To protect the rights and interests of company shareholders and creditors, the Company Act stipulates that companies may lend to shareholders or any other person only under the circumstances that an inter-company transaction calls for such lending arrangement or an inter-company short-term financing facility is necessary provided. Furthermore, interest income must be calculated in accordance with Paragraph 2, Article 24-3 of the Income Tax Act.

The National Taxation Bureau of the Southern Area, Ministry of Finance stated that, in accordance with Paragraph 2, Article 24-3 of the Income Tax Act, “a company that lends money to a shareholder or any person without charging interest or charging the stipulated interest at an obviously lower rate, except for paying in advance the salary of an employee, shall calculate interest income based on the lending base rate of the Bank of Taiwan on January 1 of each respective year and an interest income tax shall be levied on the profit-seeking enterprise.” The National Taxation Bureau calls on profit-seeking enterprises to pay attention to these regulations to avoid tax adjustments and being asked to pay any additional tax levied.

For example, the National Taxation Bureau found during an audit that the asset-liability statement of Company A’s income tax return for the year 2023 reported other receivables of NT$30 million. Upon investigation, it was determined that this amount was a short-term financing loan to a peer company, for which Company A charged an interest rate of 1% per annum. Since the agreed interest rate was deemed excessively low, the interest income should be adjusted upward based on the lending base rate of the Bank of Taiwan on January 1, 2023 (2.867% per annum), in accordance with Paragraph 2, Article 24-3 of the Income Tax Act.

The Bureau would like to remind profit-seeking enterprises that when lending money to shareholders or any person, they should ensure the reasonableness of the interest charged to avoid tax adjustments and  additional tax levied from obviously too low rates. For any inquiries, please call our toll-free number 0800-000-321. It is our pleasure to serve you.

Press Release Contact: Mr. Chang
Profit-seeking Enterprise Income Tax Division
TEL: 06-2223111 ext.8053