Global Tax Alert | 27 June 2017

Taiwan issues a draft amendment to controlled foreign company rules

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On 6 June 2017, Taiwan’s Ministry of Finance issued ruling #10604557490 (the Ruling) to clarify the proposed controlled foreign company (CFC) regulations issued on 9 November 2016.1

Significant influence

A Taiwanese company will be required to include its pro rata share of CFC’s earnings in its taxable income if the company and its related parties directly or indirectly hold more than 50% of the shares of a company located in a low-tax jurisdiction or have substantial control of the CFC’s operations. Substantial control means exercising significant influence on the CFC’s operating decisions such as the CFC’s personnel, finance and operating policies.

Measurement date

A determination of a direct or indirect shareholding or capital percentage of the Taiwanese company in a CFC is made on the measurement date that is generally the last day of CFC’s fiscal year. The Ruling proposes a change to the highest percentage during the CFC’s fiscal year, if the shareholding percentage is intentionally reduced below the CFC threshold, i.e., 50% or less to avoid the CFC income inclusion.

Low-tax jurisdiction

A jurisdictions with a corporate income tax rate that is lower than 11.9% is considered a low-tax jurisdiction. The Ruling clarifies that the 11.9% rate is the statutory tax rate.

Source documents to support CFC earnings

The proposed regulations issued last year require a Taiwanese company to attach its CFC’s financial statement certified by a CPA of the CFC’s local jurisdiction when filing the Taiwan tax return to substantiate its income from the CFC. The Ruling would accept uncertified financial statements or the equivalent, if their accuracies have been confirmed by other means and also approved or acknowledged by the local tax collection offices.


1. See EY Global Tax Alert, Taiwan releases draft rules on controlled foreign company and place of effective management, dated 22 December 2016.

For additional information with respect to this Alert, please contact the following:

Ernst & Young, Taiwan
  • Sophie Chou
    +886 2 2757 8888 ext. 88872
  • Chien-Hua Yang
    +886 2 2757 8888 ext. 88875
  • Anna Tsai
    +886 2 2757 8888 ext. 88873
  • Mei-Lien Chen
    +886 2 2757 8888 ext. 67271
Ernst & Young LLP, Asia Pacific Business Group, New York
  • Chris Finnerty
    +1 212 773 7479
  • Kaz Parsch
    +1 212 773 7201
  • Bee-Khun Yap
    +1 212 773 1816
Ernst & Young LLP, Asia Pacific Business Group, Houston
  • Trang Martin
    +1 713 751 5775

EYG no. 04010-171Gbl