The National Taxation Bureau of Taipei, Ministry of Finance stated that for sole proprietorships violating tax regulations, the punishment shall be imposed on the responsible person registered at the time of the violation.

The Bureau explained that recent instances have been discovered in which sole proprietorships quickly and deliberately change their responsible person after being caught by tax authorities for violating tax regulations in an attempt to avoid additional taxes and penalties. According to the Ministry of Finance's Directive Tai-Cai-Shui No. 861894479 dated May 7, 1997, if a sole proprietorship is found to have violated tax regulations before changing its responsible person or business registration, the punishment shall still be imposed on the person registered as the responsible person at the time of the violation.

The Bureau pointed out that sole proprietorships do not have legal person status. Although they operate under the name of the sole proprietorship, the rights and obligations ultimately belong to the individual investors (proprietors). The natural person operating the sole proprietorship is the subject of these rights and obligations. Therefore, when a sole proprietorship commits a tax law violation warranting punishment, the natural person operating the business shall be the subject of such punishment. Even if the responsible person is immediately changed after the violation, the rights and obligations of the sole proprietorship cannot be transferred. The Bureau will still hold the responsible person registered at the time of the violation accountable, and this will not change due to a change in responsible person.

The Bureau urges sole proprietorships that may have inadvertently violated tax regulations to promptly report and pay any additional taxes to the local tax office in accordance with Article 48-1 of the Tax Collection Act, before being reported or investigated by tax authorities or designated investigators of the Ministry of Finance, to avoid penalties.

(Contact Person: Ms. Chen, Head of Legal Affairs Division; Phone: 2311-3711 ext. 2071)