National Taxation Bureau of Taipei • 2020-01-08
National Taxation Bureau of Taipei (hereinafter referred to as NTBT) stated that financial statements of the overseas head offices audited by local CPAs and attested by the embassies or consulates of the Republic of China (hereinafter referred to as R.O.C.) or local institutions recognized by government of R.O.C. or certified by foreign tax authorities should be provided if R.O.C. based branch offices declare allocation of management fees paid by the overseas head offices while filing their profit-seeking enterprise income tax returns.
The NTBT pointed out that in accordance with the provision of Article 70 of the Regulations Governing Assessment of Profit-Seeking Enterprise Income Tax (hereinafter referred to as the Assessment Regulations), computation of allocation of management fees paid by the overseas head office should be based on the ratio calculated by using the operating revenue of the specific branch office as the numerator, and the total amount of operating revenues of all branch offices and all business departments of the head office as the denominator. Furthermore, financial statements of the overseas head office (with information of total operating revenue and management fees) audited by local CPAs and attested by the embassies or consulates of the R.O.C. or local institutions recognized by government of R.O.C. or certified by foreign tax authorities should be provided. For branch office using allocation basis other than ratio of operating revenue approved by the tax authorities of R.O.C., the financial statements of the overseas head office provided should specify information such as contents of the allocation basis, methods of allocation and amounts of fees allocated for branch offices and the business departments of the head office.
The NTBT stated that there was branch office C found lack of required documents and be subject to extra tax payment after tax investigation of its 2017 profit-seeking enterprise income tax return. Branch office C filed allocation of management fees paid by its overseas head office around NT$19 million for year 2017. However, it failed to submit documents such as contents of management fees, allocation basis and financial statements of the overseas head office at request of the NTBT. Eventually branch office C is subject to additional tax payment around NT$3 million due to not in compliance with relevant rulings of the Assessment Regulations.
The NTBT reminded that to avoid extra tax payment accrued from lack of required documents, profit-seeking enterprises should comply with the provisions of the Assessment Regulations when filing the allocations of management fees of overseas head offices.
(Contact: Ms. Liu, Revenue Assessor of First Examination Division; Tel: 886-2- 2311-3711 Ext. 1216)