Article 5
The term “ the taxable income as calculated in accordance with the provisions of the Income Tax Act ” referred to in Paragraph 1, Article 7 of the Act shall mean the aggregate amount of the taxable income as calculated in accordance with Article 24 or Article 41 of the Income Tax Act minus the amount of incomes in respect of which assessment, or payment of the profit-seeking enterprise income tax is stopped or exempted pursuant to the provisions set out in the Income Tax Act and other laws and the amount of income after having deducted its business operation loss incurred in the preceding years as specified in Article 39 of the Income Tax Act.
When calculating the amount of taxable income set forth in the preceding paragraph, except for the amount of the incomes exempt from assessment and/or payment of profit-seeking enterprise income tax under the Income Tax Act and the Offshore Banking Act that are required to be deducted first, the amount of incomes which are exemptible from assessment or payment of profit-seeking enterprises income tax under other laws and the amount of business operation losses incurred in preceding years which are deductible in accordance with the relevant provisions of other laws, and the sequential order for deductions under the provisions set out in Article 39 of the Income Tax Act shall be selected and determined by the said profit-seeking enterprise at its own discretion when filing its annual income tax return.
The formula for use by a profit-seeking enterprise to calculate the amount of its basic income in accordance with the provisions set out in Article 7 of the Act is hereby given as follows:
Basic Income Amount = Taxable Income + (the Income Amount as set forth in Subparagraph 1, Paragraph 1, Article 7 of the Act – the Loss as set forth in Paragraph 2, Article 7 of the Act) + the Amount of the Incomes as set forth in Subparagraphs 2 to 8, Paragraph 1, Article 7 of the Act ＋ (the Income Amount set forth in Subparagraph 9, Paragraph 1, Article 7 of the Act – the Loss as set forth in Paragraph 2, Article 7 of the Act) + (the Income Amount as set forth in Subparagraph 10, Paragraph 1, Article 7 of the Act – the Loss as set forth in Paragraph 4, Article 7 of the Act)
If after the amounts of the additional taxable income set forth in Subparagraphs 1, 9, and 10, Paragraph 1, Article 7 of the Act and the amount of the income of each category in the current year have been added into the calculation formula set forth in the preceding paragraph and the profit-seeking enterprise has subtracted the losses of the same category, respectively, and the amount of the balance after subtracting such losses is positive, such enterprise shall add such balance into the calculation of the formula in the preceding paragraph, and, in the case that the balance is negative, such amount shall be excluded from the above calculation, and Paragraph 2, Article7 of the Act shall apply.
If the balance of the preceding paragraph is positive and the losses of the previous year set forth in Paragraphs 2 to 4, Article 7 of the Act have been subtracted, respectively, and the amount of the balance is a negative figure, then such negative figure shall be excluded from the calculation; and, moreover, at the time of subtracting the losses of the previous year from the amount of income, the sequential order for the year of the occurrence of a loss shall be offset against income of the same category year by year in sequence.
When the profit-seeking enterprise calculates the amount of the additional income set forth in Subparagraph 1, Paragraph 1, Article 7 of the Act, if there is income derived from stock transactions as prescribed in Paragraph 3, Article 7 of the Act, the following provisions shall apply:
1. The income derived from stock transactions set forth in Paragraph 3, Article 7 of the Act with deduction of the losses derived from stock transactions in the current year performed under the provisions of the aforesaid paragraph and article, the income or losses derived from securities transactions except for stocks set forth in Article 4-1 of the Income Tax Act, and the income or losses derived from futures transactions set forth in Article 4-2 of the same Act shall be combined.
2. After the calculation of the total amount of income or losses according to the previous subparagraph, if the balance is negative, then such negative amount shall be excluded from the calculation of the basic income amount and, in accordance with Paragraph 2, Article 7 of the Act, such negative amount shall be deducted from the positive balance following the calculation made in accordance with the preceding Subparagraph 1 from any ensuing years.
3. After the calculation of the combined amounts according to Subparagraph 1 above, if the balance is positive, the profit-seeking enterprise may, in accordance with Paragraph 2, Article 7 of the Act, deduct the negative balance of the previous year as calculated according to the preceding subparagraph. If, after the deduction of such negative balance from the positive balance of the previous year, the balance is positive, and, the calculation of the balance (negative balance counted as zero) is made in accordance with Paragraph 3, Article 7 of the Act that for income derived from stock transactions in the current year minus losses from stock transactions in the current year, only one-half of the amount of such balance shall be added into the calculation of the basic income amount, in addition to the amounts accruing in full from the other two types of transactions given in the first subparagraph above, to give the combined total as described in the first subparagraph. However, if, after the deduction of such negative balance, the balance is still negative, such negative amount shall be excluded from the calculation.
Paragraph 3, Article 7 of the Act provides that the calculation of the holding period shall be made according to the first-in first-out method.
In case any income added to the taxable income in the formula set forth in the third Paragraph of this Article is derived from a source outside the territory of the ROC and in respect of which the income tax paid under the tax law of the source income country where the income is derived, the taxpayer may, after having obtained a tax payment certificate issued in the same tax year by the tax authority of the source income country where the income was derived, and having the certificate duly authenticated by the ROC embassy or consulate, or other authenticating institution acceptable to the ROC Government and located in the foreign place where such income was derived, subtract such offshore income from the amount from the balance calculated in accordance with Paragraph 1, Article 4 of the Act.
The maximum amount of the offshore income deductibles under the preceding paragraph shall be calculated in accordance with the following formula: Maximum Amount of the Deductible Offshore Income = (the Amount of Basic Income Tax set forth in Paragraph 1 of Article 12 – the Amount of Taxable Income as calculated in accordance with the Income Tax Act) × the Amount of the Tax-Free Offshore Income that should be added into the amount of the Basic Income in accordance with Paragraph 1, Article 7 of the Act ÷ (the amount of Tax-Free Onshore Income and the Tax-free Offshore Income that should be added into the Amount of the Basic Income in accordance with Paragraph 1, Article 7 of the Act.
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Article 10
Where a profit-seeking enterprise has, in accordance with the provisions set out in Article 49 of the Financial Holding Company Act or in Article 40 of the Business Mergers and Acquisitions Act, elected to name the financial holding company or the parent company after the merger or acquisition to act as the taxpayer for the filing of a combined profit-seeking enterprise income tax return, the amount of its basic income to be declared in the said combined profit-seeking enterprise income tax return shall be the sum of the amount of the combined taxable income as calculated in accordance with the provisions set out in the Income Tax Act plus the aggregate amount of the additional incomes of each of the companies involved in the combined income tax return as indicated in Subparagraphs under Paragraph 1, Article 7 of the Act.
For the companies specified in the preceding paragraph that choose the financial holding company or the parent company after merger or acquisition to act as the tax payer to file a combined profit-seeking enterprise income tax return, and if there is any loss occurred after the effective date of the Act in connection with the amount of the additional incomes specified in Subparagraphs 1, 9, and 10, Paragraph 1, Article 7 of the Act as declared by them, and if such loss has been confirmed by the collection authority, then the deduction of such loss shall be effected in accordance with the following provisions:
1. Prior to filing the combined declaration, the loss which is incurred after the effective date of the Act in connection with the additional income(s) added by each of the foregoing companies in accordance with Subparagraphs 1, 9, and 10, Paragraph 1, Article 7 of the Act and has been confirmed by the collection authority but has not yet been subtracted may be subtracted by the order of the year of the occurrence of a loss from the current-year income specified in each of the above mentioned Subparagraphs within five years after the year in which such loss was incurred by the individual companies. If the balance is negative after the subtraction, the negative balance shall not be included in the income amount.
2. From the year in which the combined profit-seeking enterprise income tax return is filed, the loss which is incurred after the effective date of the Act in connection with the additional income(s) added by each of the foregoing companies in accordance with Subparagraphs 1, 9, and 10, Paragraph 1, Article 7 of the Act and has (have) been confirmed by the collection authority may be subtracted by the order of the year of the occurrence of a loss from the current-year income specified in each of the above mentioned Subparagraphs within five years after the year in which the loss was incurred by the financial holding company or the parent company after merger or acquisition. If the balance is negative after the subtraction, the negative balance shall not be included in the amount of income.
3. After the combined declaration, if any of the foregoing individual companies elects to file individual income declaration due to the change in its equity shareholdings, and if it has incurred any loss in connection with any of the additional taxable incomes specified in Subparagraphs 1, 9 and 10, Paragraph 1, Article 7 of the Act within five years, and such loss has been confirmed as deductible loss by the collection authority but not yet deducted, then the said individual company filing such individual income declaration may, within five years from the year in which the same loss incurred by all companies involved in the combined income declaration, subtract by the order of the year of the occurrence of a loss, on a year after year-basis and in compliance with the provisions set out in Subparagraphs 2 to 4, Article 7 of the Act, from its basic taxable income loss incurred by it at a deduction rate equal to the ratio of the loss incurred by it during each current taxation period in connection with each individual item of such additional income to the aggregate amount of the losses incurred by all companies in connection with the same individual additional taxable income as declared in the combined annual profit-seeking enterprise income tax return. After the loss incurred by any or more individual companies filing individual income declaration has (have) been deducted in accordance with the foregoing provisions, the financial holding company or the parent company after the relevant merger or acquisition process that files the combined income declaration may keep on subtracting by the order of the year of the occurrence of a loss the remaining sum (balance) of the combined loss incurred by other companies in connection with each of the additional taxable incomes specified in Subparagraphs 1, 9 and 10, Paragraph 1, Article 7 of the Act in each taxation period during the preceding five years duly confirmed by the collection authority as deductible losses but not yet subtracted from the combined amount of the basic incomes of such other companies.
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Article 11
Where a profit-seeking enterprise which is exempted from declaring the amount of its income basic tax according to the Act has incurred any loss as specified in Paragraph 2, 3, or 4, Article 7 of the Act, and such loss has been confirmed by the collection authority as a deductible loss, such loss may be deducted from the taxable income by the order of the year of the occurrence of a loss, within five years from the following the year of the occurrence of such loss by the said profit-seeking enterprise while declaring the amount of its income basic tax.
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Article 12
The method for calculating the amount of the income basic tax by a profit-seeking enterprise as prescribed in Article 8 of the Act is formulated as follows:
The Amount of Income Basic Tax = (the Amount of Basic Income – NT$ 500,000) × tax rate
The amount of tax levied on foreign-sourced incomes under Paragraphs 8 and 9 of Article 5 of these Rules, the retained refundable income tax amount set forth in Article 100-1 of the Income Tax Act, and the amount of the provisional income tax payment not yet offset and the withholding income tax amount not yet offset, may be deducted from the amount of income tax difference calculated in accordance with Paragraph 1, Article 4 of the Act when calculating the amount of payable income tax, and shall be paid up by a profit-seeking enterprise before filing its annual income tax return.
In the event the amount of income tax difference as calculated in accordance with the provisions set out in Paragraph 1, Article 4 of the Act and referred to in the preceding paragraph is offset by the provisional income tax payment and the amount of the withholding income tax, such amount of income tax difference may be included in the balance in the shareholder imputation tax credit account for the then current tax year. The date of inclusion shall be the last day of the fiscal year as prescribed in Article 23 of the Income Tax Act.
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Article 14
The formulas to be used by an individual taxpayer for calculating his/her basic taxable income and for calculating his/her income basic tax in accordance with the provisions set out respectively in Articles 12 and 13 of the Act are specified as follows:
The Amount of Basic Income = Net Amount of Consolidated Income + (The Amounts specified in Subparagraphs 1, 2, 4, Paragraph 1, Article 12 of the Act) + (The Amount specified in Subparagraph 3, Paragraph 1, Article 12 of the Act – the Loss specified in Paragraph 2, Article 12 of the Act) + (The Amount prescribed in Subparagraph 6, Paragraph 1, Article 12 of the Act – the Loss specified in Paragraph 4, Article 12 of this Act).
The Amount of Income Basic Tax = (the Amount of Basic Income – NT$6,000,000) × 20%.
When calculating the basic taxable income using the formula specified in the preceding paragraph, if the amount of balance resulted from subtracting the amount of loss specified in Paragraph 2, Article 12 of the Act from the amount specified in Subparagraph 3, Paragraph 1, Article 12 of the Act and/or the amount of balance resulting from the subtraction of the amount of loss specified in Paragraph 4, Article 12 of the Act from the amount specified in Subparagraph 6, Paragraph 1, Article 12 of the Act are/is of a negative figure, such negative figure(s) shall not be included in the calculation.
For an individual taxpayer, if the amount of the income basic tax is higher than the amount of the ordinary income tax amount, then the amount of difference thereof as calculated under the provisions set out in Paragraph 1, Article 4 of the Act shall be offset against the not-yet-offset withholding tax and deductible tax when calculating the income tax payable by him/her, and he/she shall make voluntary payment thereof before filing his/her annual income tax return. However, the withholding tax, with regard to the amount of income which is not allowed to be added to the gross consolidated income, shall not be deducted from the income tax payable.
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Article 18
Where a profit-seeking enterprise or an individual which is required to declare the amount of his/her/its basic taxable income is found to have omitted or under-reported any basic taxable income amount, thereby resulting in any omission or under-reporting of the income basic tax payable, the amount of tax so evaded shall be computed in accordance with the following formula:
1. Where the ordinary income tax amount assessed by the collection authority under the provisions set forth in the Act is higher than or equal to the amount of the income basic tax, the provisions set out in Article 110 of the Income Tax Act shall apply instead of applying the provisions set out in Article 15 of the Act. 2. Where the ordinary income tax amount assessed by the collection authority under the provisions set forth in the Act is lower than the amount of the income basic tax, the amount of tax so evaded shall be computed in accordance with the following formula:
(1) If the taxpayer is a profit-seeking enterprise:
A. Where the amount of the ordinary income tax assessed in respect of the declared amount of the ordinary income is lower than the amount of the basic income tax assessed in respect of the declared amount of the basic income:
The Amount of Tax Evaded ＝ Total Amount of Assessed Income Basic Tax － the Amount of the Income Basic Tax Amount Assessed in respect of the Declared Amount of the Basic Income － the Amount of Withholding Tax on the Amount of Omitted or Under-reported Amount of the Income Basic Tax.
B. Where the amount of the ordinary income tax assessed in respect of the declared amount of the ordinary income is higher than the amount of the income basic tax assessed in respect of the declared amount of the basic income:
The Amount of Tax Evaded ＝ Total Amount of the Assessed Income Basic Tax － the Amount of the Ordinary Income Tax Amount Assessed in respect of the Amount of Declared Ordinary Income － the Amount of Withholding Tax on the Amount of Omitted or Under-reported Income Basic Tax.
C. The amount of the income basic tax assessed in respect of the declared amount of the basic income and the total amount of the assessed income basic tax shall be calculated in accordance with the following formulas:
The Amount of the Income Basic Tax Assessed in respect of the Declared Amount of the Basic Income ＝ (the Amount of the Basic Income Assessed in respect of the Declared Amount of Such Income － NT$500,000) × tax rate. The Total Amount of Assessed Income Basic Tax ＝ [(the Amount of the Basic Income Assessed in respect of the Declared Amount of Such Income ＋ the Amount of Omitted or Under-reported Taxable Basic Income) － NT$500,000] × tax rate.
(2) In the case of an individual taxpayer:
A. The Amount of Tax Evaded ＝ The Amount of Assessed Income Basic Tax － the Amount of the Income Basic Tax Assessed in respect of the Declared Amount of the Basic Income － the Amount of Tax Refund Assessed in respect of the Declared Amount of the Basic Income (no matter whether the tax has been refunded or not) － the Amount of Withholding Tax and Imputation Tax Credit on the Amount of Omitted or Under-Reported Income Basic Tax － the Portion of the Amount of Tax Payable and Exemptible from Fine included in the Amount of Income Basic Tax Omitted or Evaded.
B. The amount of assessed income basic tax, the amount of the income basic tax assessed in respect of the declared amount of the basic income and the portion of the amount of tax payable and exemptible from fine included in the amount of income basic tax omitted or evaded shall be calculated in accordance with the following formulas:
The Amount of Assessed Income Basic Tax ＝ [(the Amount of the Basic Income Assessed in respect of the Declared Amount of Such Income ＋ the Amount of Omitted or Under-Reported Taxable Basic Income) － NT$6,000,000] × 20%.
The Amount of the Income Basic Tax Assessed in respect of the Declared Amount of the Basic Income ＝ (the Amount of the Basic Income Assessed in respect of the Declared Amount of Such Income － NT$6,000,000) × 20%.
The Portion of the Amount of Tax Payable and Exemptible from Fine included in the Amount of Income Basic Tax Omitted or Evaded ＝ (the Amount of Assessed Income Basic Tax － the Amount of Income the Basic Tax Assessed in respect of the Declared Amount of the Basic Income) × [the Portion of the Amount of Income Taxable and Exemptible from Fine included in the Amount of Income Basic Tax Omitted or Evaded ÷ (the Amount of Assessed Basic Income － the Amount of the Basic Income Assessed in respect of the Declared Amount of Such Income)]
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Article 22
These Enforcement Rules shall take effect on 1 January 2006, except for the provisions set forth in Article 18 hereof, which shall take effect on 1 January 2007; and the portion of the provisions requiring the addition of the amount specified in Subparagraph 1, Paragraph 1, Article 12 of the Act and the provisions as set out in Article 15 of the Act and Paragraph 1, 2 of Article 14 of the Act shall take effect from the enforcement date as specified in Subparagraph 1, Paragraph 1, Article 12 of the Act.
The amended articles of the Enforcement Rules shall take effect on the date of promulgation. The amended provisions of Articles 5, 12 and 18 of the Enforcement Rules with the date of promulgation on 2 November 2012 shall be implemented in fiscal year 2013.
Note:
In case of any discrepancy between the English version and the Chinese text of this Act, the Chinese text shall govern.
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