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法律與法規命令

Tax Act:
Regulations Governing Application of Income Calculation from Controlled Foreign Company for Individual
Article 5
Content:
Where a controlled foreign company carries out substantial operating activities in its country or jurisdiction, or its current-year earnings are below a standard, the individual may be exempt under Article 12-1 of the Income Basic Tax Act. 

The term "substantial operating activities" in the preceding paragraph shall refer to a controlled foreign company meeting the following requirements: 
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 profits resulting from the sale of assets accounts for less than 10% of the sum of its net operating income and non-operating income, provided that, however, the revenue and income of its overseas branches is calculated neither in the numerator nor the denominator of the fraction. Where a controlled foreign company researches and develops intangible assets, or develops, builds, and produces tangible assets at its registered place, the royalty income, rental income, and sales profits derived from such assets shall not be calculated in the numerator of the fraction. 

The term "the current-year earnings below a standard" in the first paragraph shall refer to where the current-year earnings of an individually controlled foreign company are less than NTD 7 million. However, if the sum of the current-year earnings or losses of all of the controlled foreign companies under the control of the individual, his/her spouse, and dependents who shall file a joint consolidated income tax return in accordance with the Income Tax Act exceeds NTD 7 million, the current-year earnings of each controlled foreign company shall be subject to Article 12-1 of the Income Basic Tax Act. 

Where the operating period of a controlled foreign company is less than one year within a fiscal year, the limitation of NTD7 million referred to in the preceding paragraph shall be calculated on a pro rata basis according to the actual number of months in operation. Where the operating period of a controlled foreign company is less than one month, it shall be taken as one month. 

The term "the current-year earnings" in the first paragraph shall be calculated according to the following: 
1.The current-year earnings = Net profit of the current year calculated based on the financial accounting standards accepted by the Republic of China and the undistributed earnings of the current year transferred from other comprehensive income and other equity - (investment income derived from an invested enterprise of a non-low-tax burden country or jurisdiction, to be recognized under the equity method - investment loss derived from an invested enterprise of a non-low-tax burden country or jurisdiction, to be recognized under the equity method) + [(the distributed earnings of the invested enterprise of a non-low-tax burden country or jurisdiction, to be recognized under the equity method - the taxes paid for the dividends or earnings in such country or jurisdiction) × the controlled foreign company's holding ratio in the invested enterprise on the distribution date - realized loss derived from the invested enterprise of a non-low-tax burden country or jurisdiction, to be recognized under the equity method × the controlled foreign company's holding ratio in the invested enterprise on the date of loss realization]. 
2.The distributed earnings of, or realized loss derived from, the invested enterprise of a non-low-tax burden country or jurisdiction, shall be recognized in accordance with the amount agreed by the shareholders or the amount resolved by the shareholders' meeting of the invested enterprise; the year of the distribution date or realization date shall be treated as the year of the accruals. 

The individual shall provide the tax authority with the controlled foreign company's financial statements prepared in accordance with the financial accounting standards accepted by the Republic of China, and audited by a certified public accountant of such country or jurisdiction, or of the Republic of China. However, if the individual has any document sufficient to evidence the faithfulness of the controlled foreign company's financial statements, and such document is validated by the tax authority at the domicile location of the individual, the document may be provided in lieu of the certified public accountant-audited financial reports.
Visitor:1  Update:2018-06-04

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