ECCT-KPMG Comparative Study reveals room for improvement in Taiwan’s tax environment

The government’s Council for Economic Planning and Development (CEPD) has already responded positively to the tax study by announcing amendments to Taiwan’s Income Tax Law and changes to its administration system with a view towards improving efficiency. At a round table meeting held with the ECCT on December 10, CEPD Chairperson Ho Mei-yueh announced that a proposed amendment to the Income Tax Law, which would extend the tax loss carry forward period from the current period of 5 years to 10 years, had already been sent to the Legislative Yuan for review. Should this amendment pass, it would be an improvement particularly for start up and insurance companies, which often report losses for a number of years before becoming profitable although it would not go far enough (the ECCT recommended at least 15-20 years).

Another area recommended for improvement by the ECCT was raising the efficiency of tax administration, notably, the efficiency of tax ruling procedures. In this regard, the Ministry of Finance (MoF) will step up the reinforcement of control mechanisms and set clear rules concerning handling procedures and time limits. The MoF said that from now onwards, authorities would undertake to deal with ordinary tax cases within one month and special or more complicated cases, within three months. This is an improvement on the current system, where guidelines are either not clear or not properly enforced. Moreover, to facilitate the tax administration process, the tax authorities under the MoF will set up a single contact window or platform to strengthen communication with foreign companies and to handle applications by foreign businesses for tax rulings. The CEPD is also carefully reviewing the implications of the Alternative Minimum Tax law after concerns were raised by the ECCT that this could result in double taxation of overseas income. The CEPD gave the assurance that implementation of AMT will not result in double taxationWhile the first response from the government is positive, a number of other tax issues examined in the study have not yet been addressed. Many of these issues show that Taiwan’s tax environment is less attractive than in rival economies in the Asia Pacific region, which puts Taiwan at a disadvantage when competing for investment from both domestic and foreign multinational corporations (MNCs). The following is a list of conclusions and recommendations not yet addressed by the government:

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