MOF Advisory on Commonly Underreported Corporate Income
The Ministry of Finance’s National Taxation Bureau of the Northern Area has published a notice regarding common instances of underreported income in corporate income tax final returns and related precautions. This is to help businesses report taxes accurately and avoid penalties due to oversight.
The notice includes examples such as:
- Refunded Labor Retirement Reserve Fund: If a business liquidates or has employees without applicable seniority under the Labor Standards Act, any remaining funds from the labor retirement reserve fund should be reported as other income in the current year.
- Exercised Subscription Rights: Income from exercised subscription rights should be reported as other income in the year the rights are exercised, even if recorded as capital surplus in financial accounting.
- Overseas Income: Businesses with headquarters in Taiwan must report worldwide income, including overseas earnings from financial products, interest from foreign bonds, and gains from the sale of foreign funds. These are not subject to withholding tax but must be included in the corporate income tax return.
- Government Subsidies: Except for specific exemptions, government subsidies received should be reported as income in the year they are obtained.
- Insurance Compensation: Insurance payments received for incidents like theft or accidents should be reported as income, in addition to recognizing related losses and expenses.
- Tax Refunds: Tax refunds received in subsequent years for taxes previously expensed should be reported as non-operating income in the year received.
The Bureau emphasizes that businesses should review their income reporting. If any underreporting is identified, they should voluntarily file supplementary returns and pay the owed taxes with interest to avoid penalties, as per Article 48-1 of the Tax Collection Act.
For further clarification, businesses can visit the Bureau’s website or contact their free service hotline.
