Taiwan’s Northern District National Taxation Bureau warns of common errors in 2025 Profit-Seeking Enterprise Income Tax and 2024 Undistributed Earnings filings. Mistakes include misclassified investments, incorrect foreign income reporting, CFC miscalculations, dividend misreporting, and improper leasehold deductions.
The Northern District National Taxation Bureau of the Ministry of Finance issued guidance yesterday, 24 February 2026, ahead of the filing period for the 2025 Profit-Seeking Enterprise Income Tax Return and the 2024 Undistributed Earnings Return, identifying five frequent mistakes or omissions in corporate income tax filings:
- Misclassification of investment transactions
Transactions involving shares or capital contributions in an investee company that meet the criteria under Article 4-4, Paragraph 3 of the Income Tax Act should be treated as real estate transactions. Some enterprises erroneously report them as securities transactions exempt from income tax, neglecting to levy the consolidated housing and land transaction income tax as required under Article 24-5, Paragraph 2 of the Income Tax Act. - Incorrect reporting of foreign-sourced income
Enterprises may fail to apply for treaty benefits in the other contracting country when reporting foreign-sourced income that should be exempt or taxed at a reduced rate under an effective tax treaty. Overpaid foreign tax, according to Article 36, Paragraph 2 of the Guidelines for the Application of Tax Treaties, cannot be credited against Taiwan’s profit-seeking enterprise income tax. - Errors in CFC (Controlled Foreign Company) earnings calculation
Annual CFC earnings denominated or paid in foreign currency must be converted into New Taiwan Dollars using the annual average exchange rate based on the spot buying rate published by the Bank of Taiwan at the end of each month. Failure to follow this procedure, as stipulated under Article 6, Paragraph 4 of the Regulations Governing the Recognition of CFC Income, may lead to underreporting of CFC investment income. - Misreporting of dividends from overseas investments
Taxable dividend income from overseas investments should not be reported under Article 42 of the Income Tax Act as investment income excluded from taxable income. Incorrect reporting can result in underreporting of taxable income. - Improper deduction of leasehold improvements
Enterprises leasing property and treating expenditures on leasehold improvements as substantive investment expenditures under Article 23-3 of the Statute for Industrial Innovation may encounter issues. Since such improvements cannot be individually identified as equipment, they do not qualify as substantive investments under Article 2 of the Regulations Governing the Deduction of Undistributed Earnings and Tax Refund Applications for Companies or Limited Partnerships.
