• Service: Tax, Global Compliance Management Services, International Tax
  • Type: Regulatory update
  • Date: 5/9/2014

Taiwan - Documentary evidence required to claim certain investment losses 

May 9:  Taiwan’s Ministry of Finance has amended the rules regarding the recognition of an investment loss of “profit-seeking enterprises” when an invested enterprise reports a deficit that, in turn, results in a decrease in the amount of registered capital.

Under the new rules, the investment loss of an invested enterprise will be limited to a “substantive occurrence” and must be supported by “evidential documents.”

Changes to Article 99

The changes were made with respect to Article 99 of the “assessment rules for income tax profit-seeking enterprises” (as the “assessment rules” are referred to in English) by adding new Clause 2, as follows:

If an invested enterprise is located outside of Republic of China (ROC) and does not have substantive operating activities, evidential documents for investment loss of an invested enterprise due to operating loss from the re-invested enterprise with substantive operating activities shall be supported and verified by Embassies or Consulates, Commercial Representative or External Trade Organization of ROC. If a re-invested enterprise is located in Mainland China, evidential documents shall be proved by an institute consigned by Mainland Affairs Council, ROC (MAC) for dealing with affairs between ROC and Mainland China.

In other words, if an invested enterprise is located overseas and has no actual operating activities, there must be provided certain evidential documents of the enterprise’s investment loss resulting from the operating loss of a re-invested enterprise with substantive operating activities.

Also, another provisions added to the “assessment rules” as Clause 3 is as follows:

When an invested enterprise is judged by the court for restructuring and capital reduction, the date of capital reduction shall be determined with the restructuring plan made by the court.

These changes are effective after the date of issuance (which was 9 April 2014).

KPMG observation

The new measures affect how taxpayers can recognize an investment loss. First, the investment loss is deductible only when the loss is realized. Second, there must be concrete proof under the rules provided by new Clause 2.

Read a May 2014 report [PDF 112 KB] prepared by the KPMG member firm in Taiwan: Current amendment of “Assessment Rules for Income Tax Profit-seeking Enterprises”: In order to avoid controversy, the requirement of evidential documents for investment loss is more explicit

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