What is Tax Compliance Auditing
There are three types of declaration method commonly used by Taiwan Companies: tax declaration reviewing on paper with a standard profit rate, ordinary declaration (general declaration) and tax compliance audit. The so-called tax compliance audit is the appointment of a certified public accountant(CPA) to audit and check the corporate income tax declaration form.
Who needs Tax Compliance Auditing
- Company with losses when initially set up, but expected to have profits after 2 or 3 years
The loss of the tax compliance audit year can be used to offset the profits for the next 10 years; for the surtax 5% on undistributed profit, if your company have tax compliance audit in the year of loss, it can be used to offset the surtax on profit in the future. In other words, the loss can not be used to offset the profit in the future if the loss year does not practice the tax compliance audit.
- When the company begins to make profits, the company can conduct the tax compliance audit for provisional income tax in September, so that company can avoid paying the provisional income tax in advance. The working capital can be more flexible.
- Company with higher entertainment expenses
Having tax compliance audit can increase the limit of the entertainment expenses and reduce the tax burden. The limit of expenses can be increased by 30% more than the general declaration.
- Company with a frequent scrapped inventory of fresh products
According to the Tax Compliance Audit Report and attach relevant data to verify its scrapped value of inventory. After verification, the company is exempted to provide the inspection list and destroy supervised by the competent authority and took certified documents within 30 days after the occurrence of the incident.
- Internal staff of company lack of experience in dealing with the National Taxation Bureau
In the case of tax compliance audit, the National Taxation Bureau only conducts written review of the Tax Compliance Audit Report by the CPA.
If the National Taxation Bureau wants to audit accounts, it will generally request the CPA to provide the working paper and will not contact the company directly to audit the books or accounts.
- Want to avoid the National Taxation Bureau to audit
The National Taxation Bureau adopted written review on the tax compliance audit by the CPA. If the written review comments as excellent evaluation of the case and it can be exempted from spot-check.
- Ordinance Requires
- The banking industry, credit cooperatives industry, trust investment industry, bills finance industry, finance leasing industry, security industry (except security investment consultancy), futures industry and insurance industry
- In accordance with the encouragement of investment regulation or encouragement of upgrading industry regulation or other regulation, for the profit-seeking enterprises that have been approved to enjoy tax-free of corporate income tax, the annual net income and non-operating income is more than TWD 50 million
- In accordance with the Financial Holding Company Act or Business Mergers and Acquisitions Act or other regulations, the company applies to the consolidated corporate income tax declaration.
- The profit-seeking company which does not belong to the above four types and the annual net income and non-operating income is more than TWD 100 million.
- The total amount of property of the organization (not profit-seeking company) or its total income for the year is TWD 100 million or more.
Advantages of Tax Compliance Auditing
- Losses can offset profits in the future (decrease corporate income tax; decrease the surtax on undistributed profit).
- During provisional income tax, the company can avoid backlogs of funds.
- Increase the limit of entertainment expenses.
- Disposal of the goods; Loss of inventory after physical count; Disposal of fixed assets which do not reach the life limit that tax compliance audit can simplify the disposal procedures.
- Communicate with the National Taxation Bureau to avoid manpower wastage and penalties caused by misunderstanding or not follow the ordinance due to the complex tax law.
- Reduce the risk of being audited by National Taxation Bureau.
- With a comprehensive and internationalized plan from CPA, avoid wastage of tax burden.