For any profit-seeking enterprise and its related parties directly or indirectly holding 50% or more of the shares or capital of a foreign affiliated enterprise in a low-tax country or jurisdiction (hereinafter referred to as a "low-tax jurisdiction"), or having a significant influence on such a foreign affiliated enterprise, the said foreign affiliated enterprise is a controlled foreign company.

A profit-seeking enterprise shall recognize the investment income of the controlled foreign company mentioned in the preceding paragraph in accordance with these Regulations and include it in the taxable income of the current year. However, this provision does not apply to a controlled foreign company subject to Article 43-4 of the Income Tax Act or meeting the criteria of Paragraph 1 of Article 5 of these Regulations.

For a profit-seeking enterprise and its related parties directly or indirectly, through related parties, holding a combined total of 50% or more of the shares or capital of an affiliated enterprise in a low-tax jurisdiction as mentioned in the first paragraph, the holding ratio on the closing date of the current fiscal year shall be determined by aggregating the holding ratios calculated based on the following methods:

1. Where the profit-seeking enterprise directly holds the shares or capital of the said affiliated enterprise in a low-tax jurisdiction, its holding ratio shall be aggregated into the said calculation.

2. Where, through a domestic or foreign affiliated enterprise, the profit-seeking enterprise indirectly holds the shares or capital of an affiliated enterprise in a low-tax jurisdiction, and its holding ratio of the shares or capital of such domestic or foreign affiliated enterprise is over 50%, or it has control over such domestic or foreign affiliated enterprise, the holding ratios of the shares or capital of the said affiliated enterprise in the low-tax jurisdiction, directly and indirectly held by such domestic or foreign affiliated enterprise, shall be aggregated into the said calculation; if the profit-seeking enterprise holds no more than 50% of the shares or capital of such domestic or foreign affiliated enterprise, the holding ratio of each layer of such domestic and foreign affiliated enterprise shall be multiplied and then aggregated into the said calculation.

3. For a related party or a nominal party who meets the following criteria, its direct and indirect holding ratios of the shares or capital of the said affiliated enterprise in a low-tax jurisdiction shall be aggregated into the said calculation in accordance with the methods prescribed in the preceding two subparagraphs:

(1) The affiliated enterprise directly holds over 50% of the shares or capital of the profit-seeking enterprise.

(2) The affiliated enterprise indirectly holds the shares or capital of the profit-seeking enterprise, and its holding ratio in each layer is over 50%.

(3) According to the Enterprise Accounting Standard and interpretations thereof announced by the Accounting Research and Development Foundation, or according to International Financial Reporting Standards (IFRS), International Accounting Standards (IAS), interpretations, and interpretative announcements endorsed by the Financial Supervisory Commission, or according to the Regulations Governing the Preparation of Financial Reports by Securities Issuers (hereinafter referred to as the Financial Accounting Standards endorsed by the Republic of China), the affiliated enterprise has control over the profit-seeking enterprise.

(4) An affiliated enterprise as defined in Subparagraphs 4 to 6 and Subparagraph 9 of Paragraph 2 of Article 3.

(5) A related party as defined in Subparagraphs 1 to 6 of Paragraph 4 of Article 3.

(6) Other related parties sufficiently proven to have control over the personnel, finance, or business operations of the profit-seeking enterprise.

(7) The said profit-seeking enterprise that inappropriately circumvents the constituent elements prescribed in the preceding six items by the share transfer or other arrangements under another's name.

4. For the profit-seeking enterprise and its related parties, while calculating the direct or indirect holding ratio of the shares or capital of an affiliated enterprise in a low-tax jurisdiction in accordance with the preceding three subparagraphs, the higher figure shall be used in case of any duplicate calculations.

Where the profit-seeking enterprise and its related parties have inappropriately circumvented the constituent elements specified in the preceding paragraph by the share transfer or other arrangements before the closing date of the current year, the tax authority may determine their holding ratios of the shares or capital of the foreign affiliated enterprise in a low-tax jurisdiction in accordance with the highest aggregated holding ratio on any given day of the current year, to be calculated according to the methods provided in the subparagraphs of the preceding paragraph.

The term "significant influence" mentioned in the first paragraph shall refer to the profit-seeking enterprise and its related parties have control over the personnel, finance, or business operations of the foreign affiliated enterprise in a low-tax jurisdiction.