Recognition of Expired Payables as Other Income for Businesses
According to Taiwan’s tax regulations, businesses must reclassify unpaid expenses or liabilities that remain unsettled beyond the statute of limitations as other income. The expiration period varies depending on the nature of the obligation, typically ranging from 2 to 15 years.
Under Taiwan’s Civil Code:
- Article 125: General claims expire after 15 years unless otherwise specified.
- Article 126: Specific claims, such as rental fees or wages, expire in 5 years.
- Article 127: Short-term claims, such as hotel or restaurant bills, expire in 2 years.
Businesses must regularly review their financial records to ensure compliance with tax regulations and prevent any necessary tax adjustments. If the obligation is later settled, the payment can be recorded as a non-operating expense.
