Taiwan’s finance ministry announced that tax incentives on retained earnings invested in qualifying assets will be revoked with interest if the assets are transferred, repurposed, or sold within three years.

Taiwan’s Ministry of Finance (MOF) has announced that companies investing retained or undistributed earnings in eligible assets under Article 23-3 of the Statute for Industrial Innovation will face a recovery of the related tax benefit if those assets are transferred or sold within three years of acquisition.

The National Taxation Bureau of the Northern Area（NTBNA）, MOF, stated that, pursuant to Article 23-3 of the Statute for Industrial Innovation, if a profit-seeking enterprise uses its surplus earnings for substantial investment, and within three years from the day after the deadline for filing the undistributed earnings declaration or from the day after the application date for correction and recalculation of the undistributed earnings, the enterprise loans, leases, resells, returns or changes the original intended use to non-self-production or non-business purposes of the buildings, software, hardware, equipment, or technology constructed or purchased using the surplus earnings, it shall be required to pay the supplementary taxes previously deducted or refunded to the tax authority.

In addition, interest will accrue daily at the fixed interest rate for a one-year time deposit of postal savings, calculated from the day after the filing deadline or the day after the receipt of the tax refund, to the date of payment of supplementary tax, and collected together with the tax.

For example, Company A reported a deduction of TWD 10 million for substantial investment in undistributed surplus earnings declaration of the year 2021. Upon investigation, it was found that Company A had used the undistributed surplus earnings to purchase machinery and equipment for its own production purposes in 2022.

However, Company A changed its business scope and sold the aforementioned machinery and equipment in 2024. As this no longer met the requirement that substantial investment items must be used for self-production or business purpose, the situation was discovered and the investment was disqualified by the National Taxation Bureau of the Northern Area. As a result, Company

A not only is required to pay the supplement tax previously deducted but also the accrued daily interest charges, both to be collected together.