Profit-seeking Enterprises May Reduce the Making-up of the Losses Incurred in Past Years from Their Surplus Earnings in the Current Year. The Term "the Losses Incurred in Past Years" Includes Losses f
HuWei Office, National Taxation Bureau of the Central Area, Ministry of Finance, stated that pursuant to Article 66-9 of the Income Tax Act, when a profit-seeking enterprise files its undistributed earnings, its surplus earnings can be used to make-up for the losses incurred in past years. The term "the losses incurred in past years" not only refers to the losses after the year 1998 but also includes the losses before the year 1997.
The Office provides the following example: When auditing Company A's undistributed earnings declaration for the year 2022, the authority discovered that the company had reported after-tax net income of NT$430,000 and a deduction of NT$430,000 for the making-up of the losses incurred in past years, but the balance sheet of the company for the year 2022 showed accumulated profits of NT$ 370,000 (including accumulated profits of NT$830,000 before the year 1997 and accumulated losses of NT$460,000 after the year 1998.) The company said that the undistributed earnings filing started from the year 1998, so the make-up for the losses incurred in previous years should also be calculated from the year 1998. In accordance with Paragraph 1, Article 48-10 of the Enforcement Rules of the Income Tax Act, the measure “to make up the losses incurred in past years” shall mean an action taken by a profit-seeking enterprise to use the undistributed surplus earnings available in the current year to make up the losses to be offset as calculated up to the final settlement date of the previous year in accordance with the Business Entity Accounting Act, Securities and Exchange Act, or other laws used in preparing financial reports. In other words, it not only refers to the losses after 1998 but also includes the losses before 1997. Because the balance sheet of the company in the year 2022 showed accumulated profits of NT$ 370,000, no losses were incurred in past years to be made up. However, the company failed to deduct this amount. As a result, it was subject to additional taxation and a fine in accordance with Article 110-2 of the Income Tax Act.
The Office reminds all profit-seeking enterprises that when they make up the losses incurred in past years in undistributed surplus earnings declarations, they should pay special attention to the accuracy of the amount. Failure to comply with these regulations may result in adjustments and the imposition of additional taxes, which may lead to penalties.
If you have any questions, please call our toll-free service number 0800-000321 for consultation, and we will do our best to serve you.
Contact person: Profit-seeking enterprise Income Tax and Estate and Gift Tax Section, Ms. Chuo.
Tel: (05)633-8571 ext. 108.
Reference URL：https://www.mof.gov.tw/Eng/singlehtml/f48d641f159a4866b1d31c0916fbcc71?cntId=50f90ee375c54f0488c9489eb9b2efd2