Sign up for tax alert emails    GTNU homepage    Tax newsroom    Email document    Print document    Download document

January 15, 2020

Taiwan releases final regulations on undistributed earnings tax exemption for substantive investments

The Ministry of Finance published, on 9 January 2020, the final Regulations on Deduction of Undistributed Earnings and Application for Tax Refund for Substantive Investment Made by a Profit-seeking Enterprise or a Limited Partnership1 (the final Regulations).2 Documentation requirements for the undistributed earnings tax exemption3 were amended in the final Regulations.4

Documentation requirements

Documentation required to support eligible investment expenditure includes copies of construction or purchase agreements, accounting records of assets acquired, Government Uniform Invoices, import declarations, proof of delivery and acceptance, and proof of payment. For the construction of buildings or self-developed hardware or software, an itemization of construction costs, license for usage and other relevant supporting documents are required.

The draft regulations proposed that a board or shareholders’ earnings reinvestment resolution was required to support the exemption, however the final Regulations eliminate this requirement to ease the compliance burden on taxpayers.

Exemption application timing

If the qualified investment is completed before the filing of the undistributed earnings tax return, the eligible investment amount can be deducted from the undistributed earnings tax base.

An amended filing and refund application is required to be submitted within one year after the completion of the investment if the investment is completed after the undistributed earnings tax returns has been filed and paid.


1. A Taiwan limited partnership is not a pass-through entity for income tax purposes unless it is a qualified venture capital limited partnership approved by the Taiwan Taxation Administration.

2. Pursuant to article 23-3 of the Statute for Industrial Innovation.

3. Under current rules, current year earnings that are not distributed by taxpayers in the subsequent fiscal year are subject to an undistributed earnings tax of 5%. Article 23-3 of the Statute for Industrial Innovation provides an incentive that if the taxpayers make substantial qualified investments using current year after-tax earnings, the amount of the substantial qualified investments would be excluded from the base of the undistributed earnings tax.

4. Details of the undistributed earnings tax exemption are provided in EY Global Tax Alert, Taiwan releases draft regulations on undistributed earnings tax exemption for substantive investments, dated 5 December 2019.

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



The information contained herein is general in nature and is not intended, and should not be construed, as legal, accounting or tax advice or opinion provided by Ernst & Young LLP to the reader. The reader also is cautioned that this material may not be applicable to, or suitable for, the reader's specific circumstances or needs, and may require consideration of non-tax and other tax factors if any action is to be contemplated. The reader should contact his or her Ernst & Young LLP or other tax professional prior to taking any action based upon this information. Ernst & Young LLP assumes no obligation to inform the reader of any changes in tax laws or other factors that could affect the information contained herein.


Copyright © 2024, Ernst & Young LLP.


All rights reserved. No part of this document may be reproduced, retransmitted or otherwise redistributed in any form or by any means, electronic or mechanical, including by photocopying, facsimile transmission, recording, rekeying, or using any information storage and retrieval system, without written permission from Ernst & Young LLP.


Any U.S. tax advice contained herein was not intended or written to be used, and cannot be used, by the recipient for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code or applicable state or local tax law provisions.


"EY" refers to the global organisation, and may refer to one or more, of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients.


Privacy  |  Cookies  |  BCR  |  Legal  |  Global Code of Conduct Opt out of all email from EY Global Limited.


Cookie Settings

This site uses cookies to provide you with a personalized browsing experience and allows us to understand more about you. More information on the cookies we use can be found here. By clicking 'Yes, I accept' you agree and consent to our use of cookies. More information on what these cookies are and how we use them, including how you can manage them, is outlined in our Privacy Notice. Please note that your decision to decline the use of cookies is limited to this site only, and not in relation to other EY sites or Please refer to the privacy notice/policy on these sites for more information.

Yes, I accept         Find out more