A Reference List of the Low-tax Countries or Jurisdictions Subject to the Controlled Foreign Company Rules
The National Taxation Bureau of the Southern Area, Ministry of Finance (hereinafter “The Bureau”), indicated that the controlled foreign company (hereinafter “CFC”) rules have been enforced from the taxable year of 2023 to prevent any profit-seeking enterprise and individual from avoiding tax obligations in the R.O.C via establishing a CFC in a low-tax country or jurisdiction to retain earnings without distribution.
For any profit-seeking enterprises or individuals and their related parties directly or indirectly holding 50% or more of shares or capital of a foreign affiliated enterprise registered in a low-tax country or jurisdiction, or having a significant influence on such a foreign affiliated enterprise, the profit-seeking enterprise shall recognize the investment income and the individual shall calculate the overseas CFC business income in accordance with the regulations.
The Bureau explained that the Ministry of Finance had announced a reference list of the low-tax countries or jurisdictions. The key points are summarized as follows:
1. The tax rate of the profit-seeking enterprise income tax in the country or jurisdiction where the foreign affiliated enterprise is located is not more than 14%, such as Anguilla and 28 other countries or jurisdictions.
2. The country or jurisdiction where the foreign affiliated enterprise is located imposes taxes on a territorial basis, does not impose taxes on offshore income, or imposes taxes only after incomes are remitted back, such as Belize and 49 other countries or jurisdictions.
3. The country or jurisdiction, such as Independent State of Samoa, Republic of Ireland, Republic of Mauritius, where the foreign affiliated enterprise is located, has a special tax rate or tax system for a specific region or type of enterprise. Under these circumstances, the special tax rate or tax system shall be considered under the fact of case.
The Bureau has pointed out that the above-mentioned list is for reference only. Whether a country or jurisdiction is applicable to Article 4 of the Regulations Governing Application of Accrued Income from Controlled Foreign Company for Profit-Seeking Enterprise or Article 4 of the Regulations Governing Application of Income Calculation from Controlled Foreign Company for Individual, it shall depend on the actual situation of that country or jurisdiction.
The relevant regulations about the CFC rules are available at the website of The Bureau (https://www.ntbsa.gov.tw/English) “Home>Themes>Taxation>Profit-seeking Enterprise Income Tax>Anti-tax Avoidance Rules.” For any inquiries, please feel free to contact us through our toll-free number 0800-000-321. It is our pleasure to serve you.
Press Release Contact: Ms. Cheng
Profit-seeking Enterprise Income Tax Division
TEL: 06-2223111 ext.8054
Reference URL：https://www.mof.gov.tw/Eng/singlehtml/f48d641f159a4866b1d31c0916fbcc71?cntId=070a8409e34c4e5e861d1d85a2f448bc