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Taiwan –  Company Loan Shall Calculate Interest Income

Company Loan Shall Calculate Interest Income

When a company loans to another without charging interest, or with an agreed interest rate lower than the common rate, the company should compute taxable interest income based on the benchmark interest rate published by the Taiwan Bank (Article 24-3, Income Tax Act). 

Following is an example from the tax bureau:

Company A lent NTD 10 million to a shareholder, interest-free,  on January 1st 2023. By the end of 2023, the shareholder had not repaid the loan. When Company A files its annual 2023 income tax return, it should calculate taxable interest income of NTD 286,700 based on the Taiwan Bank’s benchmark interest rate of 2.867% as of January 1st of Year 2023 [= 10,000,000 NT dollars × 2.867%].

The authority emphasized that when companies file their annual income tax settlements, if they  gave loan to others, they must adjust their interest income according to the provisions of the Income Tax Act to avoid subsequent tax adjustments.