The Accounts Payable of a Profit-Seeking Enterprise That Have Not Yet Been Paid at the Period of Limitation for the Claims Shall Be Enumerated Under “Other Revenue”
When doing business, profit-seeking enterprises often have unpaid accounts derived from purchase of goods or expenses. Hence, when filing profit-seeking enterprise income tax, companies should take note of unpaid accounts or expenses or losses or various debts payable recorded in a profit-seeking enterprise's accounts that have yet to be paid at the time of the expiry of the period for the validating of such claims, and enumerate them under “Other Revenue” at the end of the fiscal year.
The National Taxation Bureau of the Southern Area, Ministry of Finance (hereinafter “The Bureau”) stated that the extinctive prescription of a claim is 2, 5, or 15 years depending on the nature of a claim in accordance with Articles 125 to 127 of the Civil Code.
For example, claims such as the price of goods, charges for transportation, remuneration of undertakers, attorneys, certified public accountants as well as public notaries, and disbursements are extinguished by prescription if not exercised within 2 years. However, if the claim is for the payments of interest, rentals, and other periodical prestations falling due at set intervals of one year or less, each successive payment of the claim is extinguished by prescription if it is not exercised within 5 years.
Therefore, when creditor's claim is not exercised within statutory period, the unpaid accounts recorded in a profit-seeking enterprise's accounts shall be reclassified as “Other Revenue,” and shall be recognized as non-operating expenditure at the time of actual payment.
For instance, during the audit of Company A’s 2020 profit-seeking enterprise income tax, it was found that an unpaid rental payment of NT$1,000,000 occurred in June 2015 and was recognized as account payable in the end of the year 2020. In this case, the claim of the rental payment was extinguished by prescription because it was not exercised within 5 years. Besides, a prescription was not interrupted by any exceptional cause. So, the Bureau, based on extinctive prescription of the claim, assessed Company A an increased other revenue of NT$1,000,000.
The Bureau would like to remind profit-seeking enterprises that, to avoid being levied additional tax due to any omission or under-reporting of income, they shall examine if any claims of unpaid accounts payable are extinguished by prescription should be reclassified as “Other Revenue” when filing profit-seeking enterprise income tax.
For additional information, please feel free to contact us through our toll-free number 0800-000-321 (from Monday to Friday, 8 A.M. to 5 P.M.). We are at your service.
Press Release Contact:
Ms. LI, Profit-seeking Enterprise Income Tax Division
TEL:06-2223111 ext. 8035
Reference URL：https://www.mof.gov.tw/Eng/singlehtml/f48d641f159a4866b1d31c0916fbcc71?cntId=0a0d8cf79d904c589b0516d10e588f91