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6.1. Main Rules Governing the Determination of Taxable Income

Taxable income of enterprises in Taiwan is defined as total annual income (worldwide for residents, Taiwan sourced for non-residents) less costs, expenses, tax-exempt income, losses carried forward from previous years, and taxes paid. The determination must be based on Taiwan's generally accepted accounting principles.

Consolidated Filing

While consolidation for groups of companies when determining taxable income is generally not allowed, certain groups are allowed to consolidate under certain restrictions, covered in Sec. 5.3. However, this is for corporate income tax only.

Deemed Profit

Taiwan allows for certain non-resident enterprises to use deemed profits rates when calculating taxable income when it is difficult to ascertain the costs and expenses from their business in Taiwan. The enterprise types include:

  • International Transportation;
  • Construction Contracting;
  • Technical Service Providers; and
  • Machinery and Equipment Leasing.

The deemed profit rates are 15% of income, or 10% for international transportation. Calculating taxable income based on deemed profits rates is available whether or not an enterprise has a fixed place of business or business agent in Taiwan. However, carry forward of prior years' losses is not allowed.

Alternative Minimum Tax

When determining an enterprise’s tax liability, the regular calculation may be compared to an alternative minimum tax (AMT) calculation (covered in Sec 8.1.). The AMT calculation includes certain income that is exempt under regular calculation, including gains from securities and futures transactions and gains from land sales.