Profit-seeking enterprises should pay attention to the year of declaring the bad debt losses for claims receivable overdue for more than two years in the annual income tax return.
The National Taxation Bureau of the Northern Area (NTBNA), M.O.F., stated that, pursuant to Subparagraph 2, Paragraph 5, Article 49 of the Income Tax Act and Item 2, Subparagraph 5 and Subparagraph 8, Article 94 of the Regulations Governing Assessment of Profit-Seeking Enterprise Income Tax, if profit-seeking enterprises have accounts receivable, notes receivable, or any other items of uncollected credit overdue for more than two years and, despite collection efforts, fail to collect the principal or interest, they can declare bad debt losses. Evidence such as delivered legal attest letter, rejected or returned legal attest letters due to the recipient’s death, or debt collection evidence of the court could be used to support the declaration of bad debt losses. The year of delivery of legal attest letter or court collection evidence determines the year of declaring the bad debt losses in the annual income tax return.
The Bureau explained using an example: Company A under the jurisdiction of NTBNA declared a bad debt loss of NT$6 million in profit-seeking enterprise income tax return of 2020. Upon investigation, it was found that Company A had sold goods to Company B in 2018 and was unable to collect the accounts receivable. In January 2021, Company A applied to the court for a payment order and got the final certificate. Although the debt had already been overdue for more than two years by the end of December 2020, Company A could meet the requirements for declaring bad debt losses in 2021, in which the payment order certificate of the court is obtained. Thus, Company A should declare the bad debt loss in income tax return of 2021, not of 2020. As a result, the Bureau did not recognize NT$6 million bad debt loss in Company A’s income tax return of 2020, leading to additional tax liability of NT$1.2 million. The Bureau, as a compassionate tax administration, assisted Company A to correct and declare the bad debt losses in income tax return of 2021.
The Bureau would like to especially remind companies that the calculation of the aforementioned overdue debt for more than 2 years is two years from the next day on which the repayment is due. In addition, for profit-seeking enterprises conducting debt collection through postal legal attest letters, they should pay attention to whether the debtor’s business address has been changed. If you have any questions, please visit the website of NTBNA (https://www.ntbna.gov.tw) to inquire about the relevant laws or call the toll-free service number 0800-000321 for detailed consultation services.
News contact: Ms. Lee, Head, Profit-seeking Enterprise Income Tax Division.
Tel. No.(03)3396789, Ext. 1350
Reference URL：https://www.mof.gov.tw/Eng/singlehtml/f48d641f159a4866b1d31c0916fbcc71?cntId=59c565f66ce04ed7bc145e34c409cc69