A controlled foreign company that carries out substantial operating activities in its country or jurisdiction, or its current-year earnings do not exceed a given standard, may be exempt from compliance with Paragraph 1 of Article 8.

The term "substantial operating activities" referred to in the preceding paragraph shall mean a controlled foreign company that meets the following criteria:

1. It has a fixed place of business in its registered place and recruits employees to carry out actual operating business at the local area.

2. The sum of its investment income, dividends, interest, royalties, rental income, and gains on the sale of assets for current year constitutes less than 10% of the sum of its net operating income and non-operating income; however, the following items are not included in the calculation of the numerator or denominator:

(1) Income and gains from the overseas branches of a controlled foreign company are not included in either the calculation of the numerator or the denominator.

(2) A controlled foreign company's royalty income and rental income earned from the use of intangible assets developed in-house or tangible assets developed, constructed, or manufactured by itself in its registered place, as well as gains on the sale of such assets, are not included in the calculation of the numerator.

(3) Where a controlled foreign company under the control of a bank, securities company, futures company, or insurance company approved by the competent authority of the Republic of China is mainly engaged in the banking, securities, futures, or insurance business in its registered place, the core business income of such controlled foreign company shall not be included in the calculation of the numerator.

The term "current-year earnings do not exceed a given standard" in the first paragraph shall refer to where the current-year earnings of each controlled foreign company are no more than NTD 7 million individually. However, for controlled foreign companies that their shares or capital are directly held by the same profit-seeking enterprise within the territory of the Republic of China and do not meet the criteria of substantial operating activities mentioned in the previous paragraph, if the sum of their current-year earnings or losses is a positive number exceeding NTD 7 million, Paragraph 1 of Article 8 shall be applied to such controlled foreign companies.

For a controlled foreign company whose operating period within a fiscal year is less than one year, when applying the preceding paragraph, its current-year earnings or losses shall be annualized based on the proportion of the months of operation to the full year. Any part of the operating period less than a full month shall be regarded as a full month for such calculations.