2020-05-18 13:11:41

In response to the COVID-19 pandemic, the Ministry of Finance has extended the tax return period to June 30th this year to reduce the risk of group infections, a first for the country. However, the National Taxation Bureau reminded on the 12th that if enterprises fail to declare corporate income tax within the prescribed time limit, they are liable for a 10% “delayed declaration fee”, and cannot benefit from the loss carry forward tax privilege. In order to encourage sustainable operation for enterprises, the country’s income tax law stipulates that enterprises can use the losses of the previous decade as a deduction. As many companies need to invest large sums of money in the initial stage of entrepreneurship, considering the severity of initial losses, the country has set up a profit and loss offset method to reduce the burden on enterprises. However, if an enterprise wants to apply for the loss carry forward tax privilege, their accounting books must comply with the regulations of the Business Entity Accounting Act, and the enterprise’s loss and revenue must be filled with the blue form return or be audited by an accountant. The enterprise must also complete the tax return within the prescribed time period. Officials have indicated that failure to file a tax return within the prescribed time period, but within 15 days of supplementary filings, enterprises shall be subject to a late surcharge of 10%. Taking this year as an example, the tax filing period is until June 30th. If an enterprise makes a return before July 15th, in addition to the corporate income tax payable, they are also liable for a late surcharge (up to TWD30,000). If an enterprise delays reporting 15 days after the prescribed time period, using this year as an example, after July 16th, the enterprise will be liable for an additional 20% "delayed declaration fee" (up to TWD90,000) in addition to the assessed tax payable. Officials have emphasized, if an enterprise files tax return after the prescribed time period, not only can they not benefit from the loss carry forward tax privilege, if there is an under-reporting of taxable income, the National Taxation Bureau may impose a fine of less than three times the amount of tax evaded by the enterprise. For example, company A had an annual income of TWD3 million in 2018, which can be reported after deducting the previous year’s loss of TWD1 million, which is equal to a taxable income of TWD2 million. Generally speaking, company A only needs to pay TWD400,000 for corporate income tax (2 million x 20%). However, the accounting staff of company A failed to report within 30 days due to negligence. The National Taxation Bureau determined that company A could not apply for the loss carry forward tax privilege, and the income tax payable was increased to TWD600,000 (3 million x 20%). Officials have pointed out that, according to calculations, the late surcharge was TWD120,000 (600,000 x 20%), but as the legal limit had been reached, and the final penalty was TWD90,000.