The definitions of the terms as used in the Regulations are as follows:

1. 

"Affiliated Enterprise(s)" shall mean those enterprises having a subordinate or control relationship with respect to each other as set forth in the preceding Article.

2. 

"Related Parties" shall mean the Affiliated Enterprises referred to in the preceding subparagraph or the following parties:

(1)

Profit-seeking enterprise and a foundation which receives a donation from the profit-seeking enterprise in the amount representing 1/3 or more of the total funds in its balance sheet of such foundation;

(2)

A profit-seeking enterprise and a foundation whose one half or more of the total number of directors consist of the directors, supervisors, general manager or its equivalent or other superior of the profit-seeking enterprise, as well as the spouse of any such person;

(3)

A profit-seeking enterprise and its directors, supervisors, general manager or its equivalent or other superior, vice general managers, assistant general managers, and department heads under the direct supervision of the general manager;

(4)

A profit-seeking enterprise and the spouses of its directors, supervisors, general manager or its equivalent or other superior;

(5)

A profit-seeking enterprise and the relatives of its chairman of the board, or general manager or its equivalent and other superior within the second degree; and

(6)

A profit-seeking enterprise and the persons who evidentially have the power to control over the enterprise or have material influence ability over the personnel, financial, business operation, or management policy of the enterprise.

3. 

"Unrelated Parties" shall mean any person other than those specified in the preceding subparagraph.

4. 

"Controlled Transactions" shall mean transactions conducted by and between/among Related Parties that fall within the scope set forth in Paragraph 1 or 3 of Article 2.

5. 

"Uncontrolled Transactions" shall mean transactions conducted by and between/among Unrelated Parties.

6. 

"Transaction Result" shall mean transaction price or profit.

7. 

"Non-arm's-length" shall mean the situation when the conditions are made or imposed between (Related) Parties in their commercial or financial relations that differ from those made by Unrelated Parties, resulting in the failure to accrue any profits that would have been accrued to one of the parties by reason of those conditions.

8. 

"Tangible Assets" shall mean merchandise, raw materials, supplies, work-in-progress, finished goods, by-products, short-term investment, securities, accounts receivable, notes receivable, creditor’s rights and other receivables, fixed assets, deferred assets, long-term investment, and other Tangible Assets.

9. 

"Intangible Assets" shall mean any asset other than those specified in the preceding subparagraph, which is capable of being owned or controlled for use in commercial activities, and whose use or transfer would be compensated had it occurred in a transaction between independent parties in comparable circumstances, such as business rights, copyright, patent, trademark, enterprise name, brand name, design or model, plan, secret formula, trade secrets, or information concerning industrial, commercial, or scientific experience or proprietary knowledge, all franchises online marketing, client data, and other rights that have property value.

10. 

"Transfer Pricing" shall mean the price or profit in Controlled Transactions conducted by profit-seeking enterprises.

11. 

"Arm’s-length Method" shall mean a method for assessing whether the price or profit in Controlled Transactions is at the arm’s length or for determining the arm’s length result of Controlled Transactions.

12. 

"Business Restructurings" shall mean the redeployment of functions, assets, and/or risks among Affiliated Enterprises. It may also involve the termination or substantial renegotiation of existing contractual terms or arrangements, and reorganize or adjust the structure of the organizations. They have typically consisted of:

(1)

Conversion of full-fledged distributors into limited-risk distributors and vice versa; similarly, conversion of full-fledged distributors into commissionaires and vice versa.

(2)

Conversion of full-fledged manufacturers into contract-manufacturers and vice versa; similarly, conversion of full-fledged manufacturers into toll-manufacturers and vice versa.

(3)

Transfers of intangible property rights to an intra-group-appointed enterprise to centralize control by management or to decentralize control to other enterprises of the intra-group.

(4)

Streamlining an organization or closing one’s business or part of one’s business.

(5)

Other arrangements announced by the MOF.

13. 

"Multinational Enterprise (MNE) Group" shall mean a collection of profit-seeking enterprises related through affiliated relationship or control such that it is either required to prepare consolidated financial statements for financial reporting purposes under applicable accounting principles or would be so required if equity interests in any of the enterprises were traded on a public securities exchange; the group shall include two or more enterprises the tax residence for which is in different jurisdictions, or include an enterprise that is resident for tax purposes in one jurisdiction and is subject to tax with respect to the business carried out through a permanent establishment in another jurisdiction.

14. 

"Ultimate Parent Entity" shall mean a constituent entity of an MNE Group that meets the following criteria:

(1)

it owns directly or indirectly a sufficient interest in one or more other constituent entities of the MNE Group such that it is required to prepare consolidated financial statements under accounting principles generally applied in its jurisdiction of tax residence, or would be so required if its equity interests were traded on a public securities exchange in its jurisdiction of tax residence; and

(2)

there is no other constituent entity of such MNE Group that owns directly or indirectly an interest described in (1) above in the first mentioned constituent entity.

If a company, regulated by the Financial Holding Company Act or the Corporate Merger and Acquisition Act, or one of its subsidiaries engaged in transactions with Unrelated Parties resulting in allocation of mutual revenue, cost, expenses, profit or loss not made at arm's-length, they shall be deemed as Related Parties when the collection authorities-in-charge conduct their investigations, and the transactions among them shall be deemed Controlled Transactions.