The National Taxation Bureau of Taipei (NTBT), Ministry of Finance, states that, differences between book value and year-end valuation on accounts receivable or accounts payable denominated in foreign currencies are unrealized exchange gains or losses. These unrealized gains or losses shall be excluded from annual Profit-Seeking Enterprise Income Tax Returns.

The Bureau explains that according to Paragraph 1, Article 29 and Paragraph 1, Article 98 of the Regulations Governing Assessment of Profit-Seeking Enterprise Income Tax, recognition of exchange gains or losses is limited to “realized” amounts only. Therefore, any year-end valuation arising from unfinished transaction, regardless of gains or losses, are considered unrealized and therefore exempt from tax-purpose recognition.

NTBT provides the following example: Company A had several USD accounts receivable from export sales in Year 2023. At the end of year 2023, valuation of these accounts at spot exchange rate resulted in unrealized exchange losses of NT$5 million. Company A mistakenly reported exchange losses of NT$5 million in its Year 2023 profit-seeking enterprise income tax returns. NTBT, pursuant to Paragraph 1, Article 98 of the Regulations Governing Assessment of Profit-Seeking Enterprise Income Tax, disapproved the deduction of exchange loss of NT$5 million and assessed a tax payment bill of NT$1 million for Company A.

NTBT strongly reminds that for profit-seeking enterprise income tax purposes, unrealized exchange gains or losses are not allowed to be reported as taxable income(loss). Profit-seeking enterprises shall pay attention to relevant regulations to avoid possible incorrect reporting and related delinquent taxes.

(Contact: Ms. Wu, Head of Legal Affairs Division; Tel: +886-2-2311-3711 ext. 2011)