| 25. | INCOME TAX |
| a. | Income tax recognized in profit or loss |
The major components of income tax were as follows:
| For the Year Ended December 31 | ||||||||||||||||
| 2015 | 2016 | 2017 | ||||||||||||||
| NT$ | NT$ | NT$ | US$ (Note 4) | |||||||||||||
| Current income tax | ||||||||||||||||
| In respect of the current year | $ | 4,029,076 | $ | 4,177,900 | $ | 4,979,766 | $ | 168,008 | ||||||||
| Income tax on unappropriated earnings | 187,654 | 829,345 | 1,076,353 | 36,314 | ||||||||||||
| Changes in estimate for prior years | (20,719 | ) | 28,160 | (88,162 | ) | (2,974 | ) | |||||||||
| 4,196,011 | 5,035,405 | 5,967,957 | 201,348 | |||||||||||||
| For the Year Ended December 31 | ||||||||||||||||
| 2015 | 2016 | 2017 | ||||||||||||||
| NT$ | NT$ | NT$ | US$ (Note 4) | |||||||||||||
| Deferred income tax | ||||||||||||||||
| In respect of the current year | $ | 190,829 | $ | 574,541 | $ | 534,472 | $ | 18,032 | ||||||||
| Adjustments attributable to changes in tax rates | 3,794 | 14,184 | - | - | ||||||||||||
| Changes in estimate for prior years | (20,890 | ) | (206,788 | ) | 52,872 | 1,784 | ||||||||||
| Effect of foreign currency exchange differences | (58,671 | ) | (26,498 | ) | (31,698 | ) | (1,070 | ) | ||||||||
| 115,062 | 355,439 | 555,646 | 18,746 | |||||||||||||
| Income tax recognized in profit or loss | $ | 4,311,073 | $ | 5,390,844 | $ | 6,523,603 | $ | 220,094 | ||||||||
A reconciliation of income tax expense calculated at the statutory rates and income tax expense recognized in profit or loss was as follows:
| For the Year Ended December 31 | ||||||||||||||||
| 2015 |
2016 (Retrospectively Adjusted)
|
2017 | ||||||||||||||
| NT$ | NT$ | NT$ | US$ (Note 4) | |||||||||||||
| Profit before income tax | $ | 25,011,788 | $ | 27,968,705 | $ | 31,020,663 | $ | 1,046,581 | ||||||||
| Income tax expense calculated at the statutory rates | $ | 6,307,148 | $ | 8,634,187 | $ | 10,890,498 | $ | 367,426 | ||||||||
| Nontaxable expense in determining taxable income | 160,530 | (34,954 | ) | 483,715 | 16,319 | |||||||||||
| Tax-exempt income | (537,987 | ) | (700,274 | ) | (623,566 | ) | (21,038 | ) | ||||||||
| Additional income tax on unappropriated earnings | 338,142 | 829,345 | 1,076,353 | 36,314 | ||||||||||||
| Loss carry-forward and income tax credits currently used | (1,286,705 | ) | (898,700 | ) | (1,124,043 | ) | (37,923 | ) | ||||||||
| Remeasurement of deferred income tax assets, net | (688,584 | ) | (2,797,673 | ) | (4,131,473 | ) | (139,389 | ) | ||||||||
| Changes in estimate for prior years | (20,719 | ) | 28,160 | (88,162 | ) | (2,974 | ) | |||||||||
| Withholding tax | 39,248 | 81,543 | 40,281 | 1,359 | ||||||||||||
| Land value increment tax | - | 249,210 | - | - | ||||||||||||
| Income tax expense recognized in profit or loss | $ | 4,311,073 | $ | 5,390,844 | $ | 6,523,603 | $ | 220,094 | ||||||||
For the years ended December 31, 2015, 2016 and 2017, the Group applied a tax rate of 17% for resident entities subject to the Income Tax Law of the ROC; for the subsidiaries located in China, the applied tax rate was 25%; and for other jurisdictions, the Group measures taxes by using the applicable tax rate for each individual jurisdiction.
In February 2018, it was announced by the President that the Income Tax Law of 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 be adjusted and would increase by NT$201,965 thousand (US$6,814 thousand) and NT$788,556 thousand (US$26,604 thousand), respectively, in 2018.
As the status of 2018 appropriations of earnings is uncertain, the potential income tax consequences of 2017 unappropriated earnings are not reliably determinable.
| b. | Income tax recognized directly in equity |
| For the Year Ended December 31 | ||||||||||||||||
| 2015 | 2016 | 2017 | ||||||||||||||
| NT$ | NT$ | NT$ | US$ (Note 4) | |||||||||||||
| Deferred income tax | ||||||||||||||||
| Related to employee share options | $ | (33 | ) | $ | (204 | ) | $ | 262 | $ | 9 | ||||||
| c. | Income tax recognized in other comprehensive income |
| For the Year Ended December 31 | ||||||||||||||||
| 2015 | 2016 | 2017 | ||||||||||||||
| NT$ | NT$ | NT$ | US$ (Note 4) | |||||||||||||
| Deferred income tax | ||||||||||||||||
| Related to remeasurement of defined benefit plans | $ | 11,002 | $ | 73,637 | $ | (51,217 | ) | $ | (1,728 | ) | ||||||
| d. | Current tax assets and liabilities |
| December 31 | ||||||||||||
| 2016 | 2017 | |||||||||||
| NT$ | NT$ | US$ (Note 4) | ||||||||||
| Current tax assets | ||||||||||||
| Tax refund receivable | $ | 260,559 | $ | 28,458 | $ | 960 | ||||||
| Prepaid income tax | 211,193 | 232,084 | 7,830 | |||||||||
| $ | 471,752 | $ | 260,542 | $ | 8,790 | |||||||
| Current tax liabilities | ||||||||||||
| Income tax payable | $ | 6,846,350 | $ | 7,619,328 | $ | 257,062 | ||||||
| e. | Deferred tax assets and liabilities |
The Group offset certain deferred tax assets and deferred tax liabilities which met the offset criteria.
The movements of deferred tax assets and deferred tax liabilities were as follows:
| Balance at January 1 | Recognized in Profit or Loss | Recognized in Other Comprehensive Income | Recognized in Equity | Exchange Differences | Acquisitions through business combinations | Balance at December 31 | ||||||||||||||||||||||
| NT$ | NT$ | NT$ | NT$ | NT$ | NT$ | NT$ | ||||||||||||||||||||||
| Year ended December 31, 2015 | ||||||||||||||||||||||||||||
| Temporary differences | ||||||||||||||||||||||||||||
| Property, plant and equipment | $ | (2,431,855 | ) | $ | (1,083,273 | ) | $ | - | $ | - | $ | 10,670 | $ | - | $ | (3,504,458 | ) | |||||||||||
| Defined benefit obligation | 796,642 | 20,398 | 11,002 | - | 17,897 | - | 845,939 | |||||||||||||||||||||
| FVTPL financial instruments | (170,059 | ) | (62,152 | ) | - | - | 13 | - | (232,198 | ) | ||||||||||||||||||
| Others | 1,166,297 | 229,799 | - | (33 | ) | (11,076 | ) | - | 1,384,987 | |||||||||||||||||||
| (638,975 | ) | (895,228 | ) | 11,002 | (33 | ) | 17,504 | - | (1,505,730 | ) | ||||||||||||||||||
| Loss carry-forward | 519,898 | 812,217 | - | - | (8,538 | ) | - | 1,323,577 | ||||||||||||||||||||
| Investment credits | 452,331 | (32,904 | ) | - | - | (68,308 | ) | - | 351,119 | |||||||||||||||||||
| Others | (853 | ) | 853 | - | - | - | - | - | ||||||||||||||||||||
| $ | 332,401 | $ | (115,062 | ) | $ | 11,002 | $ | (33 | ) | $ | (59,342 | ) | $ | - | $ | 168,966 | ||||||||||||
| Year ended December 31, 2016 | ||||||||||||||||||||||||||||
| Temporary differences | ||||||||||||||||||||||||||||
| Property, plant and equipment | $ | (3,504,458 | ) | $ | (182,291 | ) | $ | - | $ | - | $ | (72,098 | ) | $ | - | $ | (3,758,847 | ) | ||||||||||
| Defined benefit obligation | 845,939 | (48,601 | ) | 73,637 | - | 2,509 | - | 873,484 | ||||||||||||||||||||
| FVTPL financial instruments | (232,198 | ) | 212,737 | - | - | (1,902 | ) | - | (21,363 | ) | ||||||||||||||||||
| Others | 1,384,987 | (283,179 | ) | - | (204 | ) | (21,780 | ) | - | 1,079,824 | ||||||||||||||||||
| (1,505,730 | ) | (301,334 | ) | 73,637 | (204 | ) | (93,271 | ) | - | (1,826,902 | ) | |||||||||||||||||
| Loss carry-forward | 1,323,577 | (110,967 | ) | - | - | (91,008 | ) | 2,939 | 1,124,541 | |||||||||||||||||||
| Investment credits | 351,119 | 56,862 | - | - | (25,245 | ) | - | 382,736 | ||||||||||||||||||||
| $ | 168,966 | $ | (355,439 | ) | $ | 73,637 | $ | (204 | ) | $ | (209,524 | ) | $ | 2,939 | $ | (319,625 | ) | |||||||||||
| Year ended December 31, 2017 | ||||||||||||||||||||||||||||
| Temporary differences | ||||||||||||||||||||||||||||
| Property, plant and equipment | $ | (3,758,847 | ) | $ | (101,576 | ) | $ | - | $ | - | $ | (18,643 | ) | $ | - | $ | (3,879,066 | ) | ||||||||||
| Defined benefit obligation | 873,484 | (26,736 | ) | (51,217 | ) | - | (15,291 | ) | - | 780,240 | ||||||||||||||||||
| FVTPL financial instruments | (21,363 | ) | (86,342 | ) | - | - | 2,802 | - | (104,903 | ) | ||||||||||||||||||
| Others | 1,079,824 | (22,748 | ) | - | 262 | (28,929 | ) | - | 1,028,409 | |||||||||||||||||||
| (1,826,902 | ) | (237,402 | ) | (51,217 | ) | 262 | (60,061 | ) | - | (2,175,320 | ) | |||||||||||||||||
| Loss carry-forward | 1,124,541 | (456,246 | ) | - | - | 13,146 | - | 681,441 | ||||||||||||||||||||
| Investment credits | 382,736 | 138,002 | - | - | 13,475 | - | 534,213 | |||||||||||||||||||||
| $ | (319,625 | ) | $ | (555,646 | ) | $ | (51,217 | ) | $ | 262 | $ | (33,440 | ) | $ | - | $ | (959,666 | ) | ||||||||||
| Balance at January 1 | Recognized in Profit or Loss | Recognized in Other Comprehensive Income | Recognized in Equity | Exchange Differences | Acquisitions through business combinations | Balance at December 31 | ||||||||||||||||||||||
| US$ (Note 4) | US$ (Note 4) | US$ (Note 4) | US$ (Note 4) | US$ (Note 4) | US$ (Note 4) | US$ (Note 4) | ||||||||||||||||||||||
| Year ended December 31, 2017 | ||||||||||||||||||||||||||||
| Temporary differences | ||||||||||||||||||||||||||||
| Property, plant and equipment | $ | (126,817 | ) | $ | (3,427 | ) | $ | - | $ | - | $ | (629 | ) | $ | - | $ | (130,873 | ) | ||||||||||
| Defined benefit obligation | 29,470 | (902 | ) | (1,728 | ) | - | (516 | ) | - | 26,324 | ||||||||||||||||||
| FVTPL financial instruments | (721 | ) | (2,913 | ) | - | - | 94 | - | (3,540 | ) | ||||||||||||||||||
| Others | 36,431 | (767 | ) | - | 9 | (976 | ) | - | 34,697 | |||||||||||||||||||
| (61,637 | ) | (8,009 | ) | (1,728 | ) | 9 | (2,027 | ) | - | (73,392 | ) | |||||||||||||||||
| Loss carry-forward | 37,940 | (15,393 | ) | - | - | 444 | - | 22,991 | ||||||||||||||||||||
| Investment credits | 12,913 | 4,656 | - | - | 454 | - | 18,023 | |||||||||||||||||||||
| $ | (10,784 | ) | $ | (18,746 | ) | $ | (1,728 | ) | $ | 9 | $ | (1,129 | ) | $ | - | $ | (32,378 | ) | ||||||||||
| f. | Items for which no deferred tax assets have been recognized |
Unrecognized deferred tax assets related to loss carry-forward, investment credits and deductible temporary differences were summarized as follows:
| December 31 | ||||||||||||
| 2016 | 2017 | |||||||||||
| NT$ | NT$ | US$ (Note 4) | ||||||||||
| Loss carry-forward | $ | 652,593 | $ | 542,054 | $ | 18,288 | ||||||
| Investment credits | 280,068 | - | - | |||||||||
| Deductible temporary differences | 904,441 | 712,141 | 24,026 | |||||||||
| $ | 1,837,102 | $ | 1,254,195 | $ | 42,314 | |||||||
The unrecognized loss carry-forward will expire through 2030 and the unrecognized investment credits will expire through 2018.
| g. | Information about unused loss carry-forward, unused investment credits, tax-exemption and other tax relief |
As of December 31, 2017, the unused loss carry-forward comprised of:
| Year of Expiry | NT$ | US$ | ||||||
| (Note 4) | ||||||||
| 2018 | $ | 230,656 | $ | 7,782 | ||||
| 2019 | 34,981 | 1,180 | ||||||
| 2020 | 615,327 | 20,760 | ||||||
| 2021 | 164,377 | 5,546 | ||||||
| 2022 and thereafter | 178,154 | 6,011 | ||||||
| $ | 1,223,495 | $ | 41,279 | |||||
As of December 31, 2017, unused investment credits comprised of:
| Remaining Creditable Amount | ||||||||||
| Tax Credit Source | NT$ | US$ | Expiry Year | |||||||
| (Note 4) | ||||||||||
| Purchase of machinery and equipment | $ | 518,790 | $ | 17,503 | 2018 | |||||
| Others | 15,423 | 520 | 2022 and thereafter | |||||||
| $ | 534,213 | $ | 18,023 | |||||||
As of December 31, 2017, profits attributable to the following expansion projects were exempted from income tax for a 5-year period:
| Tax-exemption Period | ||
| Construction and expansion of 2007 by the Company | 2016.01-2020.12 | |
| Construction and expansion of 2008 by the Company | 2014.01-2018.12 | |
| Construction and expansion of 2008 by ASE Test Inc. | 2014.01-2018.12 | |
| Construction and expansion of 2009 by ASE Test Inc. | 2018.01-2022.12 | |
| Expansion of 2008 by ASE Electronics Inc. | 2016.01-2020.12 |
Some China subsidiaries qualified as high technology enterprises were entitled to a reduced income tax rate of 15% and were eligible to deduct certain times of research and development expenses from their taxable income.
| h. | Unrecognized deferred tax liabilities associated with investments |
As of December 31, 2016 and 2017, the taxable temporary differences associated with the investments in subsidiaries for which no deferred tax liabilities have been recognized were NT$14,417,873 thousand and NT$16,401,422 thousand (US$553,354 thousand), respectively.
| i. | Integrated income tax |
As of December 31, 2016 and 2017, unappropriated earnings were all generated on and after January 1, 1998. As of December 31, 2016 and 2017, the balance of the Imputation Credit Account was NT$3,328,374 thousand and NT$4,003,283 thousand (US$135,064 thousand), respectively.
The creditable ratio for the distribution of earnings of 2016 was 10.01%. Since the amended Income Tax Act published in February 2018 abolished the imputation tax system, no creditable ratio for distribution of earnings in 2018 is expected.
| j. | Income tax assessments |
Income tax returns of ASE Inc. have been examined by authorities in 2012, 2014 and 2015 and its ROC subsidiaries have been examined by authorities through 2013 to 2015. ASE Inc. disagreed with the result of examinations relating to its income tax returns for 2014 and 2015 and appealed to the tax authorities. The related income tax expenses in the years resulting from the examinations have been accrued in respective tax years or in the year of the settlement.