Taiwan's transfer pricing rules require extensive contemporaneous documentation for related party transactions.

Prior to submission of annual corporate income tax return, an enterprise must have a transfer pricing report and related documentation prepared and ready for submission if requested by the tax authorities for investigation. Any request for documentation must be provided within 30 days of the initial request, though an additional 30 day extension may be made available if formally requested.

The contemporaneous documentation that must be kept, in addition to the documentation disclosed with the annual tax return, includes:

• The transfer pricing report, including:
  • An industry and economic analysis
  • A functions and risks analysis of all related parties in the transactions
  • How the arm’s length principle is applied
  • The selection of comparables and related information
  • A comparability analysis
  • The transfer pricing methods selected by the enterprise and the related parties
  • The result of comparables search under the best method of transfer pricing
• Report of affiliated enterprises as defined under Taiwan company law, which includes:
  • Enterprises that have controlling and subordinate relation between
  • Enterprises that have made investment in each other
• Any other documents relevant to the pricing between related parties

Unless prior approval is obtained, the transfer pricing documentation must be in Chinese

Safe Harbor

Taiwan transfer pricing rules include provisions for safe harbor. If an enterprise meets the thresholds for safe harbor they do not need to maintain contemporaneous transfer pricing documentation. However the Taiwan tax authorities can still request other documentation in regard to transfer pricing to evidence that transaction are done at arm's length. Enterprises meeting any of the following criteria can qualify for safe harbor under Taiwan's transfer pricing rules.

• Total annual revenue does not exceed TWD 300 million
• Total annual revenue exceeds TWD 300 million but does not exceed TWD 500 million, and total related party transactions do not exceed TWD 100 million
• Does not utilize tax credits of more than TWD 2 million in a single year or a carry forward of losses exceeding TWD 8 million for the preceding 5 years to reduce income tax
• The enterprise has no transactions with any non-resident related or affiliated parties
• Total annual related party transactions is less than TWD 200 million

Country-by-Country Reporting

On 14 November 2017, Taiwan adopted the three-tiered documentation requirements of BEPS Action 13, including the Master file, Local file, and Country-by-Country (CbC) Report. The rules are applicable to fiscal years beginning on or after 1 January 2017.

Master File

A Master file must be filed with the Taiwan authorities if an MNE group entity resident in Taiwan meets a TWD 3 billion annual revenue threshold and cross-border related-party transactions meet a TWD 1.5 billion threshold.

The Master file documentation requirements are in line with the BEPS Action 13 guidelines. The Master file is required to be submitted within 12 months following the close of the fiscal year. An MNE group may designate one entity for submitting the Master File. The Master file should be prepared in Chinese or accompanied by a Chinese translation. English may be accepted, but a translation must be submitted within one month of request with a possible one-month extension.

Local File

The Local file documentation requirements are an expansion of the previous transfer pricing documentation rules and are in line with the BEPS Action 13 guidelines. The Local file is also required to be submitted within 12 months following the close of the fiscal year. Current revenue/transaction thresholds applicable for transfer pricing documentation requirements may apply in respect of the Local file.

The Local file should be prepared in Chinese or accompanied by a Chinese translation. English may be accepted, but a translation must be submitted within one month of request with a possible one-month extension.

CbC Report

The CbC reporting requirements are in line with the BEPS Action 13 guidelines. The reporting threshold for the CbC report is TWD 27 billion consolidated group revenue in the previous year.

A CbC report must be filed by

• The ultimate parent entity of an MNE group resident in Taiwan, or
• Non-parent constituent entity resident in Taiwan, if one of the conditions is met:
  • The ultimate parent entity is not obligated to file a CBCR in its jurisdiction of tax residence;
  • There is no agreement for exchange of CbC report with Taiwan; or
  • Taiwan authorities were unable to obtain the CbC report filed by the ultimate parent entity

However, the Taiwan constituent entity will not be required to file a CbC report if a surrogate parent entity has been designated to submit a CbC report in a jurisdiction that will exchange the CbC report with Taiwan, and the same has notified to the Taiwanese authority.

CbC reports are generally required to be submitted within 12 months following the close of the reporting fiscal year.