[Finance]

Ministry of Finance intends to provide tax preference for foreign entities without permanent establishments or branches that operating profit in income within territory of ROC can be deducted as cost expense so that the tax shall be greatly lowered. A foreign entity in ROC can deduct surplus, i.e. operating profit in compliance with Article 8-9 of Income Tax Act from total income by providing invoices/receipts of cost expenses. And withholding tax at the rate of 20% could be calculated based on the net income by deducting the cost expense. However, it is not easy to recognize the difference between operating profit, other income and labor remuneration. According to scholars’ opinion, most of the surplus, not from royalty, dividend or interest, shall be recognized as operating profit.