The finance ministry mandated that CFC losses are deductible only if audited statements or equivalent proof are filed by the tax deadline (plus a one-time six-month extension); otherwise, they’re disallowed.
Taiwan’s Ministry of Finance has announced on 14 July 2025 that Controlled Foreign Corporation (CFC) losses will only be accepted if taxpayers submit appropriate financial statements or relevant supporting documents by the statutory deadline for filing annual income tax returns. Taxpayers may apply for an extension of up to six months, but failure to provide the required documentation within the applicable timeframe will result in the losses being disallowed.
The Controlled Foreign Company (CFC) Rules were officially implemented in 2023. If a profit-seeking enterprise holds shares or capital of a foreign company that satisfies the definition of a CFC and the CFC does not qualify for the exemption threshold, it must recognize the CFC’s investment income in accordance with Article 43-3 of the Income Tax Act and include it in the current year’s taxable income.
The National Taxation Bureau of the Southern Area, Ministry of Finance stated that, to uphold tax fairness, the current-year earnings of a CFC must be included in taxable income, while CFC losses may also be recognized, according to the Regulations Governing Application of Recognizing Income from Controlled Foreign Company for Profit-Seeking Enterprise (hereinafter referred to as the “CFC Regulations”).
Enterprises must calculate and declare the CFC’s losses in accordance with Articles 6 and 7 of the CFC Regulations within the income tax return filing deadline, and provide either financial statements audited and certified by a qualified certified public accountant (hereinafter referred to as CPA) from the CFC’s country or jurisdiction (or by a CPA licensed in the ROC), or other sufficient supporting documents to verify the authenticity of the financial statements, for verification by the tax authority.
If the required documents cannot be provided within the deadline, enterprises may apply for an extension before the filing deadline by submitting a written explanation or by checking the box “Application for an Extension to Provide Documents” on Page B7 of the income tax return form. The maximum extension period is six months and can be granted only once. If the enterprise fails to submit the financial statements within the extended deadline, any CFC losses determined by the tax authority will not be eligible for the loss deduction of the past ten years under the CFC rules.
The Bureau provides the following example: Company A holds 100% ownership of Company B, which is registered in the Cayman Islands and qualified as a CFC. In May 2024, Company A filed its 2023 tax return declaring a CFC loss of TWD 6 million but failed to submit CPA-audited financial statements or alternative documents by the filing deadline and also neglected to apply for an extension. It was not until October 2024 that the company provided the CFC’s financial statements. Under the CFC Regulations, the declared loss will not qualify for the loss deduction of the past ten years.
