The Northern District National Taxation Bureau has issued a reminder to businesses regarding the Controlled Foreign Company (CFC) rules, which came into effect in 2023. The rules were introduced prevent multinational enterprises from establishing controlled foreign companies (CFC) in low-tax burden countries or jurisdictions to keep surplus earnings undistributed to avoid the tax burden in the R.O.C.
To help ensure accurate reporting, the Bureau has identified four common mistakes enterprises should avoid when filing CFC-related information:
    1. Misidentifying Low-Tax Jurisdictions
Some companies mistakenly assume that only the Ministry of Finance’s published reference list applies. In reality, the list is for reference only and does not cover cases where preferential tax rates apply to specific regions or types of businesses, such as in Samoa or Mauritius. Whether a jurisdiction qualifies as “low-tax” must be determined based on the actual tax rule in place for that year.
    2. Omitting CFCs That Qualify for Exemptions
Even when a CFC meets the criteria for exemption—such as having substantive business activities or falling under the de minimis threshold—it must still be reported in the prescribed format. Supporting documents proving exemption eligibility must also be submitted.
    3. Using Incorrect Exchange Rates
Errors are often made when converting CFC financial data into New Taiwan Dollars. The rules require companies to use the annual average exchange rate, calculated from the Bank of Taiwan’s spot buying rates at the end of each month.
    4. Late Submission of CFC Financial Statements
Businesses that report CFC losses must attach CPA-audited financial statements or acceptable alternative documents within the filing deadline. Extensions are available but must be requested before the deadline, either through a formal application or by checking the extension option on page B7 of the tax return. Only one extension is permitted, for a maximum of six months. Failure to comply means CFC losses will not qualify for the 10-year carryforward deduction.
The Bureau urges enterprises to carefully review their filings for the 2024 tax year to avoid these issues and to ensure compliance with the law. For further details, businesses can visit the Bureau’s official website (https://www.ntbna.gov.tw) or call the toll-free service line at 0800-000321.
〔Contact person：Ms. Liu, Head, Profit-seeking Enterprise Income Tax Devision；Tel：（03）3396789, ext. 1350〕