A Profit-seeking Enterprise Declaring the Deduction of Losses Shall Deduct the Non-taxable Investment Income in the Loss Year
National Taxation Bureau of the Southern Area, Ministry of Finance indicated that a profit-seeking enterprise organized as a company or a limited partnership that keeps a complete set of account books, uses the Blue Returns as provided in the Income Tax Act (hereinafter “the Act”) 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 account and declared within the prescribed period, taxation may be made on its net income after deduction of losses incurred in the preceding 10 years as verified and determined by the local collection authority-in-charge. However, in the event where there is an investment income, not being included in the taxable income in the year of loss, such investment income shall be deducted from the aforesaid losses.
The Bureau explained that, in the case of a profit-seeking enterprise organized as a company or a limited partnership declaring the deduction of losses in accordance with the proviso of Paragraph 1, Article 39 of the Act, the investment income not included in the taxable income pursuant to Article 42 of the Act received by the profit-seeking enterprise in the year of loss shall be subtracted before the enterprise deducts the assessed losses in the preceding 10 years from its net income of the current year.
For example, in the fiscal year 2019, Company A was assessed business losses of NT$3 million by the tax collection authority and has received non-taxable dividends of NT$1 million from domestic profit-seeking enterprises. In the fiscal year 2020, the net income of Company A was NT$8 million. Therefore, the deduction of losses derived from the fiscal year 2019 would be NT$2 million (NT$3 million – NT$1 million). To calculate the taxable income of the fiscal year 2020, Company A shall deduct the losses of NT$2 million incurred in the year 2019, declaring NT$6 million (NT$8 million – NT$2 million) as its taxable income.
The Bureau would like to kindly remind profit-seeking enterprises to be aware of the requirements when declaring the deduction of losses incurred in the preceding 10 years. The investment income, being excluded from the taxable income, is supposed to be deducted from the losses first, and the balance of losses shall be deducted from the net income afterwards. Be cautious about filing the tax return correctly to avoid supplemental tax payment and the relevant interest accrued.
Press Release Contact: Ms. Hsu, First Examination Division
TEL: 06-2223111 ext. 8031
Reference URL：https://www.mof.gov.tw/Eng/singlehtml/f48d641f159a4866b1d31c0916fbcc71?cntId=7c1729fbf9f94f7cb0876be92291f65b