Corporate Tax 2010 - BMR Advisors

Lee and Li, Attorneys-at-Law
Taiwan
4.2 When is that tax generally payable
For a company with a calendar tax year, it should pay provisional
income tax in September of the current tax year, and the final
income tax payable in May of the following year.
4.3 What is the tax base for that tax (profits pursuant to
commercial accounts subject to adjustments; other tax
base)
Corporate income tax is payable on a company’s taxable income,
which is the net profits pursuant to commercial accounts, subject to
adjustments under tax laws.
4.4 If it otherwise differs from the profit shown in commercial
accounts, what are the main other differences
Certain income that is recorded under commercial accounts is not
subject to income tax. For example capital gains from the sale of
securities issued by Taiwan companies and dividends received from
Taiwan companies.
Certain expenses that are recorded under commercial accounts are
not deductible for income tax purposes under certain circumstances.
For example, the entertainment expenses exceed the tax allowance,
the lack of or insufficient documents evidencing the expenses, the
expenses are not for operating business, and so on.
4.5 Are there any tax grouping rules Do these allow for relief
in Taiwan for losses of overseas subsidiaries
Tax grouping rules apply only to wholly-owned subsidiaries that are
incorporated under Taiwan law and where consolidated income tax
returns are filed. In addition, losses of a Taiwan company’s
overseas subsidiaries do not provide any relief to their Taiwan
parent company, as a Taiwan company can only recognise the losses
of an overseas subsidiary when the latter reduces its capital to make
up its losses, or dissolves and liquidates.
4.6 Is tax imposed at a different rate upon distributed, as
opposed to retained, profits
No. Tax is not imposed at a different rate upon distributed, as
opposed to retained, profits. However, if a company does not
distribute its after-tax earnings by the end of the year following the
year in which such earnings were generated, undistributed earnings
tax (“UET”) will be imposed at 10% of such after-tax earnings. The
UET paid will further reduce the retained earnings available for
future distribution by the company. When the company declares
dividends out of retained earnings on which 10% UET has been
paid, a proportionate amount of the 10% UET (up to 10% of the
gross amount of the dividends declared) can be offset as a credit
against the income tax that should be withheld upon distributing the
dividends to foreign shareholders of the company.
4.8 Are there any local taxes not dealt with in answers to
other questions
Land tax, vehicle licence tax, and amusement tax.
5 Capital Gains
5.1 Is there a special set of rules for taxing capital gains and
losses
Capital gains from the sale of securities issued by Taiwan
companies are exempt from income tax; while capital losses
incurred therefrom are not tax deductible.
Capital gains from the futures transactions that are subject to futures
transaction tax are exempt from income tax; while capital losses
incurred therefrom are not tax deductible.
Capital gains from the sale of a piece of land are exempt from income
tax, but are subject to land value increment tax (question 2.5 above);
while capital losses incurred therefrom are not tax deductible.
All other capital gains generated by Taiwan companies are taxable;
while losses are deductible.
5.2 If so, is the rate of tax imposed upon capital gains
different from the rate imposed upon business profits
Except for capital gains from the sale of securities, futures or a
piece of land, as advised in question 5.1 above, all other capital
gains should be consolidated into other taxable income when filing
annual income tax return and subject to income tax accordingly.
5.3 Is there a participation exemption
Taiwan has no participation exemption rule.
5.4 Is there any special relief for reinvestment
Taiwan has no relief for reinvestment. However, dividends
received by a Taiwan company from an invested company in
Taiwan are not subject to income tax.
6 Branch or Subsidiary
6.1 What taxes (e.g. capital duty) would be imposed upon the
formation of a subsidiary
No tax is payable upon the formation of a subsidiary.
6.2 Are there any other significant taxes or fees that would be
incurred by a locally formed subsidiary but not by a
branch of a non-resident company
Taiwan
4.7 What other national taxes (excluding those dealt with in
“Transaction Taxes”, above) are there - e.g. property taxes,
etc.
Tobacco and alcohol tax, and mine concession tax.
ICLG TO: CORPORATE TAX 2010
© Published and reproduced with kind permission by Global Legal Group Ltd, London
A Taiwan incorporated subsidiary and a Taiwan branch of a non-
Taiwan tax resident company are both subject to Taiwan income tax
for their taxable income; whereas the former is subject to tax for its
worldwide income, and the latter is subject to tax for its Taiwansourced
income.
As advised in our answer to question 4.6 above, if a company does
not distribute its after-tax earnings by the end of the year following
the year in which such earnings were generated, undistributed
earnings tax (“UET”) will be imposed at 10% of such after-tax
WWW.ICLG.CO.UK 249