The NTBT stipulated on 26 August 2026 that foreign branches operating in Taiwan allocating head office management expenses must prepare and retain the foreign parent company’s audited financial statements and cost allocation methodologies to support deduction claims for profit-seeking enterprise income tax. This requirement ensures transfer pricing compliance for cross-border service charges.
Key Takeaways
- Documentation Package: Taiwanese branches must maintain the head office’s consolidated financial statements, management fee calculation worksheets, service agreements, and evidence of actual services rendered.
- Arm’s Length Standard: Allocated management fees must reflect the economic value of services received, benchmarked against comparable independent service arrangements to satisfy Article 41 of the Income Tax Act.
- Withholding Tax Obligation: Payments to foreign head offices for management services may trigger 20% withholding tax (reduced under tax treaties) unless the services are performed entirely outside Taiwan.
Disclaimer: This article is compiled and summarized by the AI based on publicly available information and is for general information purposes only. It does not constitute any form of formal tax advice, legal opinion, or basis for performance. Please consult a qualified professional tax advisor or legal counsel for tax advice.
Source: Read Official Announcement