The amount of income of a profit-seeking enterprise shall be the net income, i.e., the gross yearly income after deduction of all costs, expenses, losses and taxes. When calculating the amount of income in which there are taxable and exempt incomes involved, the costs, expenses or losses, except for those which are attributable to such respective income in a direct, reasonable and definite way, which may be attributed to thereby and recognized as deductions respectively, shall be reasonably allocated to the respective income. Measures regarding such allocation shall be prescribed by the MOF.
The accounts, expenses, losses, or various debts recorded in a profit-seeking enterprise's accounts that are payable but yet to be paid at the time of the expiry of the statute of limitations shall be enumerated under “other revenue” headings, and shall be enumerated under “non-operating expenditure” headings at the time of actual payment.
Income derived from interest of short-term commercial papers by a profit-seeking enterprise in accordance with Category 4, Paragraph 1 of Article 14 shall not be added to the amount of income of the profit-seeking enterprise, but withheld in accordance with Article 88. However, where the issuing date of short-term commercial papers held by a profit-seeking enterprise is a day on or after January 1, 2010, the interest income of such short-term commercial papers shall be added to the amount of income of the profit-seeking enterprise.
Beginning January 1, 2010, interest distributed from beneficiary securities or asset-backed securities issued in accordance with the Financial Asset Securitization Act or the Real Estate Securitization Act by a profit-seeking enterprise shall be added to the amount of income of the profit-seeking enterprise, and excluded from the application of Paragraph 2, Article 41 of the Financial Asset Securitization Act and Paragraph 3, Article 50 of the Real Estate Securitization Act regarding separate taxation.
The dividends or earnings received by a profit-seeking enterprise having its head office outside the territory of the Republic of China shall not be added to the amount of income of the profit-seeking enterprise, but withheld in accordance with Article 88.

Revenues received by a profit-seeking enterprise from interest on government bonds, corporate bonds, and financial bonds shall be calculated in accordance with the bonds’ holding periods, face values and interest rates.
The tax on interest revenues, as mentioned in the preceding paragraph and calculated in accordance with the prescribed withholding rates, shall be deducted from the amount of income tax payable on the annual income tax return of a profit-seeking enterprise.
The gains or losses derived from securities transactions whereby a profit-seeking enterprise purchases bonds as described in the first paragraph between two interest payment days and then sells them before the next interest payment day shall be the net amount of the sale price minus the purchase price and interest revenues.
Beginning January 1, 2010, the interest derived from a repo (RP/RS) trade whereby a profit-seeking enterprise purchases securities or short-term commercial papers as described in the first paragraph and Paragraphs 2 and 3 in the preceding Article shall be the net amount of the sale price at their maturity in excess of the original purchase price. The interest shall be withheld in accordance with Article 88 and added to the amount of income of the profit-seeking enterprise, and the amount of such withholding tax shall be deducted from the amount of income tax payable for the annual income tax return of the profit-seeking enterprise.

Articles 4-1 and 4-2 shall not apply to gains or losses resulting from the buying or selling of securities or financial derivatives as approved by the competent authority for the purposes of risk management undertaken by a warrant issuer who issues call (put) warrants which have been approved by the competent authority. In such case, the gains or losses shall be included in the profits or losses from issuing call (put) warrants. Where, however, the losses resulting from the buying and selling of call (put) warrants and the underlying securities as approved by the competent authority and from the buying and selling of futures, which are subject to the futures transaction tax in accordance with the Futures Transaction Tax Act, exceed the net amount of premiums received for the issuance of the call (put) warrants after subtracting relevant costs and expenses, such losses shall not be deductible.
Articles 4-1 and 4-2 shall not apply to profits or losses resulting from the carrying on of the business of financial derivatives transactions as approved by the competent authority. Such profits or losses shall, after the completion of settlement, be included in the amount of the income of the profit-seeking enterprise in the year of settlement and taxed accordingly.

Where a shareholder, a member of the board of directors, or a supervisor of a profit-seeking enterprise organized as a company who receives money on behalf of the company and does not turn in the said sum within a reasonable period of time, or appropriates the sum for his or her own use, a tax shall be charged to the company for interest income based on the lending base rate of the Bank of Taiwan on January 1 of each respective year. However, if the aforesaid person has committed the offence of misappropriation, breach of trust or fraud against the company and has been charged with a lawsuit or prosecuted by a prosecutor, the company shall be exempt from such tax on interest income.
A company that lends money to a shareholder or any person without charging interest or charging the stipulated interest at an obviously lower rate, except for paying in advance the salary of an employee, shall calculate interest income based on the lending base rate of the Bank of Taiwan on January 1 of each respective year and an interest income tax shall be levied on the profit-seeking enterprise in accordance with this Act.

Beginning from the year 2011, a profit-seeking enterprise which has its head office within the territory of the Republic of China and is engaged in marine transportation, qualified under certain criteria and approved by the central competent authority will be able to calculate the taxable income derived from marine transportation on the basis of the amount of the net tonnage, which is regulated in Paragraph 2. As for the revenue from activities other than marine transportation, the calculation of such income is subject to the relevant provisions of this Act.
The taxable income derived from marine transportation as mentioned in the preceding paragraph is calculated by multiplying the accumulated daily profit, calculated in accordance with the following table, by 365 days:
1. For each ship with a net tonnage not exceeding 1,000 tons, the daily profit for each 100 tons up to 1,000 tons shall be NT$67.
2. If the net tonnage of the ship is above 1,000 tons but no more than 10,000 tons, the daily profit for each 100 tons between 1,000 and 10,000 tons shall be NT$49.
3. If the net tonnage of the ship is above 10,000 tons but no more than 25,000 tons, the daily profit for each 100 tons between 10,000 and 25,000 tons shall be NT$32.
4. If the net tonnage of the ship is above 25,000 tons, the daily profit for each 100 tons above 25,000 tons shall be NT$14.
The profit-seeking enterprise which elects to calculate the taxable income derived from marine transportation in accordance with Paragraph 1, once the choice is made to do so, shall be bound to such choice for a period of 10 years and shall not be changed. In case the profit-seeking enterprise fails to meet the requirements with reference to Paragraph 1 within the aforementioned period, and the approval has been cancelled by the central competent authority, such enterprise will not be eligible to apply to calculate its income under the terms and conditions in the preceding paragraph for a period of five years commencing from the year in which it fails to meet the requirements.
To the profit-seeking enterprise which elects to calculate its taxable income in accordance with Paragraph 2, the following provisions do not apply:
1. The proviso of Paragraph 1, Article 39 regarding the deduction of losses.
2. Other tax incentives provided for in other laws.
The regulations governing the scope of business revenue, deadlines for filing applications, application procedures and other relevant matters in Paragraph 1 shall be prescribed by the MOF in consultation with the central competent authority.

Income or losses derived from transactions of house and land by a profit-seeking enterprise for the current year, where the amount of the income or losses shall be the total revenue minus the costs, expenses, and losses. However, the land value increment tax paid in accordance with the Land Tax Act shall be excluded from the expenses, unless such tax paid is prorated to the part of the total amount of land value increment not being deducted from the amount of the income.
Income derived from transactions of house and land by a profit-seeking enterprise and calculated in accordance with the preceding Paragraph, after deduction of the total amount of land value increment calculated in accordance with the assessed present value provided in Paragraph 1, Article 30 of the Land Tax Act, shall not be added to the amount of income of the profit-seeking enterprise. The tax payable shall be computed separately in accordance with the following tax rates. If the enterprise has no fixed establishment within the territory of the Republic of China, its business agent or an entrusted agent shall be responsible for the filing of the income tax return and the payment of tax.
1. For a profit-seeking enterprise having its head office within the territory of the Republic of China:
(1) The transferred house and land that have been held for a period of no more than 2 years shall be taxed at 45%.
(2) The transferred house and land that have been held for a period of more than 2 years but no more than 5 years shall be taxed at 35%.
(3) The transferred house and land that have been held for a period of more than 5 years shall be taxed at 20%.
(4) House and land that have been held for a period of no more than 5 years and are transferred because of any involuntary cause announced by the MOF shall be taxed at 20%.
(5) A profit-seeking enterprise who sells house and land, where the house is built in partnership with a business entity and the share of land associated with the unit has been held for a period of no more than 5 years, shall be taxed at 20%.
(6) House and the share of land associated with the house that are transferred for the first time after the completion of construction and have been held for a period of no more than 5 years, where the house and land are acquired through participation in urban renewal by providing land, legal buildings, other rights, or capital in accordance with the Urban Renewal Act or participation in reconstruction in accordance with the Statute for Expediting Reconstruction of Urban Unsafe and Old Buildings, shall be taxed at 20%.
2. For a profit-seeking enterprise having its head office outside the territory of the Republic of China:
(1) The transferred house and land that have been held for a period of no more than 2 years shall be taxed at 45%.
(2) The transferred house and land that have been held for a period of more than 2 years shall be taxed at 35%
The amount of losses derived from transactions of house and land by a profit-seeking enterprise for the current year calculated in accordance with Paragraph 1 shall be deducted first from the income derived from transactions of house and land computed at the same applicable tax rate for the current year. Only when such income is insufficient to be deducted, may the portion of losses which are not yet deducted be deducted from the income derived from transactions of house and land computed at the different applicable tax rate for the current year. If there is a balance of losses after the subtraction in the current year, the losses may be deducted from the income derived from transactions of house and land within ten years from the year after such losses are derived.
A house and the share of land associated with the house that are transferred for the first time after the completion of construction shall be exempt from application of the preceding two Paragraphs. Income derived from such transactions of house and land by a profit-seeking enterprise calculated in accordance with Paragraph 1, after deduction of the total amount of land value increment calculated in accordance with the assessed present value provided in Paragraph 1, Article 30 of the Land Tax Act, shall be added to the amount of income of the profit-seeking enterprise. If the balance is a negative figure, the transaction income shall be counted as zero. The losses derived from transaction of house and land may be deducted from the income of the profit-seeking enterprise. However, the total amount of land value increment prescribed above shall not be deducted.
In the course of an investigation or a recheck conducted by the tax authority, where a profit-seeking enterprise fails to present the account books and documents of evidence to prove the amount of his income derived from a transaction of house and land, the tax authority shall determine the amount of the transaction income based on the investigative information. When the investigative information of the cost or expense is not available, the tax authority may assess the cost, based on the assessed value of the house and the present value of the land at the time of acquisition (which shall be duly adjusted with the price index announced by the government), and may assess the expense, based on 3% of the transaction price, and such expense shall not exceed NT$300,000.
A profit-seeking enterprise organized as a sole proprietorship or a partnership that has any income derived from transactions of house and land shall be subject to assessment of income tax in accordance with Articles 14-4 through 14-7 of this Act, and such income shall not be added to the amount of income of the profit-seeking enterprise. The preceding five Paragraphs shall not apply to a profit-seeking enterprise organized as a sole proprietorship or a partnership.

Any profit-seeking enterprise having its head office outside the territory of the Republic of China and being engaged in international transport, construction contracting, providing technical services, or machinery and equipment leasing, etc., in the territory of the Republic of China, the cost and expenses for which are difficult to allocate and calculate may apply for approval from the MOF, or the MOF may make the decision to consider ten percent of its total business revenue for an enterprise engaged in international transport business, or fifteen percent of its total business revenue for one engaged in any other businesses, as its income derived within the territory of the Republic of China regardless whether or not it has a branch office or business agent in the territory of the Republic of China. In such cases, however, the regulations in Article 39 regarding the deduction of losses cannot be applied.
Business revenue derived by an international transport enterprise within the Republic of China as provided in the preceding paragraph shall be as follows:
1. Marine transport enterprises: Referring to all ticket fares or transportation charges for outbound passengers and cargo accepted for carriage inside the territory of the Republic of China;
2. Air transport enterprises:
(1) Passenger transport: refers to ticket fares from the stations of embarkation inside the territory of the Republic of China to first-leg stations outside the territory of the Republic of China,
(2) Cargo transport: refers to freight charges for the entire trip for the cargo accepted for carriage. However, if an international air transport enterprise has transshipped its outbound cargo enroute to an aircraft of another international air transport enterprise due to the route restrictions or other reasons, its freight charges shall be calculated according to the distance of the trip actually made.
First-leg stations outside the territory of the Republic of China as provided in Item 1, Subparagraph 2 of the preceding paragraph shall be prescribed by decree of the MOF.

In the case of a motion picture enterprise outside of the territory of the Republic of China which has no branch office inside the territory of the Republic of China, fifty percent of the revenue from the lease of motion pictures through agents shall be deemed as income within the territory of the Republic of China. Where a branch office has been established inside the territory of the Republic of China, costs may be computed at forty-five percent of the revenue from the lease of motion pictures.

Where documents of evidence with respect to purchases are not obtained or kept by a profit-seeking enterprise or are found to be incorrect upon verification, the tax authority may determine the purchase costs on the basis of the lowest prices in the current year at the locality concerned.
Where documents of evidence with respect to sales are not issued to others or the counterfoils thereof are not kept by a profit-seeking enterprise, the tax authority may determine the selling prices on the basis of the highest price in the current year at the locality concerned.

The portion of an item of raw material used by a manufacturer in excess of the general raw material consumption standard of the trade shall be disallowed unless a justifiable reason is submitted to the tax authority and found true upon verification by the tax authority.

Interest on capital is a distribution of profit and, as such, shall not be considered as expense or loss.

Interest payable on loans within a business year is deductible as expense or loss of that year.
Where the interest rate on a loan as provided for in the loan contract exceeds the statutory rate, computation shall nevertheless be made according to the maximum interest rate chargeable by local commercial banks; however, in case the tax authority has determined the maximum interest rate with respect to a loan acquired from a source other than a bank by reference to the market rate, the maximum interest rate as determined by the tax authority may apply.

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Salaries of the staff employees and workers of a profit-seeking enterprise in conformity with any of the following provisions may be considered as expense or loss:
1. Salaries of the staff employees and workers paid by corporations or cooperatives, or salaries of the shareholders, board directors and supervisors who conduct business under a prior agreement paid by corporations or cooperatives duly prescribed in the provisions of incorporation or under a previous resolution of a shareholders' meeting or members' meeting as payable, irrespective of whether the enterprises or cooperatives operate at a profit or loss.
2. Salaries of the staff employees and workers of a partnership or sole-proprietorship and salaries of the partners or sole proprietor who conducts the business, paid irrespective of whether the partnership or sole-proprietorship operates at a profit or loss, if the amount of the salaries paid does not exceed the standard generally adhered to by other firms of the same trade.

All those profit-seeking enterprises to which the Labor Standards Act applies may each year set aside an amount within the limit of no more than fifteen percent of the total salaries and wages paid in that year, as a worker retirement reserve according to the Labor Standards Act or as labor pension or annuity insurance premiums according to the Labor Pension Act, and the appropriation thus made may be considered as expense of that year.
Any profit-seeking enterprise which is not subject to the application of the Labor Standards Act and has established rules for the retirement of staff employees and workers may each year set aside a reserve for retirement pensions of no more than four percent of the total salaries and wages paid in that year. However, in the case where a profit-seeking enterprise has set aside a retirement fund for staff employees that is operated independently of the aforesaid profit-seeking enterprise under a separate means of custody, operation, distribution, etc., in conformity with the regulations as prescribed by the MOF, the profit-seeking enterprise may each year appropriate within the limit of no more than eight percent of the total salaries and wages paid in that year to the retirement reserve and may further consider the appropriation as an expense of that year.
Where a retirement fund for workers or a reserve for retirement pensions for staff employees has been set up pursuant to the above two paragraphs, payment of retirement pensions or severance pay in accordance with the regulations shall be paid first from such fund or reserve when staff employees and workers retire or are dismissed henceforward, and only when the fund or the reserve is insufficient to meet requirements, may such payments be considered as expense of the year of payment.
In computing income during a liquidation proceeding upon dissolution, closure, merger or transfer of ownership of a profit-seeking enterprise in accordance with Article 75, the accumulative balance of the retirement fund for workers or the reserve for retirement pensions should be transferred to the current year's profit and handled accordingly.

Expenditures incurred in the expansion, replacement, improvement or repair of buildings, vessels, machinery, tools, apparatus, appliances and other equipment for use in business, where such expenditures result in an increase of the value or efficiency thereof that cannot be exhausted within two years, are an increment of the capital and, as such, shall not be considered as expense or loss.

For damages due to force majeure, the portion of loss that has been indemnified by insurance shall not be considered as expense or loss.

Voluntary contributions and donations made by a profit-seeking enterprise shall be considered as expense or loss of the year of payment in accordance with the following provisions:
1. Regarding those contributions that have been made for assisting national defense construction or troop morale, to government at any level and donations for a designated purpose approved by the MOF as a special case, no restriction on the amount of money is placed;
2. In addition to the contributions and donations as provided in the preceding subparagraph, those that have been made by organizations and institutions which conform to Paragraph 4 of Article 11 are capped at ten percent of the amount of income.

Direct expenses incurred in the course of business for social entertainment for which positive evidence of payment has been received may be considered as expense or loss to the extent as provided hereunder:
1. If the value of yearly purchases of an enterprise is less than NT$30,000,000, direct expenses for social entertainment incurred at the time and for the purpose of purchase shall not exceed 0.15% of the value of purchases for the whole year, and such expenses for an enterprise approved to use Blue Returns shall not exceed 0.2% of the value of purchases for the whole year. If the value of yearly purchases is between NT$30,000,000 and NT$150,000,000, the expenses for social entertainment corresponding to the portion of purchases in excess of NT$30,000,000 shall not exceed 0.1% of that portion, and such expense for an enterprise approved to use the Blue Returns shall not exceed 0.15%. If the value of yearly purchases is between NT$150,000,000 and NT$600,000,000, the expenses for social entertainment corresponding to the portion of purchases in excess of NT$150,000,000 shall not exceed 0.05% of that portion, and such expenses for an enterprise approved to use the Blue Returns shall not exceed 0.1%. If the value of yearly purchases exceeds NT$600,000,000, the expenses for social entertainment corresponding to the portion of purchases in excess of NT$600,000,000 shall not exceed 0.025% of that portion, and such expenses for an enterprise approved to use the Blue Returns shall not exceed 0.05%;
2. If the value of yearly sales of an enterprise is less than NT$30,000,000, direct expenses for social entertainment incurred at the time and for the purpose of sales shall not exceed 0.45% of the value of sales for the whole year, and such expenses for an enterprise approved to use the Blue Returns shall not exceed 0.6% of the value of sales for the whole year. If the value of yearly sales is between NT$30,000,000 and NT$ 150,000,000, the expenses for social entertainment corresponding to the portion of sales in excess of NT$30,000,000 shall not exceed 0.3% of that portion, and such expenses for an enterprise approved to use the Blue Returns shall not exceed 0.4%. If the value of yearly sales is between NT$150,000,000 and NT$600,000,000, the expenses for social entertainment corresponding to the portion of sales in excess of NT$150,000,000 shall not exceed 0.2% of that portion, and such expenses for an enterprise approved to use the Blue Returns shall not exceed 0.3%. If the value of yearly sales exceeds NT$600,000,000, the expenses for social entertainment that correspond to the portion of sales in excess of NT$600,000,00 shall not exceed 0.1% of that portion, and such expenses for an enterprise approved to use the Blue Returns shall not exceed 0.15%.
3. If the amount of yearly freight charges of an enterprise is less than NT$30,000,000, direct expenses for social entertainment incurred at the time and for the purpose of transportation of goods shall not exceed 0.6% of the freight charge for the whole year , and such expenses for an enterprise approved to use the Blue Returns shall not exceed 0.7% of the freight charges for the whole year. If the amount of yearly freight charges is between NT$30,000,000 and NT$150,000,000, the expenses for social entertainment corresponding to the portion of freight charges in excess of NT$30,000,000 shall not exceed 0.5% of that portion, and such expenses for an enterprise approved to use the Blue Returns shall not exceed 0.6%. If the amount of yearly freight charges exceeds NT$150,000,000, the expenses for social entertainment corresponding to the portion of freight charges in excess of NT$150,000,000 shall not exceed 0.4% of that portion, and such expenses for an enterprise approved to use the Blue Returns shall not exceed 0.5%.
4. If the yearly business income of those businesses engaged in providing services or credit is less than NT$9,000,000, direct expenses for social entertainment incurred at the time and for the purpose of consummating business transactions for the supply of services or credit shall not exceed 1% of the business income for the whole year, and such expenses for an enterprise approved to use the Blue Returns shall not exceed 1. 2% of the business income for the whole year. If the yearly business income is between NT$9,000,000 and NT$45,000,000, the expenses for social entertainment corresponding to the portion of business income in excess of NT$9,000,000 shall not exceed 0.6% of that portion, and such expenses for an enterprise approved to use the Blue Returns shall not exceed 0.8%. If the yearly business income exceeds NT$45,000,000, the expenses for social entertainment corresponding to the portion of business income in excess of NT$45,000,000 shall not exceed 0.4% of that portion, and such expenses for an enterprise approved to use the Blue Returns shall not exceed 0.6%.
The limits of various entertainment expenses allowed for disbursement by state-owned enterprises shall be determined by the competent authority and set out in their budgets. For a profit-seeking enterprise that engages in export trade and earns foreign exchange receipts, besides considering as expense the payment of social entertainment expenses as prescribed in the Subparagraphs of the preceding Paragraph, a special social entertainment expense may also be considered as expense, not exceeding 2% of its total foreign exchange receipt settlements of the current year.

Losses incurred not in the course of operation of business or subsidiary business, family expenses, surcharges for delinquent reporting, non-reporting, and delinquent payment of tax as provided in various tax laws, and various fines shall not be considered as expense or loss.

Losses incurred in the operation of business in previous years shall not be included in the computation of taxable income for the current year. However, in the case of a profit-seeking enterprise organized as a company that keeps a complete set of account books and evidential documents, uses the Blue Returns as provided in Article 77, or the account books of which have been audited and attested to by a certified public accountant, both for the years such losses occurred and for the years to which the losses are carried over, and then files annual income tax return within the prescribed period, taxation may be made on its net income after the deduction of losses incurred in the preceding ten years as verified and determined by the competent tax authority.
If losses incurred before the implementation of the amendment of this Act on January 6, 2009, by a profit-seeking enterprise organized as a company conforming to the requirements set out in the proviso of the preceding Paragraph, as verified and determined by the tax authority have not been deducted completely according to the Act before January 6, 2009, the amended provision applies to the remaining losses.

Where the period of business operation is under one year, the amount of income derived for such period shall first be converted into a corresponding annual income according to the proportion of the length of the period to the year, and the amount of income tax shall then be determined by the tax rate applicable to such annual income but paid on the basis of the original proportion for the period in which business is actually operated.
Where the period of business operation is shorter than one month, it shall be counted as one month.

If a profit-seeking enterprise whose head office is outside the territory of the Republic of China has a fixed place of business or a business agent located inside the territory of the Republic of China, the fixed place of business or business agent shall keep separate accounting books and its profit-seeking enterprise income tax shall be assessed accordingly.

The dividends or earnings received by a profit-seeking enterprise, organized as a company, a cooperative, or other juristic person, from its investment in another domestic profit-seeking enterprise shall not be included in its taxable income.

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A profit-seeking enterprise which has an affiliated relationship with, or is directly or indirectly owned or controlled by another domestic or foreign profit-seeking enterprise, whereof, if it is found that arrangement of their mutual income, cost, expense, profit or loss distribution does not conform with the regular business practices for resulting in the tax evasion or reduction, the tax authority, for the purpose of accurately computing the income of this enterprise, may report it to the MOF for approval in effecting an adjustment in accordance with the regular business practice.

Beginning from the year 2011, excess interest shall not be considered as expense or loss if the proportion of related party debt to equity of a profit-seeking enterprise exceeds a specified ratio.
The profit-seeking enterprise referred to in the preceding paragraph shall, when filing its tax return, disclose the information regarding the debt-to-equity ratio of the debt owed to related parties and other relevant information in its annual income tax return.
The regulations governing the scope of related parties, liabilities, and owner's equity, the specified debt-to-equity ratio, and other requirements to be observed by the profit-seeking enterprise specified in Paragraph 1 of this Article shall be prescribed by the MOF.
The preceding three paragraphs shall not apply to banks, credit cooperatives, financial holding companies, bills finance companies, insurance companies and securities firms.

For any profit-seeking enterprise and its related parties directly or indirectly holding 50% or more of the shares or capital of a foreign affiliated enterprise in a low-tax country or jurisdiction, or having a significant influence on such a foreign affiliated enterprise, unless one of the following provisions is met, the surplus earnings of that foreign affiliated enterprise shall be recognized as the profit-seeking enterprise’s investment income which is calculated according to the ratio and holding period of the shares or capital, and such investment income shall be included in the taxable income of the current year:
1. The foreign affiliated enterprise engages in substantial operating activities in its country or jurisdiction.
2. The current year surplus earnings of the foreign affiliated enterprise are below a given standard. However, if the aggregate amount of the current year’s surplus earnings of all foreign affiliated enterprises which are held by the same profit-seeking enterprise exceeds such standard, the investment income of the aforesaid foreign affiliated enterprises shall still be included in the taxable income of the current year.
The term "low-tax country or jurisdiction", as mentioned in the preceding paragraph, refers to where the tax rate of the profit-seeking enterprise income tax or substantially similar tax in the country or jurisdiction where a foreign affiliated enterprise is located is not more than 70 percent of the tax rate set in Subparagraph 2 of Paragraph 5 of Article 5, or where only income sourced from that country or jurisdiction is taxed.
Starting from the current year in which the foreign affiliated enterprise meets Paragraph 1, if the losses of each year incurred in the foreign affiliated enterprise have been audited and attested to by a certified public accountant in a local country or jurisdiction or in the Republic of China , then filed by the profit-seeking enterprise, and verified by the tax authority, such losses may be deducted from surplus earnings of the foreign affiliated enterprise within ten years, and the investment income of the profit-seeking enterprise shall be calculated in accordance with Paragraph 1.
When the profit-seeking enterprise receives dividends or surplus earnings from the foreign affiliated enterprise, the amount received has been recognized as investment income under Paragraph 1 shall not be included in the taxable income; the excess amount shall be included in the taxable income of the receiving year. In the case that income tax has been paid on dividends or surplus earnings in accordance with the tax law of the source country, such tax paid may, upon presentation by the taxpayer of evidence of tax payment issued by the tax office of said source country and attested by an overseas agency of the Republic of China or other organizations recognized by the Government of the Republic of China in the said locale, be deducted from the amount of tax payable by the taxpayer within five years from the date following the expiration date of the statuary period for filing the tax return in the year of recognizing investment income, to the extent that such deduction shall not exceed the amount of additional tax payable from the inclusion of the investment income with the applicable domestic rate.
The regulations governing the scope and relevant calculation methods of related parties, affiliated enterprises, a significant influence, recognized investment income, substantial operating activities, a standard of the current year surplus earnings, the deduction of losses, and foreign tax credits, required documents, and other requirements specified in the preceding four Paragraphs shall be prescribed by the MOF.
If an affiliated enterprise specified in Paragraph 1 is subject to Article 43-4 for a given year, the preceding five Paragraphs do not apply.

Any foreign profit-seeking enterprise established according to foreign law but with a place of effective management in the Republic of China shall be deemed as a profit-seeking enterprise having its head office within the territory of the Republic of China, and it shall be subject to the profit-seeking enterprise income tax in accordance with the Income Tax Act and other relevant laws. In case of violation, the foreign profit-seeking enterprise shall be subject to the Income Tax Act and other relevant laws.
A foreign profit-seeking enterprise specified in the preceding Paragraph shall be deemed as a profit-seeking enterprise established according to the Republic of China’s laws, and its payment of various kinds of income shall be recognized as income from sources in the Republic of China in accordance with Article 8. The tax withholders shall withhold income tax from various income payments and issue withholding tax statements or non-withholding tax statements, dividend statements, and other relevant certificates in accordance with the Income Tax Act and other relevant laws. In case of violation, the foreign profit-seeking enterprise shall be subject to the Income Tax Act and other relevant laws. However, if the foreign profit-seeking enterprise distributes surplus earnings not earned in the year pertaining to the profit-seeking enterprise income tax in accordance with Paragraph 1, the surplus earnings are considered to be not from sources in the Republic of China in accordance with Article 8.
The term "a foreign profit-seeking enterprise with a place of effective management in the Republic of China" as mentioned in Paragraph 1 refers to a foreign profit-seeking enterprise that is in accordance with the following provisions:
1. The decision maker who makes significant decisions in business management, financial management, and personnel management is an individual resident in the Republic of China, the head office is within the territory of the Republic of China, or the place where the significant decisions are made is in the Republic of China.
2. Financial statements, records of accounting books, minutes of meetings of the Board of Directors or minutes of meetings of the shareholders are prepared or stored in the territory of the Republic of China.
3. Major business activities are carried out in the Republic of China.
The MOF shall prescribe the regulations governing the measures applying to levying income tax, withholding tax, and issuing certificates; the standard and procedure of identifying place of management and evidential documents; and other requirements specified in the preceding three Paragraphs.