Income Tax

12 Months Ended

Dec. 31, 2023

26.	INCOME TAX

Income tax expense recognized in profit or loss

Income tax expense consisted of the following:


	Years Ended December 31
	2021				2022				2023
	NT$ (In Millions)				NT$ (In Millions)				NT$ (In Millions)

Current income tax expense
Current tax expense recognized in the current year		$	107,694.4			$	190,022.2			$	156,684.0
Income tax adjustments on prior years			(14,539.5	)			(19,413.0	)			(32,775.5	)
Other income tax adjustments			152.2				206.1				244.3

			93,307.1				170,815.3				124,152.8

Deferred income tax expense (benefit)
The origination and reversal of temporary differences			(17,530.0	)			(24,714.5	)			3,210.1
Investment tax credits			(5,621.7	)			4,676.7				925.9

			(23,151.7	)			(20,037.8	)			4,136.0


Income tax expense recognized in profit or loss		$	70,155.4			$	150,777.5			$	128,288.8

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


	Years Ended December 31
	2021				2022				2023
	NT$ (In Millions)				NT$ (In Millions)				NT$ (In Millions)

Income before tax		$	663,036.0			$	1,144,072.2			$	979,316.5


Income tax expense at the statutory rate		$	134,595.2			$	231,776.1			$	197,935.7
Tax effect of adjusting items:
Nondeductible (deductible) items in determining taxable income			11,279.5				12,309.8				(7,642.2	)
Tax-exempt income			(89,852.9	)			(157,955.9	)			-
Additional income tax under the Alternative Minimum Tax Act			32,852.7				61,578.0				-
Additional income tax on unappropriated earnings			18,849.5				42,336.8				29,221.8
The origination and reversal of temporary differences			(17,530.0	)			(24,714.5	)			3,210.1
Income tax credits			(5,651.3	)			4,654.1				(61,905.4	)

			84,542.7				169,984.4				160,820.0
Income tax adjustments on prior years			(14,539.5	)			(19,413.0	)			(32,775.5	)
Other income tax adjustments			152.2				206.1				244.3


Income tax expense recognized in profit or loss		$	70,155.4			$	150,777.5			$	128,288.8

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

For the years ended December 31, 2021, 2022 and 2023, 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, 2022				December 31, 2023
	NT$ (In Millions)				NT$ (In Millions)

Deferred income tax assets

Temporary differences
Depreciation		$	45,299.3			$	41,094.7
Refund liability			12,089.5				9,415.0
Unrealized exchange losses			5,782.4				7,100.0
Unrealized loss on inventories			2,305.3				2,771.2
Net defined benefit liability			1,722.0				1,729.7
Deferred compensation cost			361.2				489.6
Investment tax credits			945.0				19.1
Others			681.2				1,556.5


		$	69,185.9			$	64,175.8


Deferred income tax liabilities

Temporary differences
Others		$	(1,031.4	)		$	(53.8	)


	Year Ended December 31, 2021
					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		$	19,354.4			$	15,365.7			$	-			$	0.6			$	34,720.7
Refund liability			3,755.1				2,231.5				-				(0.4	)			5,986.2
Investment tax credits			-				5,621.7				-				-				5,621.7
Net defined benefit liability			1,342.1				(75.9	)			(29.1	)			-				1,237.1
Unrealized loss on inventories			858.5				41.0				-				(0.5	)			899.0
Deferred compensation cost			330.3				49.2				-				(5.5	)			374.0
Others			317.8				59.1				(56.2	)			(5.5	)			315.2


		$	25,958.2			$	23,292.3			$	(85.3	)		$	(11.3	)		$	49,153.9


Deferred income tax liabilities

Temporary differences
Unrealized exchange gains		$	(866.5	)		$	160.2			$	-			$	-			$	(706.3	)
Others			(863.4	)			(300.8	)			(3.4	)			-				(1,167.6	)


		$	(1,729.9	)		$	(140.6	)		$	(3.4	)		$	-			$	(1,873.9	)


	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
Investment tax credits			5,621.7				(4,676.7	)			-			-				945.0
Deferred compensation cost			374.0				(48.2	)			-			35.4				361.2
Others			315.2				334.9				-			31.1				681.2


		$	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
Investment tax credits			945.0				(925.9	)			-			-				19.1
Others			681.2				887.0				-			(11.7	)			1,556.5


		$	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	)

The deductible temporary differences for which no deferred income tax assets have been recognized

As of December 31, 2022 and 2023, the aggregate deductible temporary differences for which no deferred income tax assets have been recognized amounted to NT$26,790.9 million and NT$52,686.2 million, respectively.

Unused tax-exemption information

As of December 31, 2022, the profits generated from the following project of TSMC are exempt from income tax for a five-year period:


		Tax-exemption Period

Construction and expansion of 2009 by TSMC		2018 to 2022

The information of unrecognized deferred income tax liabilities associated with investments

As of December 31, 2022 and 2023, the aggregate taxable temporary differences associated with investments in subsidiaries not recognized as deferred income tax liabilities amounted to NT$222,682.6 million and NT$254,182.9 million, respectively.

Income tax examination

The tax authorities have examined income tax returns of TSMC through 2021. All investment tax credit adjustments assessed by the tax authorities have been recognized accordingly.