|
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, 2017 and 2016 are as follows:
|
|
|
2017 |
|
|
2016 |
|
||
|
|
|
(in million pesos) |
|
|||||
|
Net deferred income tax assets |
|
|
30,466 |
|
|
|
27,348 |
|
|
Net deferred income tax liabilities |
|
|
3,366 |
|
|
|
3,567 |
|
The components of our consolidated net deferred income tax assets and liabilities as at December 31, 2017 and 2016 are as follows:
|
|
|
2017 |
|
|
2016 |
|
||
|
|
|
(in million pesos) |
|
|||||
|
Net deferred income tax assets: |
|
|
|
|
|
|
|
|
|
Customer list and trademark |
|
|
6,760 |
|
|
|
8,686 |
|
|
Fixed asset impairment/depreciation due to shortened life of property and equipment |
|
|
5,597 |
|
|
|
82 |
|
|
Unamortized past service pension costs |
|
|
5,098 |
|
|
|
4,795 |
|
|
Pension and other employee benefits |
|
|
3,620 |
|
|
|
3,569 |
|
|
Accumulated provision for doubtful accounts |
|
|
3,102 |
|
|
|
2,925 |
|
|
Provision for other assets |
|
|
2,523 |
|
|
|
2,798 |
|
|
Unearned revenues |
|
|
1,778 |
|
|
|
1,572 |
|
|
Unrealized foreign exchange losses |
|
|
746 |
|
|
|
2,735 |
|
|
Accumulated write-down of inventories to net realizable values |
|
|
669 |
|
|
|
624 |
|
|
MCIT |
|
|
607 |
|
|
|
65 |
|
|
NOLCO |
|
|
243 |
|
|
|
231 |
|
|
Derivative financial instruments |
|
|
(30 |
) |
|
|
(72 |
) |
|
Others |
|
|
(247 |
) |
|
|
(662 |
) |
|
Total deferred income tax assets – net |
|
|
30,466 |
|
|
|
27,348 |
|
|
Net deferred income tax liabilities: |
|
|
|
|
|
|
|
|
|
Intangible assets and fair value adjustment on assets acquired – net of amortization |
|
|
2,387 |
|
|
|
2,597 |
|
|
Unamortized fair value adjustment on fixed assets from business combination |
|
|
338 |
|
|
|
409 |
|
|
Unrealized foreign exchange gains |
|
|
269 |
|
|
|
273 |
|
|
Investment property |
|
|
207 |
|
|
|
279 |
|
|
Undepreciated capitalized interest charges |
|
|
8 |
|
|
|
8 |
|
|
Others |
|
|
157 |
|
|
|
1 |
|
|
Total deferred income tax liabilities – net |
|
|
3,366 |
|
|
|
3,567 |
|
Changes in our consolidated net deferred income tax assets (liabilities) as at December 31, 2017 and 2016 are as follows:
|
|
|
2017 |
|
|
2016 |
|
||
|
|
|
(in million pesos) |
|
|||||
|
Net deferred income tax assets – balance at beginning of the year |
|
|
27,348 |
|
|
|
21,941 |
|
|
Net deferred income tax liabilities – balance at beginning of the year |
|
|
(3,567 |
) |
|
|
(3,704 |
) |
|
Net balance at beginning of the year |
|
|
23,781 |
|
|
|
18,237 |
|
|
Provision for deferred income tax |
|
|
2,738 |
|
|
|
4,134 |
|
|
Movement charged directly to other comprehensive income |
|
|
507 |
|
|
|
1,467 |
|
|
Others |
|
|
74 |
|
|
|
(57 |
) |
|
Net balance at end of the year |
|
|
27,100 |
|
|
|
23,781 |
|
|
Net deferred income tax assets – balance at end of the year |
|
|
30,466 |
|
|
|
27,348 |
|
|
Net deferred income tax liabilities – balance at end of the year |
|
|
(3,366 |
) |
|
|
(3,567 |
) |
The analysis of our consolidated net deferred income tax assets as at December 31, 2017 and 2016 are as follows:
|
|
|
2017 |
|
|
2016 |
|
||
|
|
|
(in million pesos) |
|
|||||
|
Deferred income tax assets: |
|
|
|
|
|
|
|
|
|
Deferred income tax assets to be recovered after 12 months |
|
|
26,246 |
|
|
|
23,664 |
|
|
Deferred income tax assets to be recovered within 12 months |
|
|
5,602 |
|
|
|
5,616 |
|
|
|
|
|
31,848 |
|
|
|
29,280 |
|
|
Deferred income tax liabilities: |
|
|
|
|
|
|
|
|
|
Deferred income tax liabilities to be settled after 12 months |
|
|
(1,206 |
) |
|
|
(1,308 |
) |
|
Deferred income tax liabilities to be settled within 12 months |
|
|
(176 |
) |
|
|
(624 |
) |
|
|
|
|
(1,382 |
) |
|
|
(1,932 |
) |
|
Net deferred income tax assets |
|
|
30,466 |
|
|
|
27,348 |
|
The analysis of our consolidated net deferred income tax liabilities as at December 31, 2017 and 2016 are as follows:
|
|
|
2017 |
|
|
2016 |
|
||
|
|
|
(in million pesos) |
|
|||||
|
Deferred income tax assets: |
|
|
|
|
|
|
|
|
|
Deferred income tax assets to be recovered after 12 months |
|
|
— |
|
|
|
— |
|
|
Deferred income tax assets to be recovered within 12 months |
|
|
— |
|
|
|
— |
|
|
|
|
|
— |
|
|
|
— |
|
|
Deferred income tax liabilities: |
|
|
|
|
|
|
|
|
|
Deferred income tax liabilities to be settled after 12 months |
|
|
(3,026 |
) |
|
|
(3,222 |
) |
|
Deferred income tax liabilities to be settled within 12 months |
|
|
(340 |
) |
|
|
(345 |
) |
|
Net deferred income tax liabilities |
|
|
(3,366 |
) |
|
|
(3,567 |
) |
Provision for (benefit from) income tax for the years ended December 31, 2017, 2016 and 2015 consist of:
|
|
|
2017 |
|
|
2016 |
|
|
2015 |
|
|||
|
|
|
(in million pesos) |
|
|||||||||
|
Current |
|
|
3,841 |
|
|
|
6,043 |
|
|
|
9,273 |
|
|
Deferred |
|
|
(2,738 |
) |
|
|
(4,134 |
) |
|
|
(4,710 |
) |
|
|
|
|
1,103 |
|
|
|
1,909 |
|
|
|
4,563 |
|
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, 2017, 2016 and 2015 are as follows:
|
|
|
2017 |
|
|
2016 |
|
|
2015 |
|
|||
|
|
|
(in million pesos) |
|
|||||||||
|
Provision for income tax at the applicable statutory tax rate |
|
|
4,371 |
|
|
|
6,621 |
|
|
|
9,529 |
|
|
Tax effects of: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Nondeductible expenses |
|
|
784 |
|
|
|
3,239 |
|
|
|
1,171 |
|
|
Difference between Optional Standard Deduction, or OSD, and itemized deductions |
|
|
(22 |
) |
|
|
(20 |
) |
|
|
(33 |
) |
|
Income not subject to income tax |
|
|
(301 |
) |
|
|
(35 |
) |
|
|
(168 |
) |
|
Income subject to lower tax rate |
|
|
(520 |
) |
|
|
(168 |
) |
|
|
(104 |
) |
|
Equity share in net earnings of associates and joint ventures |
|
|
(872 |
) |
|
|
(354 |
) |
|
|
(972 |
) |
|
Income subject to final tax |
|
|
(2,545 |
) |
|
|
(2,879 |
) |
|
|
(680 |
) |
|
Net movement in unrecognized deferred income tax assets and other adjustments |
|
|
208 |
|
|
|
(4,495 |
) |
|
|
(4,180 |
) |
|
Actual provision for income tax |
|
|
1,103 |
|
|
|
1,909 |
|
|
|
4,563 |
|
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, 2017 and 2016 are as follows:
|
|
|
2017 |
|
|
2016 |
|
||
|
|
|
(in million pesos) |
|
|||||
|
NOLCO |
|
|
7,151 |
|
|
|
7,844 |
|
|
Provisions for other assets |
|
|
3,801 |
|
|
|
4,926 |
|
|
Accumulated provision for doubtful accounts |
|
|
3,122 |
|
|
|
3,836 |
|
|
Pension and other employee benefits |
|
|
1,758 |
|
|
|
93 |
|
|
Unearned revenues |
|
|
1,320 |
|
|
|
65 |
|
|
Asset retirement obligation |
|
|
621 |
|
|
|
656 |
|
|
Accumulated write-down of inventories to net realizable values |
|
|
304 |
|
|
|
234 |
|
|
Derivative financial instruments and others |
|
|
149 |
|
|
|
4 |
|
|
MCIT |
|
|
111 |
|
|
|
260 |
|
|
Unrealized foreign exchange losses |
|
|
105 |
|
|
|
87 |
|
|
Fixed asset impairment |
|
|
74 |
|
|
|
818 |
|
|
Investment properties |
|
|
(460 |
) |
|
|
— |
|
|
|
|
|
18,056 |
|
|
|
18,823 |
|
|
Unrecognized deferred income tax assets |
|
|
5,495 |
|
|
|
5,829 |
|
DMPI recognized deferred income tax assets to the extent that it is probable that sufficient taxable income will be available to allow all or part of the deferred income tax assets to be utilized. Digitel and DMPI’s unrecognized deferred income tax assets amounted to Php2,798 million and Php3,573 million as at December 31, 2017 and 2016, respectively.
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, 2017 are as follows:
|
Date Incurred |
|
Expiry Date |
|
MCIT |
|
|
NOLCO |
|
||
|
|
|
|
|
(in million pesos) |
|
|||||
|
December 31, 2015 |
|
December 31, 2018 |
|
|
88 |
|
|
|
2,436 |
|
|
December 31, 2016 |
|
December 31, 2019 |
|
|
150 |
|
|
|
1,584 |
|
|
December 31, 2017 |
|
December 31, 2020 |
|
|
480 |
|
|
|
3,941 |
|
|
|
|
|
|
|
718 |
|
|
|
7,961 |
|
|
Consolidated tax benefits |
|
|
|
|
718 |
|
|
|
2,388 |
|
|
Consolidated unrecognized deferred income tax assets |
|
|
|
|
(111 |
) |
|
|
(2,145 |
) |
|
Consolidated recognized deferred income tax assets |
|
|
|
|
607 |
|
|
|
243 |
|
The excess MCIT totaling Php718 million as at December 31, 2017 can be deducted against future RCIT liability. The excess MCIT that was deducted against RCIT amounted to Php15 million for the year ended December 31, 2017 and nil for the years ended December 31, 2016 and 2015. The amount of expired portion of excess MCIT amounted to Php72 million, Php232 million and Php91 million for the years ended December 31, 2017, 2016 and 2015, respectively.
NOLCO totaling Php7,961 million as at December 31, 2017 can be claimed as deduction against future taxable income. The NOLCO claimed as deduction against taxable income amounted to Php4,241 million, Php8,531 million and Php14 million for the years ended December 31, 2017, 2016 and 2015, respectively. The amount of expired NOLCO amounted to Php354 million, Php571 million and nil for the years ended December 31, 2017, 2016 and 2015, respectively.
Registration with Subic Bay Freeport Enterprise and Clark Special Economic Zone Enterprise
SubicTel is registered with Subic Bay Freeport Enterprise, while ClarkTel is registered with Clark Special Economic Zone Enterprise under Republic Act 7227, or R.A. 7227, otherwise known as the Bases Conversion and Development Act of 1992. As registrants, SubicTel and ClarkTel are 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 R.A. 7227.
Our consolidated income derived from non-registered activities with Economic Zone is subject to the RCIT rate at the end of the reporting period.