Worldwide transfer pricing reference guide 2014

Taiwan (continued)
Frequency of tax audit and transfer pricing scrutiny by the tax authority (continued)
• Whether the tested party is the least complex entity in a transaction
• Why different transactions are tested on an aggregate basis
• Whether the denominator for calculating the profit level indicator is one of the variables in the controlled transaction
• Whether the use of intangible assets by related parties are remunerated accordingly/fairly
• Whether services provided to related parties are remunerated accordingly/fairly
• When the payment terms for accounts receivable are significantly longer between related parties than third parties, or when overseas
deferred expenses are significant or out-of-the ordinary. In each case, Taiwan’s tax authority will consider these transactions as a type of
loan and expect interest income to be paid to the lender
• Whether reasonable fee income is received by acting as the guarantor for a related party
APA opportunity
APAs are available under Articles 23 through 32 of the transfer pricing guidelines. According to Tax Letter Ruling No. 9404540920,
under an APA, a tax return is not subject to a transfer pricing audit except under the following circumstances:
• The enterprise fails to provide the tax authority with the annual report regarding the implementation of the APA
• The enterprise fails to keep the relevant documents in accordance with transfer pricing guidelines
• The enterprise fails to follow the provisions of the APA
• The enterprise conceals material facts, provides false information or conducts wrongful acts
Expected reaction to OECD Report on BEPS
Currently, the issue is still under discussion and no further action has been taken.
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