Taiwan Accounting Standards: An Overview for Business Owners

Taiwan Accounting Standards: An Overview for Business Owners

Taiwan Accounting Standards

Taiwan accounting standards are known as Taiwan Generally Accepted Accounting Principles (GAAP). They differ from International Financial Reporting Standards (IFRS) that are adopted by many countries.

This article will provide you a brief overview of Taiwan GAAP and the bookkeeping requirements in Taiwan, as well as the audit requirement for companies in Taiwan.

Introduction of Taiwan GAAP (vs IFRS)

While IFRS is becoming more widely adopted globally, Taiwan has its own set of accounting standards. Taiwan GAAP consists of 35 statements and interpretations, which have been developed based on the requirements of the Taiwan government, professional accounting organizations, and other stakeholders.

To enhance the international competitiveness of Taiwan’s capital market, Taiwan has started promoting the adoption of IFRS for the preparation of financial reports. Currently, public and listed companies are required to disclose their IFRS financial reports on the government website.

Taiwan Bookkeeping Requirements

All companies in Taiwan are required to keep accurate and complete accounting records in accordance with Taiwan GAAP. This includes maintaining a general ledger, preparing financial statements, and keeping supporting documents such as invoices and receipts. The general rules of Business Entity Accounting Act are summarized as below for your reference:

  • Accounting year

The accounting year for companies should be started from January 1st to December 31st (calendar year). It is also possible to set any continuous 12-month period but it should be approved by the regulatory agency.

  • Language

All recording of business transactions must use Traditional Chinese and other languages can be added as reference.

  • Currency

Businesses must use domestic currency, the new Taiwan dollar (NTD), as the bookkeeping base. If foreign currency is used for bookkeeping due to business needs, it must be converted into NTD for the closing report.

  • Accounting basis

Accrual accounting must be used as the accounting basis. If cash basis is used for business operation, the financial closing must be adjusted according to the accrual basis.

  • Processing accounting electronically

Companies may process all or part of the accounting data electronically. The internal rules related to the internal control, method of authorization, storage and safeguarding must be complied with the regulations prescribed by the Central Competent Authority.

  • Maintaining of reports and slips

The accounting documents, except those which should be permanently kept or which are related to unsettled business events, must be kept for at least 5 years after the completion of annual closing procedures.

The accounting books and financial statements must be kept for at least 10 years after the completion of annual closing procedures.

  • Penalty

The individual held responsible for company decisions will be subject to imprisonment for no more than 5 years, and in lieu thereof or in addition to, a fine of no more than NTD$600,000, if found guilty in any of the listed offenses below:

  • Knowingly using untrue information to prepare accounting documents or entering false information in account books;
  • Intentionally causing the loss, destruction, or damage of accounting documents, account books or statements which should be kept;
  • Forging or altering the contents of accounting documents, account books and statements, or tearing up any page thereof, with intent to acquire illegal profit;
  • Intentionally omitting accounting events and failing to record transactions thus causing financial statements to become untrue;
  • Causing accounting events or financial statements to become untrue by other improper means.

Financial Audit

At the end of each fiscal year, the annual business report, financial statements, and the proposal on profit distribution or loss compensation should be submitted to the shareholders for approval.

The financial statements need to be subject to the audit if the Taiwan company meet any of following criteria:

  • Capital is NTD$30,000,000 or more
  • Annual sales reach NTD$100,000,000 or more
  • Company hire 100 employees or more
  • Public companies
  • Financial institutions
  • Bank loan reach NTD$30,000,000

The audit must be performed by a certified public accountant (CPA) who has a Taiwan CPA license, joined a CPA firm, applied for practice registration, and joined a CPA association.

How to Select a Proper Bookkeeping Agent?

It is absolutely worthy to remind you to avoid choosing low-priced bookkeeping firms, especially those firms who have no time to communicate or answer your questions. As long as you are not looking for the firm with the lowest price, you can judge the firm’s level of patience during the conversation.

If the employee only provides simple responses like “yes” or “okay” to the questions you asked, it either means that you have been eliminated as a low-price client, or the firm really has no communication skills.

When you face accounting problems, an unprofessional firm may not know the answers when you ask, or they may use simple ways to brush you off. When you encounter a tax audit, they may just respond with 5 words: “just pay more income tax.” It’s like a doctor asking you to have surgery but not explaining the reasons why, so this type of communication style for a firm is not recommended for you to choose.

What can Premia TNC help you with?

PREMIA TNC offers accounting and tax services, including the collection of financial information and supporting documents, preparation of financial statements (including the statement of cash flow), and assists you in the tax return reporting with the National Tax Bureau. The accounting process is handled by our professionals, not only saving your time but also ensuring a smoother reporting process. We are happy to answer all the questions you may have! Feel free to contact us now!

Frequently Asked Questions

Q1: What is the benefit if I outsource the bookkeeping to an agent?

A: There are several benefits to doing so:
1. Save your valuable time and money
Bookkeeping is a time-consuming work and outsourcing it can let you focus on the core business operation of your company.

2. Cost effectiveness
Outsourcing can lower down your payroll and training costs. It is especially suitable for newly set up companies.

3. Reduce the risk of errors
An experienced and professional agent can provide you the best practice within your industry and you will reduce the risk of making wrong decisions.

Q2: Can I do the financial closing on a yearly basis instead of monthly?

A: There is no regulation requesting a company to do the financial closing on a monthly basis. However, the accounting events must be recorded in accordance with the sequence of occurrence on a daily basis no later than two months after such occurrence.

Q3: What is the minimum currency unit for bookkeeping for a Taiwan company?

A: The currency unit of bookkeeping for a Taiwan company is NTD or commonly known as TWD. The minimum currency unit for bookkeeping would be one NTD.