Beigang Office, National Taxation Bureau of the Central Area, Ministry of Finance, stated that the Labor Retirement Reserve Fund provided by profit-seeking enterprises in accordance with Paragraph 1, Article 56 of the Labor Standards Act is recorded as an expense in the year of allocation. Profit-seeking enterprises that have been dissolved or have no employees entitled to pensions under the Labor Standards Act should, upon settling the Labor Retirement Reserve Fund, report any remaining balance as other income in the year of settlement.

The Office provides the following example:

When reviewing the 2022 profit-seeking enterprise income tax return for Company A, it was discovered that the company had settled its Labor Retirement Reserve Fund with the competent authority and received a remaining balance of over NT$300,000 for the year. However, the company failed to declare this remaining amount. As a result, it was subject  to additional taxation and a fine in accordance with Article 110 of the Income Tax Act.

The Office reminds all profit-seeking enterprises that  when they settle their Labor Retirement Reserve Fund and reclaim the remaining balance, they should declare such funds as other income for the relevant  year to avoid underreporting or omission, which may lead to penalties.

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

Contact person: Beigang Office, Profit-seeking Enterprise Income Tax and Estate and Gift Tax Section, Ms. Chen
Tel: (05)7820249 ext.107.