The National Taxation Bureau of the Southern Area, Ministry of Finance stated that, according to Article 38 of the Income Tax Act and Articles 62 and 103 of the Regulations Governing Assessment of Profit-seeking Enterprise Income Tax, other losses filed by profit-seeking enterprises shall be attached with legal certificates and be related to their operation of business or subsidiary business, so as to be considered as expenses or losses of profit-seeking enterprises.
The Bureau provides an example regarding Company A’s profit-seeking enterprise income tax settlement for the year 2022, which reported other losses of NT$10.49 million. This loss was incurred by Company A in issuing bills as guarantee for loans made to its subsidiary. When the subsidiary went bankrupt and was unable to repay the loan, the guarantee bills were cashed for NT$16.32 million. Subsequently, after the subsidiary’s bankruptcy, the collateral was auctioned off, allowing Company A to recover NT$5.83 million. Based on this situation, Company A reported the other losses of NT$10.49 million (NT$16.32 million - NT$5.83 million) arising from the endorsement guarantee provided for its subsidiary. However, the tax authorities, upon examination, found that the guarantee bills issued by Company A for its subsidiary were not conducted in relation to its main or ancillary businesses with the intent of deriving profits or income. Although Company A provided court documents evidencing the subsidiary’s civil ruling for bankruptcy liquidation, it could not demonstrate that the loss from the endorsement guarantee was related to its main and ancillary business operations. Therefore, the other losses of NT$10.49 million reported by Company A was not recognized.
The Bureau would like to remind profit-seeking enterprises that other losses shall only be recognized in the year that the losses actually incurred and related to business or subsidiary operations. Profit-seeking enterprises should pay attention to relevant legal regulations to avoid being asked to pay any additional tax levied when filing income tax returns.
Press Release Contact: Mr. Chang
Profit-seeking Enterprise Income Tax Division
TEL: 06-2223111 ext.8053