The National Taxation Bureau of Taipei (NTBT), under the Taiwanese Ministry of Finance, has issued a notification addressed to for-profit companies that carry out transactions with related parties. In accordance with Article 22 of the Regulations for the Assessment of Income Tax on Profit-Making Companies in Transfer Pricing Transactions not Adjusted to Market Conditions, companies will be required to prepare a technical Transfer Pricing report for the 2024 fiscal year, which must be available for submission upon request by the tax authority.
Documentation requirements for transactions between related parties
Companies that carry out controlled transactions during the 2024 fiscal year must keep and, where applicable, submit a Transfer Pricing report demonstrating that the agreed conditions are in line with the arm’s length principle. This measure seeks to strengthen tax compliance in transactions between related parties and ensure the proper allocation of profits between jurisdictions.
The tax administration will formally request the report in writing, after which the company will have 30 calendar days to submit it. In exceptional cases, an extension of up to 30 additional days may be requested.
Exceptions: substitute documentation
The NTBT also provides for a number of cases in which companies may submit substitute documentation instead of the complete Transfer Pricing report.
This possibility is subject to compliance with quantitative and qualitative criteria, including:
- Companies whose total income (operating and non-operating) is less than NTD 300 million.
- Companies with income between NTD 300 million and NTD 500 million that:
- Do not benefit from significant tax incentives.
- Have not deducted losses exceeding NTD 8 million.
- Have not carried out transactions with related parties abroad.
In these cases, reasonable evidence demonstrating that the results of the transactions are within the market range will suffice, without the need for a functional analysis or comprehensive comparability analysis.
Importance of compliance and next steps
The Taiwanese tax authority has been emphatic in reminding taxpayers that failure to comply with these obligations may result in tax penalties. It therefore recommends that companies:
- Verify whether they meet the criteria that require them to prepare the full report or whether they are eligible for any of the exceptions.
- Collect and retain the required information in advance, including financial data, functional descriptions, and comparability studies.
- Consult with experts to ensure that the Transfer Pricing methodology and policies applied are defensible in the event of an audit.
- Be prepared to submit the report or substitute documentation within the established deadline, if required by the tax authorities.
Conclusion
This notice once again reflects Taiwan’s proactive stance on Transfer Pricing, in line with OECD international standards. While some flexibility is granted to smaller companies, entities with significant related-party transactions should exercise extreme caution in their compliance documentation. The implementation of a preventive and technically sound approach is essential to mitigate tax risks and ensure the integrity of cross-border operations.
Fuente: https://www.mof.gov.tw/eng/singlehtml/f48d641f159a4866b1d31c0916fbcc71?cntId=edc9c34f852a451fa713a81eda786d5e