Asia-Pacific Transfer Pricing Handbook

Chapter Thirty

Taiwan Transfer Pricing

The Republic of China (the ROC or Taiwan) enacted its transfer pricing statute in 1971, one of the first transfer pricing provisions in Asia. The ROC Ministry of Finance (MOF) later implemented transfer pricing provisions on December 28, 2004. In contrast with the transfer pricing regimes in Southeast Asia, the ROC’s transfer pricing regulations require each taxpayer to prepare a transfer pricing report and to submit this transfer pricing report to the MOF far in advance of any contemplated tax audit.

ENACTMENT OF THE TRANSFER PRICING STATUTE

The ROC enacted Article 43-1 of its Income Tax Act (ITA) in 1971. The impetus for this legislation was to deal with the problem of transfer pricing and to realize “fair and legitimate” taxation impacting controlled transactions between a profit-seeking enterprise and its related parties. The ROC included provisions similar to transfer pricing in Article 50 of the Financial Holding Company of 2001 and Article 42 of the Enterprise Merger and Acquisition Act of 2002.

ITA Article 43-1 addresses the adjustment of income the government would have to undertake for non–arm’s length transactions. Article 43-1A authorizes the collection by authorities in charge to adjust the calculation of the income on an enterprise in order to determine its taxable income and its tax liability. The MOF takes charge of the transfer pricing allocation process. The MOF needs to approve the collection process, and the MOF must undertake ...