National Taxation Bureau of Taipei, Ministry of Finance (hereinafter referred to as the Bureau) stated that relevant documents, such as contracts signed by both parties, facts of intermediation, proof of foreign exchange settlements and bank remittance, etc. should be provided when a profit-seeking enterprise declares commissions to foreign agents or distributors. If the foreign commissions are paid in New Taiwan Dollar in Taiwan, receipts issued by the foreign agents or distributors should be obtained. If the amount of commission exceeds 3% of the sale proceeds of export goods, additional evidence that the payment in New Taiwan Dollar has indeed been received or deposited into accounts of the foreign agents or distributors should be provided .
The Bureau further clarified that in accordance with Article 92 of the Regulations Governing Assessment of Profit-seeking Enterprise Income Tax, contracts or other supporting documents of the fact of intermediation should be provided when declaring commission expenses. For commissions paid to foreign agents or distributors, in addition to the contracts signed by both parties, proof of foreign exchange settlements issued by the settlement bank, stating the name and address of the remitter and the foreign remittee, settlement amount, and date should be provided by those who have made foreign exchange settlements. If foreign exchange settlement is not made, documentary proof such as bank remittance or transfer of payment should be provided. If the payment is made in the form of a demand draft, documents proving that payment of the demand draft has indeed been received or deposited into the payee’s account should be provided. If the counterparty is not an agent or a distributor and no signed contract can be provided, the agreed matters on commission payment should be specified in the correspondence or letters of credit. If the foreign commission is paid in Taiwan in New Taiwan Dollar, the amount within 3% of the sale proceeds of the export goods on the receipt issued by the foreign agent or distributor can be recognized. If the amount of commission exceeds 3% of the sale proceeds, additional supporting documents proving payment that has been received by the foreign agent or distributor or deposited into their accounts should be provided.
The Bureau illustrated with an example: During the examination of Company A’s profit-seeking enterprise income tax return for the year 2019, the Bureau uncovered that the company declared over NT$800,000 in commission payments to foreign agents, but only contracts, correspondence for the matter of intermediation, and the remittance slip for the settlement of foreign exchange were provided. As the payment was made in Taiwan in New Taiwan Dollar and exceeded 3% of the sale proceeds of export goods, Company A failed to present the receipt issued by the foreign agent and the documents proving that the payment in New Taiwan Dollar has been received. The expense was then rejected and tax imposed.
The Bureau would like to remind profit-seeking enterprises that, when declaring commission expenses, attention should be paid to retaining required legitimate certificates in order to avoid regulation violation that affects their rights and interests.
(Contact person: Assessor Ho of the First Examination Division
Telephone 2311-3711, ext. 1223)