Apr 30

19. Company selling investment products should be aware that if an investment product is not the security as stated under the provision of Securities Transaction Tax Act, the income tax that ceased to be imposed as stated in Article 4-1 of the Income Tax Act does not apply.

20. In the case of profit-seeking enterprises selling shares without the certification or authentication as prescribed in Article 162 of the Company Act, it is recognized as property transaction not as securities transaction. Therefore, when declaring gains or losses of such transactions, it is often mistakenly declared as securities transactions with tax exemption.

21. In the case of a profit-seeking enterprise having no permanent establishment but having a business agent within the territory of the Republic of China, the business agent concerned shall be responsible for filing of income return according to Item 2 Article 73 of the Income Tax Act. Because the profit-seeking enterprise is not authorized by the R.O.C. Government, it is not a “foreign company” as defined in the R. O. C. Company Act, which is not a “company” as stated in Item 1 Article 39 of the Income Tax Act. Therefore, there is yet to be any applicable regulations for offset between profits and losses.

22. Profit-seeking enterprises should compute and declare depreciation expenses for individual assets according to an inventory. However, when a Certified Public Accountant making an assessment and certification, he or she only samples and excludes the ones that exceeds the maximum depreciation expense, but neglects the regulations regarding the depreciation of fix assets being continuously presented annually according to the rate as stated in Item 2 Article 95 of Regulations Governing Assessment of Profit-seeking Enterprise Income Tax and thus fails to adjust the depreciation expenses according to regulations.

23. Companies which received government subsidy for research and development expenses not only should declare the subsidy as income but also deduct the amount from the research and development expenses.

24. The losses incurred from the sales of goods or services as prescribed in Article 39 of the Income Tax Act for profit-seeking enterprises is also applicable for educational, cultural organizations or charities, given that the organizations keep a complete set of account books, use the Blue Returns in the years such losses occurred and in the year of declaring such losses, or such losses have been duly certified by a certified public accountant and declared within the prescribed period. Then, the losses can be used as deductions from the sales income in the next 10 years. However, if the losses are not from the sales of goods or services, Article 39 of the Income Tax Act does not apply.

25. Even though a tax return has been duly certified and filed by a Certified Public Accountant before the deadline, if the tax is not paid in full or paid before the deadline, it is stilled considered as regular tax return and the preferential treatments such as a higher entertainment expense limit and the offset between Profits and Losses can no longer apply.

26. In case of a profit-seeking enterprise with its head office within the territory of the Republic of China declaring its incomes from both within and without of the territory of the Republic of China, special attentions should be paid in checking if all the foreign incomes corresponding to the deductibles from taxes paid in the source countries are declared.

written by Good Earth

Apr 29

16. The earnings of a dissolved company in the year prior to acquisition should be declared separately by the surviving company on behalf of the dissolved company rather than combined and declared with that of the surviving company.

17. In an acquisition where stock is used as consideration, the share values of the surviving company and the dissolved company are to be determined according to the Ministry of Finance Official Letters numbered 09804902120 published on November 30th, 2009 and 10304030470 published on December 1st, 2014. If the fair value of the net identifiable assets exceeds the cost of the acquisition, the gain from the bargain purchase recognized according to International Financial Reporting Standard 3-Business Combinations should be divided evenly and declared as business income over the next 5 years starting from the year in which the acquisition date falls.

written by Good Earth

Mar 25

Even though the scrapped products of a Profit-seeking enterprise due to deterioration has been certified by a CPA to adhere to Article 101-1 of Regulations Governing Assessment of Profit-seeking Enterprise Income Tax, it is not enough to have the related worksheets only listing the product names, quantity and the prices to be matching the numbers in the account bookings. Records proving the correctness of the items and quantities of the products, auditing processes, etc. should also be included.

7. When declaring the loss from the liquidation of a foreign company, the related liquidation documents should be presented.

Many mistakenly declare the actual purchasing cost of a sedan purchased by a profit-seeking enterprise (before January 1st, 2004) and recognize it as depreciation expense when the cost exceeds the limit of 2,500,000 NTD as stated in Article 95-13 of Regulations Governing Assessment of Profit-seeking Enterprise Income Tax.

9. If a Profit-seeking enterprise in the situation of omission or under-reporting of income tax due to mistakes in inventory count, it should be handled according to Article 110 of the Income Tax Act as stated in Article 52 of Regulations Governing Assessment of Profit-seeking Enterprise Income Tax.

10. When declaring tax exempt income, profit-seeking enterprises should be aware if there are multiple approved investment plans in the same fiscal year. If a tax offset for shareholders or a five-year tax holiday according to Article 8, 9 or 9-2 of Statute for Upgrading Industries applies, the tax exempt amount should be calculated separately in proportion to the paid-up capital for separate investment plans according to the related regulations.

11. When a profit-seeking enterprise declares the loss from the liquidation of an investee, the year that the loss is to be declared should be the year that the liquidation is completed and all the related liquidation documents are delivered to and recognized by the shareholders or the shareholders’ meeting.

12. According to the Income Tax Act, in case of income tax that has been paid on the income derived outside of the territory of the Republic of China in accordance with the tax act of the source country of that income, the maximum tax deductable should be the additional tax payable computed from the net foreign income after subtracting the related costs and expenses at the domestic tax rate, rather than the amount computed directly from the gross foreign income.

13. The accumulated deficits of an investee incurred before the profit-seeking enterprise started investing cannot be declared as investment loss.

14. A company that lends money to a shareholder or any person without charging interest or charging the stipulated interest at an obviously low rate is violating Article 24-3 of the Income Tax Act.

written by Good Earth

Mar 14

If the date that a company turns in all the documents for “Custom Clearance” and the date of completion of custom clearance process fall into two different calendar years, regardless of whatever the trade term is, such as CIF, FOB, etc., the date to recognize “Export Revenue” is the date the goods to be exported have gone through all custom clearance processes, or the date that Post Service as well as courier service stamps on the receipt of the goods.

written by Good Earth

Feb 23

1. Fixed assets which have not reached their service years but have been scrapped and derecognized are mistakenly recognized as “temporary differences” and are deferred to be depreciated in a later year and when they reach their service years, the undepreciated value is further accounted as loss for that year. However, fixed assets which are scrapped or destroyed before the service year calculated in accordance with the Table of Service Life of Fixed Assets should be recognized as loss or profit in accordance with Article 95-10 of Regulations Governing Assessment of Profit-seeking Enterprise Income Tax, instead of deferred.

2. Publicly quoted entities should adjust its pension payable and calculate accrued pension liabilities according to International Financial Reporting Standards (IFRS) and declare payroll expenses. If pension is not actually set aside, which is not in accord with the regulations prescribed in Article 33-1 of the Income Tax Act, it shall not be included in payroll expenses.

3. If a branded apparel retail business does not declare the sales income of an overseas area, it cannot declare payroll expenses of employees assigned to the long-term overseas posting and overseas rent expenses of that area.

4. The special reserve set aside for “Net Loss Not Recognized as Pension Cost,”
“Unrealized Revaluation Increment,” “Unrealized Gains/ (Losses) on Financial Instruments”, etc. is not in accordance with method stated the official document numbered 0950000507 published by the Financial Supervisory Commission on January 27th, 2006. Therefore, such special reserve should not be recognized as deductions of Undistributed Surplus Earnings.

written by Good Earth

Jun 24

If the compensations or damages received are related to selling of goods or services by a business owner, then GUI should be issued and included in business income tax. However, if the compensation received by a buyer from a seller is not the sales income as stated in Article 16 of the Business Tax Act, the receiver of the compensation is exempt from issuing a GUI (Government Uniform Invoice). The sales income amount as stated in Article 16 of the Business Act is the total amount received by a business owner for the goods sold or services rendered.

For example, if a tenant terminates the contract before the end of the lease term, the damage received by the landlord is considered an additional fee on top of the goods sold or the services rendered, like a rental income. Therefore, the landlord should issue a GUI and include the amount in business tax return. However, if the landlord terminates the contract before the end of the lease term, the compensation (such as moving cost, etc) paid to the tenant by the landlord is not considered a sales income amount as stated in Article 16 of the Business Act because the compensation is not obtained through selling of goods or services. Therefore, it is not taxable.

written by Good Earth

Apr 15

In 2015, Taiwan MOEA amended the Article 235 Company Act and add a new Article 235-1, which provides that a company should share with its employee at least some certain amount or % of its net profit.

Debating on how to calculate the employee bonus has been ongoing since last year either. Therefore, in Jan 2015, Taiwan MOEA provided an Administrative Order, No 10402413890, suggesting that the employee bonus could be based on a % of “net profit before income tax”.

Because there is no penalty on failing to amend the article of incorporation according to the Article 235-1 of Taiwan Company Act; this Administrative Order becomes a suggestion.

To calculate the employee bonus according to the net profit before tax or net profit after tax, the result of P&L is the same, from the shareholders’ point of view. It is the Ministry of Finance suffers due to this suggestion, the administrative order, because less tax payable; therefore, Taiwan tax office does not follow up to revise any tax regulation or administration order to endorse the Article 235-1.

Because this new article, the Article 235-1, does not stipulate the penalty if a company failing to do so, since then debating on this issues, employee bonus, has been on going to now. Thus far, more than 80% of companies have not filed amendment of its article of incorporation or association.

written by Good Earth

Mar 18

The 2016 VAT audit is starting soon. Businesses should check for any mistakes to avoid any tax penalties. The National Taxation Bureau of Taipei has been using computer system to analyze any usual information to see if there are any tax evasions.

The tax office audits businesses for fraudulent Government Uniform Invoices issued by businesses to help others avoid paying taxes. In addition, the followings are also the targets for tax office audit:

  •  Businesses using fraudulent input invoices for tax deduction
  •  GUIs were issued under the tax exempt or zero tax rate categories for taxable sales transactions.
  •  Whether businesses in the category described in Chapter 4, Section 1 of Value-added and Non-value-added Business Tax Act declare VAT according to Article 36 of the above-mentioned Act.
    (Please refer to the above-mentioned tax law: http://law.moj.gov.tw/Eng/LawClass/LawAll.aspx?PCode=G0340080)
  •  Businesses whose clientele is mostly tourists, businesses in the food and nightclub industries, cosmetic surgery clinics, post-natal care institutions, elderly care institutions who sell goods or services without business registrations, issuing GUI, paying VAT and obtaining Input Documentary Evidence.

The additional tax revue after tax audit in 2014 was 1.9 billion NTD.

There is a “counseling period” before March 31. If businesses find out any mistakes they’ve made, please file for amendment and pay the unpaid tax ASAP before the tax office starts to audit. Otherwise, the fine can be up to five times the unpaid tax amount in addition to the interest.

written by Good Earth

Feb 17

According to the amendment of the Act for Development of Small and Medium Enterprises in February 2015, the salary expense from additional staff employed by small and medium enterprises can be used to calculate an additional 30% of amount deductible. If a small and medium enterprise hires an additional employee who is under 24 years of age, or gives a raise to an entry-level employee, an additional 50% and 30% of amounts deductible can be included. In addition, under the Act for Industrial Innovation, the deductibles for the Intellectual Property income related to R&D expenses shall also be included in 2016 in accordance with the related regulation effective dates. The above-mentioned additional employee salary expense deductions shall be included in the basic income amount when businesses file profit-seeking enterprises income tax return this year.

written by Good Earth

Jan 06

The Legislative Yuan passed an amendment to Statute for Industrial Innovation, which includes changes related to individual and company R&D tax deduction and employee stock rewards.
1. Companies can reward employees with stocks as remuneration, employee stock purchases on issuance of common stock, treasury stocks, stock option certificates, and new restricted employee shares (i.e. restricted stocks). The income tax on employee stock rewards within NT$5 million may be deferred for 5 years.
2. There are 2 choices for tax deduction for R&D investment:
a) Credit up to 15% of the company’s total expenditure on R&D against its business income tax payable for that year
b) Credit up to 10% of the company’s total expenditure on R&D against its business income tax payable within 3 years
No change is allowed once the choice is made.
3. Taiwan citizens or companies may credit up to 200% of the R&D investment against the profit from R&D.

written by Good Earth