The National Taxation Bureau of Taipei, Ministry of Finance stated that, in accordance with Paragraph 1, Article 39 of the Income Tax Act, losses incurred in the operation of business in previous years shall not be included in the computation for the current year provided. However, in the case that a profit-seeking enterprise organized as a company keeps a complete set of account books, uses the Blue Returns in the years such losses occurred and in the year of declaring such losses, or such losses have been duly certified by a certified public accountant and declared within the prescribed period, taxation may be made on its net income after deduction of losses incurred in the preceding ten years as verified and determined by the local collection authority-in-charge.
The Bureau explained that, if the total taxable income of a profit-seeking enterprise is NT$120,000 (the “the minimum taxable amount”) or less, the profit-seeking enterprise is exempt from tax. Under these circumstances, the profit-seeking enterprise does not need to use the loss deduction; on the contrary, if the total taxable income of a profit-seeking enterprise is more than NT$120,000, and the profit-seeking enterprise meets the requirements for loss deduction under the provision of the aforementioned article, the profit-seeking enterprise shall not only deduct down to the minimum taxable amount in compliance with the relevant laws.
For example, Company A filed the amount of total taxable income of NT$870,000 for the year of 2021, and claimed loss deductions of NT$750,000, which stem from losses incurred in the preceding ten years, thus taxable income came to NT$120,000, with tax payable of NT$0. However, the Bureau subsequently found the un-deducted balance was NT$1,250,000 in 2020, hence Company A should deduct its loss deduction of NT$870,000 in accordance with the aforementioned regulations. As a result, the Bureau assessed Company A’s deductions at NT$870,000; following the adjustment, the un-deducted balance was NT$380,000.
The Bureau would like to remind profit-seeking enterprises that, when filing current year income, if it exceeds the minimum taxable amount (NT$120,000), they should not only deduct down to the minimum taxable amount, to avoid adjustment and additional taxes.
(Contact person: Head Lin of Profit-seeking Enterprise Income Tax Division; Tel: 2311-3711 ext. 1365)