To file tax deduction of foreign capital loss resulting from loss-offset or liquidation of offshore


National Taxation Bureau of the Central Area (or NTBCA), MOF, said that according to article 99 of The Guideline for Tax Audit, referred to as “GFTA”, only realized capital loss is eligible for tax deduction.  Moreover, only under the circumstance where paid-in capital of the invested company is reduced by loss-offset can the taxpayer be qualified for capital loss deduction.  To file for capital loss deduction, a taxpayer shall submit documentation of invested company with respect to matter of capital reduction from loss-offset, mergers and acquisitions, bankruptcy or liquidation.  As for capital loss deduction from non-operating offshore holding subsidiary, it depends on documentation of capital loss based on operating loss made by its held operating subsidiaries.  Plus, documentation shall be authenticated or certified by embassies and missions of R.O.C around the world.  As for the documentation presented by subsidiary in Mainland China, agency or organization, dealing with affairs of people between Taiwan area and Mainland area, authorized by Mainland Affairs Council, Executive Yuan, will take care of authentication issue.  
The NTBCA said that one taxpayer is subject to extra tax burden after tax audit due to insufficient documentation for foreign capital loss deduction, amounting to around 15 million Taiwan dollars.  It is said that foreign capital loss is accrued from second-tier China-based subsidiary(an operating company) which is owned by first-tier US-based subsidiary(a non-operating company) after liquidation.   Even the taxpayer presents relevant documents relating to liquidation of first-tier and second-tier subsidiaries wile filing tax return, he is required to pay extra tax because the documents of second-tier subsidiary are not qualified due to short of Straits Exchange Foundation authentication.      
The NTBCA indicated that please be aware of relevant ruling and regulations of article 99 of GFTA to file tax deduction of foreign capital loss to avoid extra tax burden.   If you have any further questions regarding issue of foreign capital loss, please call us toll-free at (0800) 000321.  Our staff is ready to help you with any question. 
(Edited by Tsu-Ping Chen, First Examination Division.  Contact at 04-23051111 ext 7186) 

Reference URL:https://www.mof.gov.tw/Eng/Detail/Index?nodeid=319&pid=77255