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Taxation
The enterprise shall recognize the loss from demolition of buildings, land improvements and undepreciated value as “cost of sale of land” according to its contracts of purchase and sale of land.
      The National Taxation Bureau of Northern Area, Ministry of Finance(NTBNA, MOF) indicated that we noted a case that a company (as a seller of land) was required to demolish buildings and land improvements before registration of land transfer pursuant to the contracts of purchase and sale of land. The company declared an annual business income tax with other losses amounting to NTD $7 million (including the undepreciated value of NTD $6.2 million and the expenses related to demolition of plant and fixtures amounting to NTD $0.8 million), and also the gains from sale of land exempt from income tax of NTD $50 million.
      The NTBNA further explained that according to the Ministry of Finance’s interpretation No.7639482, the profit-seeking enterprise
shall recognize the loss from demolition of land improvements (buildings) and undepreciated value, which were resulted from sales of land, as “cost of sale of land”. Based on the income and cost matching principle, the expenses related to demolition of plant and fixtures amounting to NTD $0.8 million and undepreciated value of NTD $6.2 million, should be recorded as “cost of sale of land.”, Hence, the gains from sale of land exempt from income tax amounting to NTD $50 million reduced to NTD $43 million, and originally declared other losses amounting to NTD $7 million reduced to NTD $0. The company shall pay an overdue tax amounting to NTD $1.19 million.
     The Bureau reminds profit-seeking enterprises of complying with the regulation to recognize the loss and undepreciated value once they are required to demolish buildings and land improvements upon the sale of land according to the contracts of purchase and sale of land. If you have any question, please visit the website of the Bureau at http://www.ntbna.gov.tw/ for more information on relevant aspects of the issue or call our toll-free number 0800-000321. It is our pleasure to service you.
Issuing Unit:National Taxation Bureau of Northern Area
Publish date:2016-07-29
View Date:2016-07-29
Update Date:2016-07-29
Rate:505
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