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December 6, 2019 Taiwan issues tax ruling on one-time transfer pricing adjustments Taiwan’s Ministry of Finance issued1 a tax ruling (the Ruling) clarifying the requirements that need to be satisfied for taxpayers to make a one-time transfer pricing (TP) adjustment to related-party transactions. The Ruling is applicable to related-party transactions occurring in taxable years commencing on or after 1 January 2020.2 Requirements Taxpayers must meet the following requirements to make a one-time TP adjustment prior to the accounting year end:
After the one-time TP adjustment has been made, taxpayers are required to pay or claim a refund of taxes,3 if any, based on the adjusted price. The Ruling also outlines the compliance requirements for the one-time TP adjustment connected with the cross-border transfer of tangible goods4 and other types of related party transactions.5 Taxpayers should disclose the adjustment with supporting documents upon the filing of the income tax return. The supporting documents include the related-party transaction agreement, reasons for the TP adjustment, proof of corresponding adjustment made by counter parties and the actual result following the TP adjustment. Endnotes 1. Ruling No. 10804629000 was issued on 15 November 2019. 2. The taxable year is generally the calendar year, 1 January to 31 December. However, a taxpayer may elect to adopt a different taxable year. 3. Customs, business tax (i.e., value-added and non-value-added business tax), commodity tax and withholding tax. 4. Compliance requirements for the cross-border transfer of tangible goods:
5. Compliance requirements for other types of related-party transactions:
For additional information with respect to this Alert, please contact the following: Ernst & Young (Taiwan), Taipei
Ernst & Young LLP (United States), Taiwan Tax Desk, New York
Ernst & Young LLP (United States), Asia Pacific Business Group, New York
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