National Taxation Bureau of Taipei, Ministry of Finance (NTBT) expressed that, in case of the business entity purchasing a debt (account receivable), subsequently if the debt payment is higher than the purchase price, the difference shall be recognized as interest income and the GUI shall be issued.
NTBT pointed out that, some creditors choose to sell its debt at a low price to pass the risk when the debtor delays to fulfill the payment. In case of that the business entity purchases aforesaid non-recourse debt and subsequently the court imposes the debtor’s property and distributes the creditor’s entitlement, if such entitlement is higher than the original purchase price of the debt, the business entity shall recognize such difference as interest income in that distribution year and issue the duplicate GUI, the receipt copy shall be preserved for future reference.
NTBT interpreted that, Company A purchased a non-recourse debt of NT$ 120,000,000 from Mr. A at the price of NT$ 41,000,000 on January 10, 2011, subsequently company A demanded the court to impose the debtor’s property, and received its entitlement of NT$ 83,000,000 on July 20, 2014. However, Company A failed to issue the GUI per the difference of NT$ 42,000,000 between the distributed entitlement and recognized such entitlement as interest income. Such situation had been found by NTBT and business tax amount of NT$ 2,000,000 in current year was levied and a fine of no more than 5 times of the tax evaded was imposed; furthermore, profit-seeking enterprise income tax based on the evaded interest income in current year was also levied and punishment was also imposed.
NTBT called on that, if there is any circumstance of that business entity purchased debt and such debt was paid, business entity shall recognize the difference between paid amount and purchase price as interest income and issue the GUI. In case of failing to recognize the interest income or failing to issue the GUI, the overdue business and profit-seeking enterprise income tax will be levied and fines will be imposed. If the public have any question, they may dial the free-toll call at 0800-000321 or go to the competent tax collection authority, the tax officers will be happy to provide service for you.
(Contact: Ms.Jian, Revenue Assessor of the Third Examination Section, Tel: 2311-3711, ext. 1730)