The National Taxation Bureau of the Central Area, Ministry of Finance expressed that to prevent any multinational enterprise from establishing a controlled foreign company (CFC) with no substantial operating activities in a low-tax country or jurisdiction to influence the CFC’s profit distribution policy and retain earnings in the CFC through equity control or substantial control for tax avoidance in our country, Article 43-3 of the Income Tax Act (hereinafter referred to as ”the Act”) was promulgated on July 27, 2016 to set the CFC rules for enterprises, and was designated by the Executive Yuan to be enforced from the 2023 taxable year for enterprises.

The Bureau pointed out that Paragraph 1, Article 5 of the Regulations Governing Application of Income from Controlled Foreign Company for Profit-Seeking Enterprise stipulates that a CFC that carries out substantial operating activities in its country or jurisdiction, or its current-year earnings are below a standard, may be exempt under Article 43-3 of the Act. The term “the current-year earnings below a standard” shall refer to where the current-year earnings of an individual CFC are less than NTD 7 million. However, if the sum of the current-year earnings or losses of all of the CFCs under the control of the same profit-seeking enterprise within the territory of the Republic of China exceeds NTD 7 million, the current-year earnings of each controlled foreign company shall be subject to Article 43-3 of the Act. Where the operating period of a CFC is less than one year within a fiscal year, the threshold of NTD 7 million shall be calculated on a pro rata basis according to the actual number of months in operation. Where the operating period of a CFC is less than one month, it shall be taken as one month.

The Bureau added that the information about the CFC rules for profit-seeking enterprises is available at the website of the Bureau (https://www.ntbca.gov.tw/English/
Home/Themes/Taxation/Profit-seeking Enterprise Income Tax/Anti-tax Avoidance Rules).

If you have any questions, please call the toll-free service number 0800-000321 for consultation, and we will do our best to serve you.

Contact person : Profit-seeking Enterprise Income Tax Division, Ms. Lin
Tel: (04)2305-1111 ext. 7156.