
— |
|
|
|
— |
|
|
|
(1 |
) |
|
|
|
$ |
(148 |
) |
|
$ |
(1,318 |
) |
|
$ |
2 |
|
|
$ |
(1,464 |
) |
For the year ended December 31, 2017
|
|
|
January 1, 2017 |
|
|
Recognized in Profit or Loss |
|
|
Recognized in Other Comprehensive Income |
|
|
December 31, 2017 |
|
||||
|
|
|
NT$ |
|
|
NT$ |
|
|
NT$ |
|
|
NT$ |
|
||||
|
|
|
(In Millions) |
|
|||||||||||||
|
Deferred Income Tax Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Temporary differences |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Defined benefit obligation |
|
$ |
1,374 |
|
|
$ |
5 |
|
|
$ |
344 |
|
|
$ |
1,723 |
|
|
Share of profits of associates and joint ventures accounted for using equity method |
|
|
330 |
|
|
|
1 |
|
|
|
— |
|
|
|
331 |
|
|
Allowance for doubtful receivables over quota |
|
|
230 |
|
|
|
59 |
|
|
|
— |
|
|
|
289 |
|
|
Impairment loss on property, plant and equipment |
|
|
122 |
|
|
|
(10 |
) |
|
|
— |
|
|
|
112 |
|
|
Deferred revenue |
|
|
117 |
|
|
|
(11 |
) |
|
|
— |
|
|
|
106 |
|
|
Valuation loss on inventory |
|
|
20 |
|
|
|
3 |
|
|
|
— |
|
|
|
23 |
|
|
Estimated warranty liabilities |
|
|
19 |
|
|
|
3 |
|
|
|
— |
|
|
|
22 |
|
|
Unrealized foreign exchange loss, net |
|
|
— |
|
|
|
17 |
|
|
|
— |
|
|
|
17 |
|
|
Accrued award credits liabilities |
|
|
20 |
|
|
|
(5 |
) |
|
|
— |
|
|
|
15 |
|
|
Trade-in right |
|
|
— |
|
|
|
15 |
|
|
|
— |
|
|
|
15 |
|
|
Property, plant and equipment |
|
|
2 |
|
|
|
— |
|
|
|
— |
|
|
|
2 |
|
|
Others |
|
|
34 |
|
|
|
(5 |
) |
|
|
— |
|
|
|
29 |
|
|
|
|
|
2,268 |
|
|
|
72 |
|
|
|
344 |
|
|
|
2,684 |
|
|
Loss carryforwards |
|
|
54 |
|
|
|
(8 |
) |
|
|
— |
|
|
|
46 |
|
|
|
|
$ |
2,322 |
|
|
$ |
64 |
|
|
$ |
344 |
|
|
$ |
2,730 |
|
|
|
|
January 1, 2017 |
|
|
Recognized in Profit or Loss |
|
|
Recognized in Other Comprehensive Income |
|
|
December 31, 2017 |
|
||||
|
|
|
NT$ |
|
|
NT$ |
|
|
NT$ |
|
|
NT$ |
|
||||
|
|
|
(In Millions) |
|
|||||||||||||
|
Deferred Income Tax Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Temporary differences |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Defined benefit obligation |
|
$ |
(1,269 |
) |
|
$ |
4 |
|
|
$ |
— |
|
|
$ |
(1,265 |
) |
|
Land value incremental tax |
|
|
(95 |
) |
|
|
— |
|
|
|
— |
|
|
|
(95 |
) |
|
Intangible assets |
|
|
(40 |
) |
|
|
1 |
|
|
|
— |
|
|
|
(39 |
) |
|
Deferred revenue for award credits |
|
|
(46 |
) |
|
|
17 |
|
|
|
— |
|
|
|
(29 |
) |
|
Valuation gain or loss on financial instruments, net |
|
|
(3 |
) |
|
|
(1 |
) |
|
|
3 |
|
|
|
(1 |
) |
|
Unrealized foreign exchange gain, net |
|
|
(10 |
) |
|
|
10 |
|
|
|
— |
|
|
|
— |
|
|
Others |
|
|
(1 |
) |
|
|
— |
|
|
|
— |
|
|
|
(1 |
) |
|
|
|
$ |
(1,464 |
) |
|
$ |
31 |
|
|
$ |
3 |
|
|
$ |
(1,430 |
) |
|
|
e. |
Items for which no deferred income tax assets have been recognized |
|
|
|
December 31 |
|
|||||
|
|
|
2016 |
|
|
2017 |
|
||
|
|
|
NT$ |
|
|
NT$ |
|
||
|
|
|
(In Millions) |
|
|||||
|
Loss carryforwards |
|
|
|
|
|
|
|
|
|
Expire in 2018 |
|
$ |
126 |
|
|
$ |
126 |
|
|
Expire in 2019 |
|
|
138 |
|
|
|
138 |
|
|
Expire in 2020 |
|
|
42 |
|
|
|
42 |
|
|
Expire in 2021 |
|
|
13 |
|
|
|
9 |
|
|
Expire in 2022 |
|
|
1 |
|
|
|
11 |
|
|
Expire in 2023 |
|
|
1 |
|
|
|
— |
|
|
Expire in 2024 |
|
|
— |
|
|
|
— |
|
|
Expire in 2025 |
|
|
14 |
|
|
|
13 |
|
|
Expire in 2026 |
|
|
— |
|
|
|
— |
|
|
Expire in 2027 |
|
|
— |
|
|
|
2 |
|
|
|
|
$ |
335 |
|
|
$ |
341 |
|
|
Deductible temporary differences |
|
$ |
3 |
|
|
$ |
2 |
|
|
|
f. |
Information about unused loss carryforwards |
As of December 31, 2017, unused loss carryforwards was as follows:
|
Remaining Creditable Amount |
|
|
Expiry Year |
|
|
NT$ (In Millions) |
|
|
|
|
|
$ |
126 |
|
|
2018 |
|
|
138 |
|
|
2019 |
|
|
45 |
|
|
2020 |
|
|
20 |
|
|
2021 |
|
|
12 |
|
|
2022 |
|
|
1 |
|
|
2023 |
|
|
4 |
|
|
2024 |
|
|
28 |
|
|
2025 |
|
|
10 |
|
|
2026 |
|
|
3 |
|
|
2027 |
|
$ |
387 |
|
|
|
|
|
g. |
The related information under the Integrated Income Tax System was as follows: |
Unappropriated earnings information
Chunghwa’s earnings generated prior to June 30, 1988 have been appropriated.
Imputation credit account
|
|
|
December 31 |
|
|
|
|
|
2016 |
|
|
|
|
|
NT$ |
|
|
|
|
|
(In Millions) |
|
|
|
Balance of Imputation Credit Account (“ICA”) |
|
$ |
7,691 |
|
The creditable ratio for distribution of earnings of 2016 was 20.48%. Effective from January 1, 2015, the creditable ratio for individual stockholders residing in the Republic of China is half of the original creditable ratio according to the revised Article 66-6 of the Income Tax Act of the ROC in June 2014. However, starting from January 1, 2018, the imputation tax system was abolished and imputation credit account is no longer applicable based on amended ROC Income Tax Act announced in February 2018.
|
|
h. |
Income tax examinations |
Income tax returns of Chunghwa have been examined by the tax authorities through 2014 (except 2013). Income tax returns of SENAO, HHI, CHSI and CHPT have been examined by the tax authorities through 2015. Income tax returns of CHI, SFD, SHE, CHYP, LED, CHIEF, Unigate, CLPT, ISPOT, Youth, Youyi, Aval and CHST have been examined through 2016, and income tax returns of CEI’s 2015 current final reports on total business income to liquidation date and on income earned from liquidation have been examined by the tax authorities.