The National Taxation Bureau of the Southern Area, Ministry of Finance, indicated that once a foreign company closes the business of its branch office in Taiwan, the branch office shall make its current final report and declare any income earned from liquidation within the prescribed period under the Article 75 of the Income Tax Act.
The Bureau expressed that a foreign company which establishes its branch office in the territory of the Republic of China (hereinafter “R.O.C.”) and which desires to cease conducting business therein, shall apply to the competent authority for nullifying the registration of the branch office according to the Article 378 of the Company Act (hereinafter “the Act”). In addition, the competent authority shall, ex officio or upon an application filed by an interested party, nullify the branch office registration of the foreign company in the event that the foreign company or the branch office has satisfied one of the items listed in Article 379 of the Act. In compliance with Article 380 of the Act, a foreign company which cancels or nullifies all of its branch offices in the territory of the R.O.C. shall complete liquidation of its business within the territory of the R.O.C. Moreover, it also has to make the current final report of the profit-seeking enterprise income tax and declare any income earned from liquidation.
The Bureau explained that a profit-seeking enterprise shall make its current final report up to the date of dissolution, closure, amalgamation or ownership transfer, and then its total business income and taxable amount on a prescribed form to the tax collection authority-in-charge within forty-five days, and further make payment voluntarily before filing the income tax return according to Article 75 of the Income Tax Act. Moreover, any income earned from liquidation during the period of liquidation shall be reported on a prescribed form to the tax collection authority-in-charge within thirty days from the date of completion of liquidation, and the taxpayer shall, before filing his/her tax return, make payment voluntarily at the prescribed rates applicable to the profit-seeking enterprise in the taxable year.
As for the earnings after completing liquidation of its business, in accordance with the Explanatory Decree No.7586738 issued by the Ministry of Finance on March 9, 1987, considering that a branch office is a branch unit of its headquarters, earnings of a branch office derived within the territory of the R.O.C. are treated as parts of earnings of its headquarters. There is no need for the branch office to distribute the earnings. However, the profit-seeking enterprise income tax shall be levied on the branch office’s profit-seeking enterprise income derived within the territory of the R.O.C. according to the Paragraph 3, Article 3 of the Income Tax Act.
The Bureau would like to remind foreign companies that, upon the closing of business of its branch offices in Taiwan, to protect its own rights and benefits, the aforesaid liquidation and current final report shall be undertaken, unless a liquidator is otherwise designated by the foreign company, by the responsible person of the foreign company in the territory of the R.O.C. or the managerial officer of its branch office within the prescribed period.
Press Release Contact: First Examination Division, Mr. Kuo