In relation to laws involving taxation, such laws should be construed in accordance with the principle of taxation law and the respective purposes of the relevant laws, balancing therewith the economic purposes and the principle of equality in substantive taxation.
When the tax collection authorities define the constituent elements and facts of tax assessment, they shall base these on the existence of actual economic relationships and their related interests derived from such economic benefit.
Taxpayers, based on gaining tax benefits, may abuse legal forms to avoid the constituent elements of taxation by irregular transactions and attain the economic benefits equivalent to normal transactions.
Such actions shall be termed tax avoidance. The tax collection authorities shall set up a claim for tax according to the legal forms equivalent to actual economic benefit and levy belated surcharges and interests.
The tax collection authorities shall bear the burden of proof in ascertaining the tax avoidance in the preceding paragraph and the constituent elements and facts of the tax assessment before that. The obligation of taxpayers to assist in the reporting of the required information according to this Act and any other relevant tax acts is not exempted from the provision in the above paragraph.
The tax collection authorities, in identifying the obligations of taxpayers in transactions with related parties, investigate facts as in the case prescribed of this section, and in determining the correct calculation of the tax payable by the taxpayers may, in accordance with the tax laws, make adjustment of the calculation based on normal transactions or the obtained information.
Belated surcharges are calculated by the payable tax at 15%, and the taxpayer shall be charged the daily interest accrued on the amount of such supplementary tax at the interest rate based on the fixed interest rate on January 1 of each year for a one-year time deposit of postal savings, for the period from the date following the original deadline for making the payment of such tax to the date said notice was issued demanding supplementary payment of tax.
In the case of this section, the authorities may not impose a penalty on tax evasion, except that taxpayers conceal, make false and misleading presentation, or provide incorrect information to material items when declaring or being investigated, which results in the tax collection authorities making an inaccurate decision.
Taxpayers may, before engaging in specific transactions, provide relevant documents to the tax collection authority for consultation; the tax collection authority shall reply within six months.
Cases of tax avoidance before this Act comes into force shall be penalized according to every tax law but not yet be penalized, the regulation of Paragraphs 3, 7, and 8 shall apply. As for cases which have already been penalized but are still pending, the amount of such penalties shall not exceed the total amount of belated surcharges and interests prescribed in Paragraph 7, except for the proviso of Paragraph 8.