National Taxation Bureau of the Central Area, Ministry of Finance indicated that commission expenses are what profit-seeking enterprises pay to agents, representatives, or brokers who act on their behalf to introduce or sell products or services. Whether a commission is paid will depend on whether agents, representatives, or brokers actually provide agency services. If agency services are not actually provided, agency contract and proof of payment settlement will not sufficiently justify that the commission expenses paid are necessary or reasonable for business needs.
The Bureau explained with an example that, domestic Company A filed Year 2022 Profit-seeking Enterprise Income Tax, reporting export commission expenses of NT$3,000,000, which was as high as 30% of the price of exported goods. Company A submitted the commission contract and remittance certificate signed with Foreign Company B. However, the commission contract did not specify the content of the agency services provided by Foreign Company B or the calculation method of commission. In addition, before signing the commission contract with Foreign Company B, Company A had direct business dealings with Foreign Company C, which was claimed to be the buyer arranged by broker Foreign Company B. Even if the commission contract was signed in form, it was still difficult to conclude that Company A had to cooperate with Foreign Company B as an intermediary to complete the transaction with Foreign Company C. Therefore, the Bureau had deducted the commission expenses and determined the amount of additional tax levied to be NT$600,000.
The Bureau reminds profit-seeking enterprises that have signed a contract with agents, representatives, or brokers and accordingly are obliged to pay commission should keep any evidentiary documentation between them and their agents. Otherwise, commission expenses will be disallowed for tax deduction due to insufficient supporting documents.
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Contact person: Profit-seeking Enterprise Income Tax Division, Mr. Yu
Tel: (04)2305-1111 ext. 7131.