When establishing or operating a business in Taiwan as an expatriate, there are numerous legal and financial aspects to consider. One crucial requirement that companies should adhere to is the preparation and submission of audit reports. This guide will discuss the critical elements of audit requirements for Taiwan companies and provide expatriates with a comprehensive understanding of their responsibilities and obligations.
The Importance of CPA Audit Reports
Audit reports are critical in maintaining transparency, ensuring financial accountability, and building investor confidence in a company’s operations. For expatriate business owners, understanding the significance of audit reports is essential to comply with local regulations and maintaining a positive corporate reputation.
What is a CPA Audit?
Taiwan businesses must have heard about CPA audits. However, many are still unclear on its intricate details.
There are three types of CPA audit: financial, tax and capital audit.
Financial Audit
According to the Article 20 of Company Law, the company shall submit the financial to the shareholders for approval or approval by the shareholders’ regular meeting after the end of each accounting year.
If an profit-seeking enterprise has grown to the specific scale, NTD$30 million of capital, 100 employees, NTD$30 million loan from the bank or NTD$100 million of sales, an accountant should be engaged to check their financial report and submit an audit report to the government. This audit report will reveal the company’s true financial position and influence future decisions about it.
Tax Audit
According to the Income Tax Act, the annual income tax return of a profit-seeking enterprise shall be examined and signed by a legally registered accountant or any other lawful agent appointed by the profit-seeking enterprise if the profit-seeking enterprise meet any of below criteria:
- financial industry;
- public company;
- enjoying certain tax benefits
- Apply for consolidated tax filing; or
- NTD$100 million of sales
The assigned accountant needs to inspect the financial statements and corporate income tax return to confirm compliance with local laws. The accountant will calculate the income tax for the period and submit it to the National Taxation Bureau.
Capital Audit
When an enterprise is formed, merged, split, acquired, sold, increasing or decreasing its capital, its financial statements should be inspected by an accountant. The accountant will prepare an audit report for the submission to the company registration authority. Please note that the capital audit is mandatory even if the capital amount is small.
Benefit of Financial Audit
A sound financial statement proves that the company has a good prospect, which is beneficial to all stakeholders and gives shareholders good investment returns. In addition, if the company encounters the new crown epidemic and the loss is greater than last year’s undistributed earnings to shareholders, it can be exempted from the 5% to 10% tax on undistributed earnings stipulated in Article 66 of the “Income Tax Law”.
Benefit of Tax Audit
Loss carryforward: In general, small and medium-sized companies do not need to apply for the tax audit. However, if the company want to apply for loss carryforward, it must engage with a CPA for the tax audit. In Taiwan, the loss can be carried forward for 10 years to offset the future income.
Entertainment expense: A company can enjoy the higher deductible amount of entertainment experience for corporate income tax return, if it engages with a CPA for the tax audit.
How Can We Help
At Premia TNC, we are dedicated to providing comprehensive audit services tailored to meet the unique needs of your business. Our experienced team of certified professionals is committed to ensuring financial accuracy, compliance, and transparency. Here’s how we can assist you:
Our core expertise lies in conducting thorough and meticulous audits of your financial statements. We bring an unbiased perspective to your financial reporting, helping you identify areas of improvement, mitigate risks, and maintain compliance with relevant regulations.
Every industry has its own set of challenges and requirements. Our team understands the nuances of various sectors and can provide specialized audit solutions that align with your industry’s standards and best practices.
Discover the peace of mind of having a reliable audit partner. Contact Premia TNC today to explore how we can contribute to your business’s success through our top-notch audit services.
FAQs
What is the benefit of Tax Audit?
The benefit of tax audit includes:
- Companies can enjoy the loss carryforward for 10 years
- Higher deductible amount of entertainment expenses for corporate income tax return
- CPA can provide the tax advisory service
What are the consequences of non-compliance with the Audit Report Requirement in Taiwan?
Failure to comply with the audit report requirement in Taiwan can result in various consequences, including fines, penalties, business suspension, and legal action. Non-compliance not only affects a company's reputation but also exposes it to legal and financial risks. Timely and accurate submission of audit reports is essential to avoid these adverse outcomes.
How to select a CPA for my Taiwan company?
You should choose a CPA with proper professional knowledge and experience on companies whose owner is a foreigner or oversea company. The communication skill is also very important because it can save a lot of time in discussion of financial and tax issues.
