On 8 January 2020, Taiwan Ministry of Finance issues the final ‘Regulations on Deduction of Undistributed Earnings and Application for Tax Refund for Substantive Investment Made by a Profit-seeking Enterprise or a Limited Partnership’. The Regulations provide details of the undistributed earnings tax exemption and qualifying investments.
The benefit will apply from the time of reporting the undistributed surplus tax in 2018. As long as the company makes a substantial investment within 3 years from the year following the year when the surplus occurs, Offer is applicable when the amount exceeds TWD 1 million. When reporting the undistributed surplus tax in 2018, the actual investment amount can be listed as a deduction.
For instance, a company’s earnings were TWD 5 million in 2018 will be taxed in May 2020 at a 5% rate. After applying the incentive, if the company purchases buildings, hardware and software that meet the requirements of these Measures for self-production or business for TWD 1.5 million in 2019, the taxable income will be reduced to TWD 3.5 million. If the company again uses earnings of TWD 2.5 million for capital expenditure in 2020, the company can claim a refund of tax by filing an amended tax return. The minimum investment amount in a year is TWD 1 million for applying tax incentive.
