Taiwan’s Northern Area National Taxation Bureau has intensified audits of 2023 CFC filings to verify compliance with substantive activity and de minimis exemption rules.
Taiwan’s National Taxation Bureau of the Northern Area, MOF, stated, on 30 April 2026, that it has strengthened audits of Controlled Foreign Corporation (CFC) cases for the year 2023 on profit-seeking enterprise income tax filings within its jurisdiction. The audits aim to verify whether the reported CFC met the requirement for substantive activities or the de minimis exemption threshold.
The Bureau provides the following example: Company A declared that it held 100% of the shares of a CFC, reporting the CFC’s annual profit of TWD 1.5 million (calculated as net profit after tax of TWD 60 million – TWD 58.5 million in investment income derived from invested enterprise located in non-low-tax jurisdictions recognised under the equity method × 100% ownership). Since the reported profit was below the TWD 7 million de minimis threshold, there was no need to calculate the investment income of the CFC.
However, upon review of the financial statements of the CFC and its invested enterprise, the Bureau found that Company A had incorrectly reported investment income derived from invested enterprise of TWD 58.5 million from the CFC’s financial statements.
According to Article 6 of Regulation Governing Application of Recognising Income from CFC for Profit-Seeking Enterprise, the investment income derived from invested enterprise was TWD 10 million, which was the net profit (or losses) after tax and other comprehensive income (or loss) items included in the undistributed surplus earnings of the current year of the invested enterprise from the invested enterprise’s financial statements.
Thus, the Bureau recalculated the CFC’s annual profit as TWD 50 million (=net profit after tax of TWD 60 million − TWD 10 million in investment income derived from invested enterprises located in non-low-tax jurisdictions recognized under the equity method × 100% ownership). Because the CFC’s annual profit exceeded the TWD 7 million de minimis threshold, the Bureau adjusted Company A’s investment income of CFC upward to TWD 50 million.
The Bureau would like to especially remind profit-seeking enterprises that they may calculate a CFC’s investment income derived from invested enterprises located in non-low-tax jurisdictions recognised under the equity method based on the financial statements of those invested enterprises.
