Income Tax

12 Months Ended

Dec. 31, 2018

Major Components Of Tax Expense Income [Abstract]

Income Tax

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
	2016			2017			2018
	NT$			NT$			NT$
	(In Millions)
Current tax
Current tax expenses recognized for the year	$	6,736		$	7,996		$	8,271
Income tax on unappropriated earnings		(346	)		(60	)		(2,070	)
Income tax adjustments on prior years		(22	)		(2	)		7
Others		15			10			8
		6,383			7,944			6,216
Deferred tax
Deferred tax expense recognized for the year		1,404			(101	)		208
Income tax adjustments on prior years		—			6			19
Change in tax rate		—			—			(38	)
		1,404			(95	)		189
Income tax expense recognized in profit or loss	$	7,787		$	7,849		$	6,405

Reconciliation of accounting profit and income tax expense was as follows:

	Year Ended December 31
	2016			2017			2018
	NT$			NT$			NT$
	(In Millions)
Income before income tax	$	49,413		$	48,009		$	44,986
Income tax expense calculated at the statutory rate    (17% in 2016 and 2017, and 20% in 2018)	$	8,400		$	8,162		$	8,997
Nondeductible income and expenses in determining    taxable income		5			34			227
Unrecognized deductible temporary differences		(9	)		(1	)		1
Unrecognized loss carryforwards		12			10			21
Tax-exempt income		(25	)		(87	)		(580	)
Additional income tax under Alternative Minimum Tax Act		—			—			46
Income tax on unappropriated earnings		(346	)		(60	)		(2,070	)
Investment credits		(234	)		(212	)		(204	)
Change in tax rate		—			—			(38	)
Effect of different tax rates of group entities operating in    other jurisdictions		(8	)		(2	)		(15	)
Income tax adjustments on prior years		(22	)		4			26
Others		14			1			(6	)
Income tax expense recognized in profit or loss	$	7,787		$	7,849		$	6,405

In 2016 and 2017, 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.

Income Tax Act in the ROC was amended in February 2018 and the corporate income tax rate is adjusted from 17% to 20%.  Such amendment is effective from 2018.  In addition, the rate of the corporate surtax applicable to 2018 unappropriated earnings is reduced from 10% to 5%.  The applicable tax rate used by subsidiaries in China is 25%, and tax rates used by other entities in the Company operating in other jurisdictions are based on the tax laws in those jurisdictions.

b. Income tax benefit recognized in other comprehensive income

	Year Ended December 31
	2016			2017			2018
	NT$			NT$			NT$
				(In Millions)
Deferred tax
Remeasurement on defined benefit plan	$	(347	)	$	(344	)	$	(243	)
Change in tax rate		—			—			(207	)
Unrealized gain or loss on available-for-sale financial assets		(2	)		(3	)		—
Total income tax benefit recognized in other    comprehensive income	$	(349	)	$	(347	)	$	(450	)

c. Current tax assets and liabilities

	December 31
	2017		2018
	NT$		NT$
	(In Millions)
Current tax assets
Tax refund receivable (included in other current assets - other)	$	2	$	—
Current tax liabilities
Income tax payable	$	8,674	$	6,221

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, 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
Allowance for doubtful receivables over quota		169		61			—		230
Share of profits of associates and joint ventures    accounted for using equity method		325		5			—		330
Deferred revenue		136		(19	)		—		117
Impairment loss on property, plant and equipment		44		78			—		122
Valuation loss on inventory		33		(13	)		—		20
Estimated warranty liabilities		18		1			—		19
Accrued award credits liabilities		22		(2	)		—		20
Property, plant and equipment		2		—			—		2
Unrealized foreign exchange loss, net		18		(18	)		—		—
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	)
Unrealized foreign exchange gain, net		(1	)		(9	)		—		(10	)
Valuation gain or loss on financial instruments, net		(5	)		—			2		(3	)
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
Allowance for doubtful receivables over quota		230		59			—		289
Share of profits of associates and joint ventures    accounted for using equity method		330		1			—		331
Deferred revenue		117		(11	)		—		106
Impairment loss on property, plant and equipment		122		(10	)		—		112
Valuation loss on inventory		20		3			—		23
Estimated warranty liabilities		19		3			—		22
Accrued award credits liabilities		20		(5	)		—		15
Trade-in right		—		15			—		15
Property, plant and equipment		2		—			—		2
Unrealized foreign exchange loss, net		—		17			—		17
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	)
Unrealized foreign exchange gain or loss, net		(10	)		10			—		—
Valuation gain or loss on financial instruments, net		(3	)		(1	)		3		(1	)
Others		(1	)		—			—		(1	)
	$	(1,464	)	$	31		$	3	$	(1,430	)

For the year ended December 31, 2018

	January 1, 2018		Effect of Retrospective Application of IFRS 9 (Note 5)		Recognized in Profit or Loss			Recognized in Other Comprehensive Income		December 31, 2018
	NT$		NT$		NT$			NT$		NT$
	(In Millions)
Deferred Income Tax Assets
Temporary differences
Defined benefit obligation	$	1,723	$	—	$	134		$	450	$	2,307
Allowance for doubtful receivables over quota		289		—		146			—		435
Share of profits of associates and joint ventures    accounted for using equity method		331		—		58			—		389
Deferred revenue		106		—		5			—		111
Impairment loss on property, plant and    equipment		112		—		(19	)		—		93
Valuation loss on inventory		23		—		65			—		88
Estimated warranty liabilities		22		—		4			—		26
Accrued award credits liabilities		15		—		(1	)		—		14
Trade-in right		15		—		(5	)		—		10
Property, plant and equipment		2		—		—			—		2
Unrealized foreign exchange loss, net		17		—		(16	)		—		1
Others		29		—		8			—		37
		2,684		—		379			450		3,513
Loss carryforwards		46		—		(5	)		—		41
	$	2,730	$	—	$	374		$	450	$	3,554

	January 1, 2018			Effect of Retrospective Application of IFRS 9 (Note 5)		Recognized in Profit or Loss			Recognized in Other Comprehensive Income		December 31, 2018
	NT$			NT$		NT$			NT$		NT$
	(In Millions)
Deferred Income Tax Liabilities
Temporary differences
Defined benefit obligation	$	(1,265	)	$	—	$	(567	)	$	—	$	(1,832	)
Land value incremental tax		(95	)		—		—			—		(95	)
Intangible assets		(39	)		—		7			—		(32	)
Deferred revenue foraward credits		(29	)		—		(2	)		—		(31	)
Unrealized foreign exchange gain, net		—			—		(1	)		—		(1	)
Valuation gain or loss on financial instruments,    net		(1	)		1		—			—		—
Others		(1	)		—		—			—		(1	)
	$	(1,430	)	$	1	$	(563	)	$	—	$	(1,992	)

e. Items for which no deferred income tax assets have been recognized

	December 31
	2017		2018
	NT$		NT$
	(In Millions)
Loss carryforwards
Expire in 2019	$	138	$	136
Expire in 2020		42		41
Expire in 2021		9		12
Expire in 2022		11		10
Expire in 2023		—		9
Expire in 2024		—		2
Expire in 2025		13		15
Expire in 2026		—		8
Expire in 2027		2		3
Expire in 2028		—		1
	$	215	$	237
Deductible temporary differences	$	2	$	1

f. Information about unused loss carryforwards

As of December 31, 2018, unused loss carryforwards was as follows:

Remaining Creditable Amount		Expiry Year
NT$ (In Millions)
$	136	2019
	41	2020
	22	2021
	11	2022
	9	2023
	2	2024
	33	2025
	12	2026
	3	2027
	8	2028
$	277

g. Income tax examinations

Income tax returns of Chunghwa have been examined by the tax authorities through 2015.  Income tax returns of Aval, CHSI, CHPT, HHI, SHE, and CHST have been examined by the tax authorities through 2016.  Income tax returns of SENAO, CHIEF, CHI, LED, Unigate, CLPT, SFD, CHYP, CHTSC, ISPOT, Youth, Youyi and SENYOUNG have been examined by the tax authorities through 2017.