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Profit-seeking Enterprises Failing to Produce Relevant Documents that Prove the Amount of Their Income Will Be Subject to Assessment Based on the Profit Standard of the Same Trade Concerned.

According to the National Taxation Bureau of Taipei(NTBT), Ministry of Finance, profit-seeking enterprises should keep sufficient vouchers and accounting records to accurately calculate their income. If the profit-seeking enterprises fail to submit relevant evidence during the investigation of assessment or Recheck procedures conducted by the collection authority, or the documents submitted are incomplete, the collection authority will assess their income based on the Profit Standard of the Same Trade Concerned.

NTBT explains that, according to Article 21 of the Income Tax Act, a profit-seeking enterprise shall keep sufficient and accurate account books, vouchers and accounting records to calculate its total amount of business income. According to Article 23 of the Business Entity Accounting Act, journals and general ledgers shall be used by all business entities. Also, According to Paragraph 1 of Article 18 of the Business Entity Accounting Act, businesses must record transactions based on bookkeeping slips and prepare bookkeeping slips based on the source documents. Moreover, based on the provisions of Article 83 of Income Tax Act, a taxpayer shall, in the course of an investigation or Recheck conducted by the collection authority, produce account books and related documents of evidence that will prove the amount of its income. Where such account books and documents of evidence are not produced, the collection authority may determine the amount of its income based on the available taxation data or the Profit Standard of the Same Trade Concerned. The so-called "not produced" refers to the fact that all the account books and documents have not been produced, or even if they are produced, they are incomplete, unfinished or inconsistent.

The Bureau gives an example. Company A operates computer-related services business in Taipei City. In its 2020 Profit-seeking Enterprise Income Tax Returns, net operating income is around NT$200 million and net income is roughly NT$30 million. After investigation conducted by NTBT, it was found that although the general ledger and Uniform Invoice  and other supporting documents were submitted, many of the source documents of the bookkeeping slips were missing or only photocopies remained. Therefore, based on the Net Profit Ratio of 29% for Company A in regard to the Profit Standard of the Same Trade Concerned, NTBT assessed the net income of more than NT$60 million and additional tax amount of more than NT$6 million. Company A appealed and claimed that the purchase and sale figures based on its accounting books could still be verified. The Bureau determined that Company A had not obtained legal vouchers in accordance with the regulations, and it was difficult to verify the relevant accounting books and settlement accounts. Therefore, during the Recheck procedures, Company A was asked to submit complete accounting vouchers but failed to do so within the time limit, so Company A's Recheck application was rejected.

NTBT reminds, in accordence with the laws, profit-seeking enterprises should not only establish a good and sound accounting system, record transactions and costs in detail, and keep accurate records of purchases, sales, inventory or the receipt and consumption of raw materials, but keep the source documents intact, in order to avoid possible tax liabilities due to undetailed information for verification during the annual return filing.

(Contact Person: Ms. Chang, Revenue Assessor of the Legal Affairs Division; Tel: 2311-3711 ext. 1862)

Last updated:2024-05-02