May 21

Taiwan Branch of a Foreign Multinational Corporation applying for and signing APA may reduce the taxation risks from a post-tax review

According to National Taxation Bureau of Taipei, MOF, a worldwide frequently seen Transfer Pricing System is established to ensure the taxing powers, preventing corporate tax avoidance or reduction from unconventional business arrangements. Due to a usual huge amount of money and complexity of transactions among multinational corporations and their affiliates, the both parties of the taxpayer and the tax imposer must contribute costs and workloads to the post tax review. To avoid tax related disputes and administrative burdens aroused from the post tax review, businesses may apply for Advance pricing agreement (APA) with the taxation bureau to reach an agreement on the result of conventional transactions.

The Bureau goes on to elaborate that APA allows the taxpayer to negotiate with the taxation bureau to discuss, according to a comparable party, the transaction results, hypothetical conditions, pricing principles, calculation methods, applicable periods, and other main concerns and to reach an agreement. The agreement is applicable for 3 to 5 years and can be extended for another 5 years under the both parties’ consensus if there are no substantial changes on the environment and the facts related to the agreement. Submitted by the Taiwan branch of a well-known international brand the other day, an APA application has been successfully reviewed by the Bureau and signed by the both parties. This has created a double-win situation for both the taxpayer and the tax imposer.

The Bureau appeals for signing an APA to not only ensure a multinational corporation’s obligation as a taxpayer but reduce the taxation risks derived from the post tax review.

written by Good Earth

Aug 27

The 11th round of Preparatory talks between Taiwan’s Straits Exchange Foundation and China’s Association for Relations across the Taiwan Straits was held on August 24th. Both parties had double-checked and verified the draft of agreements on double taxation avoidance and aviation safety. These two draft agreements were submitted to the chiefs of both sides (Lin Join-sane, chairman of Taiwan’s semi-official Straits Exchange Foundation and Chen Deming, president of China’s Association for Relations Across the Taiwan Straits) for discussion and would be signed officially in the afternoon on August 25th.

written by Good Earth

Nov 10

According to Tax Collection Act, a taxpayer who voluntarily makes tax payment covering the tax amount which he or she has failed to declare shall be liable for paying interest on the late tax payment. Nevertheless, the taxpayer is exempt from the penalty of one fold of the tax withheld under the circumstances that it is neither a case brought by an informant, nor a case under investigation by an investigator appointed by any tax collection authorities.

Aaccording to Article 92 of Income Tax Act, a tax withholder, who files the withholding and non-withholding tax return after the due date January 31, 2011, is subject to the applicable punishment at the rate of 20 percent of the tax withheld. The maximum penalty, however, shall not exceed NT$ 20,000 or be less than NT$ 1,500. Even though a taxpayer pays off a tax withheld, he or she is subject to pay the penalty.

written by Good Earth

Jun 24

According to Jun15, 2010 Gazette 09900150571 by Executive Yuan and Gazette 6927 of Office of President of ROC, the corporate income tax rate was amended from 20% to 17%. The Presidential Executive Order amends Article 5 and Article 126 of ROC Income Tax Act. According to the newly amended Income Tax Act Article 126, new corporate income tax rate 17% and exemption TWD120,000,stipulated in Article 5, is effective in 2010.

written by Good Earth

Jun 11
From the overview of Asian corporate income tax rate, previous rate of 20% in Taiwan are now cut down to 17% just like 17% in Singapore and 16.5% in Hong Kong. This way will have more chance to compete with China’s 25%, Korea’s 22%. This can boost the overall economic and industrial development should even create more employment opportunities for Taiwan. The reformation of low tax burden benefit all industries, it will provide a better and competitive investing environment for everyone.

written by Good Earth

Jun 10

By the end of January of each year, company should be careful before issuing tax withholding vouchers, check on the actual payment of the total amount of the taxpayer and the withholding tax, in order to avoid clerical error or computer error led to a short reporting of withholding voucher, the company although voluntarily made corrections to the taxes authority, shall not apply to taxes levied section 48 of Act 1 of the regulations - automatically make a report after the provisions of impunity.

According to Tax Law Article 114, section 1, paragraph 2, withholding tax has been withheld, but failing to complete the withholding vouchers promptly, or the filing a report after the deadline, or the order to repay, the company shall be entitled to a 20% of withholding tax penalty: not more than 20,002 ntd, and no less than 1500ntd, unless those who volunteer reporting or automatically fill in, pay half of the minimum as penalty.

written by Good Earth

May 13

Profit-seeking enterprise who obtained government subsidies, of the Income Tax Act there is no tax provision, in principle, it should be fully reported in the filing year as “other income” tax.  This is further explained that if the profit-seeking enterprise system accepts the depreciation of fixed assets acquired or constructed or expanded facilities owned by the ad hoc subsidies, the subsidies of the acquisition of fixed assets owned by provision for expansion of facilities can be reported as depreciation of durable service life in the average yearly income.

written by Good Earth

Apr 27

Income Tax Law of the Legislative may provide 66 of the 9 amendments, corporate retained earnings up more than half the amount of capital to be distributed to shareholders mandatory whereas keeping the current practice of imposing 10% of return earning will prevent shareholders avoid paying tax.  The Ministry of Finance holds an “optismistic view.”

After business tax comes down to 17%, the company will retain the distribution of earnings, it will be conducive to shareholder tax avoidance, and it will be best supporting measures to restore the old system before the Income Tax Act.  Company’s undistributed surplus amounted to more than half of the company’s capital, must reinforce mandatory distribution. 

Tax Director Xu Yu Zhe, said retained earnings will take years to reach half the capital, prior to 1998 when a “mandatory distribution,” was implemented, many large enterprises rasied the companies’ capital to avoid mandatory distribution.  Treasury Division collected no taxes, auditing and collection of taxes were difficult.  10% abolish levy will result in more than 200 billion or nearly 300 billion in tax losses annually.

written by Good Earth

Apr 27

If an expatriate’s spouses is a citizen of the Republic of China and the expatriate is a tax resident, the couple should file annual income tax returns jointly.  However, the couple may also chooose who is dependent, the expatriate or spouse.  Aliens in the case of non-resident individuals can also choose in accordance with Article 15 of the Income Tax Act, file annual income tax jointly or pursuant to Article 73 of the same Act adopting withholding tax levied on income.  As for their choice in accordance with the provisions of article 73, the spouse shall not consolidate the expatriate’s Taiwan income for annual income tax declaration, and the withholding tax shall not be tax deductible, and no exemption and deduction are allowed.

written by Good Earth

Mar 23

After receiving an order from a third-country buyer, the local trading company company A declares to customs and exports the materials and unfinished goods to offshore manufacturer company B for processing. Company B is responsible for exporting the finished goods directly to the third-country buyer.

I. Outsourcing Processing & Direct Export (1)

  • A. Outsourcing processing and direct export

Before shipping goods abroad for outsourcing processing, an entity shall first issue the GUI on which the value (price) of unfinished goods must be declared according to the value stated on Export Declaration approved by Customs to apply for sales for goods at zero-tax-rate. At exporting finished goods processed to the third country buyer, the entity shall issue GUI with the price computing by deducting original GUI value from total transaction amount in accordance with related transaction certificate.

(Note: GUI issuance is not required for exporting of goods.)

(Explanatory Decree No. 770665884 issued on Nov 15 1988 by Ministry of Finance)

written by Good Earth