From 1998 to 2017, if there are any earnings of the current year not distributed by a profit-seeking enterprise, an additional profit-seeking income tax shall be levied at the rate of ten percent on such undistributed surplus earnings. Beginning from the year 2018, the aforesaid tax shall be levied at the rate of five percent.
The term "undistributed earnings" as referred to in the preceding Paragraph shall denote the total amount of after-tax net income for the period and other profit items adjusted to the current year’s undistributed earnings other than after-tax net income for the period as calculated by a profit-seeking enterprise in accordance with the Business Entity Accounting Act, Securities and Exchange Act, or other laws used in preparing financial reports, less the following sums:
1. The make-up of the losses in previous years and the next year’s loss, provided they have been audited and attested to by a certified public accountant;
2. The dividends or earnings which have been distributed from the earnings gained in the current year;
3. The legal earned surplus reserve having been set aside from the surplus earnings of the current year in accordance with the Company Act or other laws, the legal reserve and the public interest reserve having been set aside in accordance with the Cooperative Act;
4. The sinking fund reserve or restricted distributable surplus earnings which were required to be set aside or restricted from distribution under any treaty signed by the Republic of China with another country, or under any agreement signed in accordance with the economic assistance or loan agreement signed by the Republic of China with any international organization;
5. The special reserve or restricted distributable surplus earnings which were required to be set aside or restricted from distribution of the surplus earnings of the current year pursuant to the order given by the competent authority in accordance with other laws;
6. The capital reserve which was required to be transformed from income after tax pursuant to other laws;
7. The amount of other loss items adjusted to the current year’s undistributed earnings other than after-tax net income for the period; and
8. Other accounts as approved by the MOF.
The amount of the accounts specified in Subparagraphs 2 through 6 of the preceding Paragraph shall be limited to those that actually occurred prior to the end of the fiscal year following the year in which the respective incomes are taxable.
The terms "after-tax net income for the period" and "the amount of other profit (or loss) items adjusted to the current year’s undistributed earnings other than after-tax net income for the period" referred to in Paragraph 2 of this Article, in the case where the financial statements in the current year of a profit-seeking enterprise were audited and attested to by a certified public accountant, shall be based on the amount which was assessed by such certified public accountant. However, if thereafter the competent tax authority conducts an assessment of such financial statements and makes an adjustment to the aforesaid items, the original amount shall be replaced by the amount after such adjustment, of which the competent tax authority has informed the enterprise.
If the reasons why distributable surplus earnings were restricted from distribution pursuant to Subparagraphs 4 and 5 of Paragraph 2 of this Article no longer pertain, the part of the distributable surplus earnings that were undistributed prior to the end of the fiscal year following the year when the reasons stopped pertaining shall be added to the surplus earnings of the year when the reasons stopped pertaining and be subject to the levy of an additional profit-seeking income tax at the rate provided by Paragraph 1 of this Article.