Taiwan Ministry of Finance (MOF) announced amendments made to “Regulations Governing Assessment of Profit-Seeking Enterprise Income Tax on Non-Arm’s-Length Transfer Pricing” (“TP assessment Rules”) on November 13, 2017. Most of the amendments reflect the requirements listed under OECD BEPS Action 13 Report. Major amendments include multinational enterprises (MNE) who have members in Taiwan may be required to file Master File and Country-by-Country Report. This amendment will be applicable from fiscal years of 2017 onward.

In view of the compliance cost of MNEs for preparing transfer pricing documents, On December 11, 2017, MOF released Safe Harbor Rules for Master File and Country-by-Country Report in Taiwan after taking into accounts of international practices, national conditions in Taiwan and public opinions.

The safe harbor threshold for the preparation of master file is lower than those for CBCR. Hence, the Taiwanese entity of a MNE group should evaluate if it needs to prepare the MF. If yes, the MF needs to be ready when filing the income tax return and needs to be submitted with Taiwan tax authority within 12 months after the last day of the reporting fiscal year.

For foreign MNE groups, the MF is usually centrally prepared at headquarters’ level. We recommend Taiwanese subsidiaries/branches of a foreign MNE to inform their headquarters as early as possible to make sure the MF can be ready by filing deadline (e.g. end of May for calendar year taxpayer) and to obtain a copy of MF for submission.

As Taiwan also has transfer pricing documentation requirement, it is also suggested to double check if the content in the MF is consistent with the Taiwanese transfer pricing report.

As for CBCR, if the revenue of a foreign MNE groups exceed the CBCR threshold of NTD 27 billion or if the entity do not qualify for the above thresholds, we recommend Taiwanese subsidiaries/branches of a foreign MNE to take the following actions:

- Ask the headquarters for the information of the CBCR filing entity (i.e. UPE or SPE);
- Disclose the information of UPE or SPE on the disclosure forms to be attached with tax return at time of filing; and
- If it is expected Taiwanese tax authority cannot obtain a copy of CBCR through tax information exchange mechanism, the Taiwanese entity should obtain a copy of the CBCR for submission.

KPMG BEPS Services Team
Ellen Ting
Partner, Tax department