In light of the international trend towards transfer pricing, to enhance transparency for tax administration, to prevent cross-border tax evasion effectively, and taking into account the compliance cost for businesses, the Ministry of Finance has amended part of the Regulations Governing Assessment of Profit-seeking Enterprise Income Tax on Non-Arm's Length Transfer Pricing, in which it is declared that the multinational enterprises’ (MNEs) affiliates in Taiwan have to submit the master file and the Country-by-Country Report (CbCR) to adopt a standardized three-tiered approach to the transfer pricing documentation.

　　The National Taxation Bureau of the Southern Area, Ministry of Finance indicated that the Organization for Economic Co-operation and Development (OECD) has revealed the BEPS (Base Erosion and Profit Shifting) Action 13 Report “Transfer Pricing Documentation and Country-by-Country Reporting”, and it is recommended that every country build up the three-tiered structure, consisting of the master file, the local file and the CbCR. The master file contains the background information regarding the MNE group, such as the organizational structure, general description of MNE’s businesses, MNE group’s intangibles, MNE’s inter-company financial activities, and MNE group’s financial and tax positions. The local file analyzes the specific transfer pricing compliance for material transactions of the local taxpayer in Taiwan. As to the CbCR, it reveals specific information relating to the global allocation of the MNE’s income, taxes paid and certain indicators of the geographic location of economic activity within the MNE group. It contains the aggregate information relating to the amount of revenue, profit (loss) before income tax, income tax paid, income tax accrued, stated capital, accumulated earnings, number of employees, and tangible assets with regard to each jurisdiction in which the MNE Group operates. In addition, it also includes the nature of the main business activity or activities of such constituent entities, which include research and development; purchasing or procurement; manufacturing or production; and sales, marketing, or distribution.

　　The Bureau further explained that a domestic profit-seeking enterprise of an MNE group shall prepare the master file and the CbCR when filing the income tax returns, and submit them to the local tax  collection authority within one year after the end of the fiscal year. The entities are as follows:
　1. Master File
Where a profit-seeking enterprise that is resident in the ROC is the constituent entity of an MNE group, the constituent entity shall submit the file. If there are two or more constituent entities of the same MNE group that are resident in the ROC, the MNE group may designate one of such constituent entities to submit the master file, and the other may be exempt from submitting it.
　2. Country-by-Country Report
　　(1)Where a profit-seeking enterprise that is resident in the ROC is the Ultimate Parent Entity (UPE)  of an MNE group, the UPE shall submit the CbCR.
　　(2)Where an MNE group whose UPE is not resident in the ROC and appoints a Surrogate Parent Entity (SPE) as a sole substitute for the UPE to submit the CbCR, other profit-seeking entities of the MNE Group which are resident in the ROC shall not be required to submit the CbCR.
　　(3)If an MNE group whose UPE or SPE is not resident in the ROC, and the tax authority is unable to acquire the CbCR through any agreement that requires the exchange of CbCRs with the jurisdiction of the UPE or SPE, its constituent entity which is resident in the ROC shall submit the CbCR.

　　The Bureau reminds that if the profit-seeking enterprise which is obligated to submit the related three-tiered documentation but fails to comply with above-mentioned regulations thereby resulting in a reduction of tax liability, it will get penalized in accordance with the Article 46 of the Tax Collection Act. Please be aware of the regulations to protect your own interest.

Press Release Statements contract person:
Mr. Tu, First Examination Division
Tel:06-2223111 ext.8032