營利事業長期派駐員工至海外關係企業提供管理或技術服務，應依營業常規認列服務費收入 Profit–Seeking Enterprises shall Recognize Service Revenue in Conformity with Regular Business Practice Whenever Sending Employees on Long-term basis to Overseas Affiliated Enterprises for Providing Management or Technology Services.
The National Taxation Bureau of Taipei (NTBT), Ministry of Finance indicated that lots of profit-seeking enterprises were recently found out failing to disclose and recognize service revenue in accordance with regular business practice in their tax returns for deploying employees to their overseas affiliates over long-term management or technology services rendering. As a result, the service revenue was assessed by tax authorities based on external comparable data and was taxed accordingly.
The NTBT also pointed out that according to Article 5, Subparagraph 5 of “Regulations Governing Assessment of Profit-Seeking Enterprise Income Tax on Non-Arm’s-Length Transfer Pricing” (hereinafter referred to as “Regulations of ATP”), rendering of services, including marketing, management, administration, technology, personnel, R&D, information processing, legal, accounting or other services, whichever provided by profit-seeking enterprises, shall be recognized as service revenue according to regular business practice.
While auditing tax return of company A for the year of 2010, the NTBT discovered that huge amount of salary expenses and travel expenses were declared. The NTBT further requested Company A to provide employees’ payroll records, details of work list, business trip reports and other information, and found that Company A sent its employees to overseas affiliated enterprises for a long period of time to provide management or technology services without receiving any rewards of services from those related parties. According to “Regulations of ATP”, the NTBT therefore assessed its service revenue on the basis of external comparable data and imposed tax accordingly.
The NTBT called on that in order to comply with the implementation of transfer pricing system, it should be noted that rendering management or technology services to overseas affiliates will be considered transactions between related parties. Profit–Seeking Enterprises shall declare the service revenue at arm’s length principle based on internal or external comparable information according to “Regulations of ATP“. Furthermore, in the case that the counter party of transaction locates in the country without a tax treaty concluded with our country, it may lead to an increase of enterprises group’s overall tax burden due to the fact that the corresponding adjustment is often not allowed to be made to the counter party.