Key Takeaways
- Taiwan’s default accounting period is January 1 to December 31, unless another period is permitted by law or justified by special business needs.
- Year-end closing should generally be completed within two months after the fiscal year-end, with an extension of up to two and a half months when necessary.
- Companies must prepare annual business reports, financial statements, and surplus earnings distribution or loss make-up proposals for shareholder approval or ratification.
- A CPA audit is required for companies meeting Taiwan’s prescribed scale thresholds, including paid-in capital of NT$30 million or more, or smaller-capital companies that meet revenue or labor-insured employee thresholds.
- Accounting documents must generally be retained for at least five years, while accounting books and financial statements must generally be retained for at least ten years.
What is Financial Year-End Closing in Taiwan?
Financial year-end closing in Taiwan is the process of finalizing accounting records, preparing statutory year-end reports, confirming shareholder or investor approvals, and supporting tax filings after the fiscal year ends. It is not only bookkeeping; it connects accounting records, management accountability, CPA audit requirements where applicable, and the company’s annual compliance timetable.
Financial year end closing in Taiwan is the crucial process of summarizing and reporting financial data at the end of the fiscal year, typically in December. It ensures compliance, assesses financial health, and informs future planning. In this article, take a closer look at the financial year end closing in Taiwan and what it entails.
Overview of Financial Year-End Closing in Taiwan
Business entities in Taiwan are generally subject to a calendar-year accounting period from January 1 to December 31, unless another period is permitted by law or required for special business needs. Under the Business Entity Accounting Act, the year-end closing process should be completed within two months after the end of the fiscal year. If necessary, the closing period may be extended by up to two and a half months; for a calendar-year taxpayer, this means the extended closing period can run to May 15 of the following year.
For companies, the year-end closing package is not limited to internal bookkeeping. The Company Act requires companies to prepare and submit the annual business report, financial statements, and surplus earnings distribution or loss make-up proposal to shareholders or the shareholders’ meeting at the end of each fiscal year. The Business Entity Accounting Act also requires year-end closing reports to be submitted to capital providers, partners, or shareholders for approval within six months after the fiscal year-end.
The year-end closing process also supports Taiwan tax compliance. For calendar-year profit-seeking enterprises, the annual profit-seeking enterprise income tax return is generally filed from May 1 to May 31. If a business uses an approved special fiscal year, the income tax return is generally filed within one month from the fifth month after the end of that fiscal year.
Key Compliance Timeline for a Calendar-Year Taiwan Company
| Compliance item | Typical timing |
| Complete year-end closing process | Within two months after fiscal year-end; extension up to two and a half months when necessary |
| Prepare annual business report, financial statements, and surplus earnings distribution or loss make-up proposal | After closing and before shareholder approval or ratification |
| File annual withholding, non-withholding, and dividend statements | Generally January 1 to January 31, subject to holiday extensions announced by the tax authority |
| File profit-seeking enterprise income tax return | Generally May 1 to May 31 |
| Submit annual reports to shareholders or shareholders’ meeting | Generally within six months after fiscal year-end |
| Retain accounting records | Accounting documents at least five years; accounting books and financial statements at least ten years |
Importance of Year-End Closing
Financial year-end closing is vital for ensuring the accuracy of the company’s books and the reliability of its financial reports. It helps businesses assess profitability, assets, liabilities, cash flows, and retained earnings or accumulated losses, while also supporting the preparation of statutory reports and annual tax filings.
A properly completed closing process also supports corporate governance. Under Taiwan company law, annual reports and financial statements must be prepared for shareholder review or ratification, and directors and relevant accounting personnel are generally relieved of responsibility only after approval, except where unlawful or improper conduct is involved.
From a compliance perspective, year-end closing helps identify reporting issues before statutory deadlines, including missing accounting records, unreconciled balances, unrecorded accruals, incorrect revenue recognition, unpaid taxes, or transactions requiring supporting documentation. Taiwan’s business tax filings are generally made every two months, while income tax filings follow the annual filing period, so year-end closing should reconcile both accounting and tax records.
Required Financial Statements
Financial year-end closing reports in Taiwan should be prepared based on the company’s accounting books and supporting documents. For companies, the statutory year-end package generally includes the annual business report, financial statements, and the surplus earnings distribution or loss make-up proposal.
- Operating report:
The business report should cover the business entity’s activities and provide an overview of operational performance and implementation of business policies during the fiscal year
- Financial statements:
Financial statements generally include the statement of financial position, statement of comprehensive income, statement of cash flows, statement of changes in equity, and necessary notes or supplementary disclosures. In practice, these may also be referred to as the balance sheet, income statement, cash flow statement, and statement of changes in equity.
- Surplus Earnings Distribution or Loss Make-Up Proposal:
Companies should prepare a proposal for surplus earnings distribution or loss make-up, where applicable. Before distributing profits, companies should first make up accumulated losses and set aside the required legal reserve in accordance with the Company Act.
Practical Year-End Closing Checklist for Taiwan Businesses
A practical Taiwan year-end closing process should include bank and cash reconciliation, accounts receivable and payable confirmation, inventory count or valuation review, fixed asset depreciation review, intercompany balance reconciliation, payroll and withholding review, business tax and uniform invoice reconciliation, accrual and prepayment review, and confirmation of supporting documents for material transactions. Companies should also confirm whether they meet the CPA audit thresholds by reviewing paid-in capital, annual net operating revenue, and the number of employees enrolled in labor insurance. Accounting records submitted or maintained for Taiwan compliance should be prepared with Chinese as the primary language, and records should be retained according to statutory retention periods.
Applicability for Foreign Companies
Foreign companies registered in Taiwan through a branch office are also subject to Taiwan financial year-end closing requirements for their Taiwan operations. A foreign company branch must appropriate funds exclusively for its Taiwan business operations and designate a responsible person in Taiwan. The Company Act applies Article 20 year-end reporting requirements to foreign company branches mutatis mutandis.
A foreign company branch should prepare year-end materials for its Taiwan branch operations, which commonly include the business report, balance sheet or statement of financial position, profit and loss statement or statement of comprehensive income, and cash flow statement. Where the branch meets the applicable scale thresholds, the financial statements must be audited and attested by a CPA before submission to shareholders, the head office, or the relevant approving body.
The CPA audit threshold for Taiwan companies generally applies where paid-in capital at the financial reporting period-end is NT$30 million or more. For companies with paid-in capital below NT$30 million, a CPA audit is still required if annual net operating revenue reaches NT$100 million or if the number of employees enrolled in labor insurance reaches 100. For foreign company branches, MOEA practice applies the Company Act requirements through Article 377, with the branch’s dedicated operating funds considered for the relevant threshold analysis.
Submission of Yearly Statements to the Ministry of Economic Affairs
After completing the financial year-end closing, companies must retain the annual closing reports at the company’s principal office. The competent authority may inspect these reports or order the company to submit them within a specified period. A company is not generally required to proactively file its annual closing reports with the Ministry of Economic Affairs or another competent authority unless the authority issues a request or a specific filing obligation applies.
If the competent authority orders submission of company closing reports, the company should ensure that the reports are complete, properly approved or ratified, and consistent with its accounting books and supporting documents. For companies required to obtain CPA audit and attestation, the CPA should conduct the audit in accordance with the applicable MOEA regulations and auditing standards
Penalties for Late Submission and Responsible Parties
Failure to comply with Taiwan’s year-end closing and annual reporting obligations may result in penalties under the Company Act. If a company violates the requirement to prepare and submit annual business reports, financial statements, or surplus earnings distribution or loss make-up proposals, or fails to comply with the CPA audit requirement where applicable, the responsible person of the company may be fined between NT$10,000 and NT$50,000.
If a company evades, impedes, or refuses an examination by the competent authority, or fails to submit required reports after being ordered to do so within a specified deadline, the responsible person may be fined between NT$20,000 and NT$100,000. Equivalent penalty rules also apply to the responsible person of a foreign company branch where Article 20 applies through Article 377 of the Company Act.
Tax compliance penalties may also arise separately if the company’s tax filings, withholding statements, business tax filings, or supporting documents are incomplete or late. In addition, where a taxpayer files a CPA-attested income tax return but fails to submit the required audit report or attachments by the deadline, the tax authority may treat the return as an ordinary filing and related incentives may become unavailable.
How we can help you
At Premia TNC, we offer more than traditional accounting and auditing services in Taiwan. Our suite of services includes:
- Bookkeeping on a monthly basis
- Preparation of financial statements
- Preparation of financial year-end closing reports
- Audit support and coordination with Taiwan CPAs
- Company income tax filing
Frequently Asked Questions
Q1: Are documents submitted by foreign companies with branches in Taiwan for financial year end closing allowed to be in the foreign company's language?
In practice, accounting records and documents submitted to Taiwan authorities should be prepared in Chinese, with traditional Chinese used for Taiwan corporate and tax filings. The Business Entity Accounting Act requires domestic language to predominate in business accounting records. Foreign-language references may be used where needed, but a Chinese version or translation should be maintained for filing, review, and audit purposes.
Q2: What is the threshold for companies in Taiwan to have their financial statements audited by a CPA?
A Taiwan company generally must have its financial statements audited and attested by a CPA if its paid-in capital at the financial reporting period-end is NT$30 million or more. If paid-in capital is below NT$30 million, CPA audit is still required where annual net operating revenue reaches NT$100 million or the number of employees enrolled in labor insurance reaches 100. Failure to comply with the Company Act audit requirement may result in a fine of NT$10,000 to NT$50,000 for the responsible person of the company.
Q3: Can a tax audit serve as a substitute for a financial audit?
No. A tax audit or CPA-attested income tax return is different from a Company Act financial statement audit. A financial audit focuses on the company’s statutory financial statements and year-end reports, while a tax audit supports the company’s income tax filing position. Where the Company Act requires CPA audit and attestation of financial statements, filing a CPA-attested tax return does not replace that obligation.
