Date 2014-06-30
Title National Taxation Bureau of Taipei Have Concluded Advance Pricing Agreement with Korean Group’s Subsidiary in Taiwan

National Taxation Bureau of Taipei, Ministry of Finance (NTBT) expressed that, in order to refrain the enterprises from evading or reducing of their tax liabilities by arranging irregular business practices, soaring countries have established the Transfer Pricing System to protect the right of levying taxes. Since the miscellaneous transactions among affiliates of multinational group are more complicated and with substantial amounts, both the taxpayer and the tax collection authority have to spend certain personnel and relevant costs whenever the tax collection authority conducts investigations afterwards. In order to prevent the dispute triggered from such ex post facto investigations which might cause extra burden of tax collection administration, the profit-seeking enterprises mayapply for the Advance Pricing Agreement (hereinafter referred to as APA) with the tax collection authority and negotiate controlled transactions in accordance with the regulations.

NTBT further pointed out that, the APA is an advanced agreement concluded between the taxpayer and the tax collection authority, which agreement shall be signed after both parties have discussed the comparables and its transaction result, assumptions, pricing policies, calculation methods, applicable period and other major issues. The applicable fiscal years of the APA are limited to three to five years since application year. If there is no substantial change to the relevant facts or environment regarding the APA, both parties of the taxpayer and the tax authority may, based on the principles of taxation efficiency, extend the applicable period of the agreement; however, the extended period shall not exceed five years. Recently, NTBT have reviewed the application of APA from Korean Group’s subsidiary in Taiwan, both parties have concluded the APA by mutual consent. This successful application would be able to create a win-win situation for both parties of taxpayer and the tax collection authority.

NTBT called on more APA application: the conclusion of APA, can not only clarify the tax liabilities of multinational group but reduce the risk of possible redundant tax review, is worthy for multinational groups to utilize it.

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