Profit-seeking enterprises should provide proof documents when declaring losses of disposal from the goods, raw materials, materials, or work-in-progress.
The National Taxation Bureau of the Northern Area （NTBNA）, M.O.F., stated that pursuant to Article 101-1 of the Regulations Governing Assessment of Profit-Seeking Enterprise Income Tax, if goods, raw materials, materials, or work-in-progress become expired, deteriorate, or are damaged, or if they cannot be sold due to stagnation or other factors, profit-seeking enterprises can declare these items to be scrapped. Evidence such as certified audit reports or annual income tax audit reports from certified public accountants, along with relevant documents, could be used to support the declaration of scrap losses. Additionally, evidence could either be lists for inspection and verification by the relevant tax authorities within 30 days after the occurrence of the event or proof documents by the business regulatory agency.
The Bureau explains using an example: Company A declared a scrap loss of NT$7 million in profit-seeking enterprise income tax return of 2021. They claimed that the items were scrapped due to expiration and could not be sold. However, Company A did not submit a list for inspection and verification by the tax authorities within 30 days after the occurrence of the event, or obtain proof documents by the business regulatory agency. As a result, the Bureau did not recognize NT$7 million scrap loss in Company A’s income tax return of 2021, leading to additional tax liability of NT$1.4 million.
The Bureau would like to especially remind companies declaring scrap losses of goods, raw materials, materials, or work-in-progress to pay attention to relevant legal regulations to avoid having their expenses or losses excluded and subject to additional taxation due to temporary negligence in compliance with tax laws, which could impact their own equity. Additionally, if there is income from the sale of scrapped goods, raw materials, materials, or work-in-progress, it should be listed as other income or deducted from scrap losses. 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=c3f265e0ce23449ca5221e02830dc073