How to Calculate Profit-Seeking Enterprise Income for Operations Under One Year
If your business operated for less than a full tax year, special tax rules apply for calculating income and tax payable. Here’s how to annualize and adjust income properly under Taiwan’s Income Tax Act.
In accordance with Article 40 of the Income Tax Act and Article 65 of its Enforcement Rules, if a profit-seeking enterprise operates for less than a full taxable year (due to incorporation, suspension, or closure), its income shall be annualized to calculate the tax payable. The tax payable is then adjusted proportionally based on the actual number of operating months (with less than one month counted as one full month).
However, this provision does not apply to income derived from liquidation or business closures ordered by tax authorities due to legal violations.
Example:
Company A was incorporated on July 15, 2024, and closed its books on December 31, 2024, operating for 6 months. During this period, it earned a net income of NTD600,000. To calculate tax, the income is annualized to NTD1,200,000, resulting in an annual tax of NTD240,000. This is then adjusted proportionally to the 6-month period, making the final tax payable NTD120,000.
