Taiwan’s National Taxation Bureau of Taipei clarified how profit-seeking enterprises should account for refunds of reduced commodity tax, depending on whether the refund was claimed in the purchase year or a subsequent year.
Taiwan’s National Taxation Bureau of Taipei, Ministry of Finance, has clarified the tax treatment of reduced commodity tax refunds received by profit-seeking enterprises under the Commodity Tax Act.
Where goods purchased by a profit-seeking enterprise meet the requirements of Article 11-1, Article 12-5 or Article 12-6 of the Commodity Tax Act, and a refund of reduced commodity tax is obtained under the relevant provisions, the refund is treated as a reduction in the cost or expense associated with the purchase.
Treatment depends on timing
If the purchased goods were recorded as a fixed asset, a refund claimed in the purchase year must be deducted from the cost of the asset.
Where the refund is claimed in the year following the purchase, it must instead be deducted from the asset’s undepreciated balance when the application is filed. Under Article 52 of the Income Tax Act, depreciation must then continue over the remaining service life using the book value after the refund has been deducted.
For goods originally recognised as an expense rather than a fixed asset, the treatment differs. A refund claimed during the purchase year is deducted from the relevant expense, while a refund claimed in the following year is recognised as other income in the year the application is filed.
| Original accounting treatment | Refund claimed in purchase year | Refund claimed in following year |
| Fixed Asset | Deduction from Cost | Deduction from Undepreciated Balance |
| Expense | Deduction from Expense | Other Income |
