Profit-seeking enterprises that do not earn foreign exchange income from exporting goods may not list special entertainment expenses

Where a profit-seeking enterprise engages in export business and records special entertainment expenses, in addition to having export business facts, it must also obtain foreign exchange income in order to comply with the requirements for reporting special entertainment expenses.

The Kaohsiung National Taxation Bureau of the Ministry of Finance stated that according to Article 37 of the Income Tax Act and Article 80 of the Profit-Seeking Enterprise Income Tax Audit Standards, profit-seeking enterprises that need to pay entertainment expenses due to business needs must obtain legal certificates in accordance with the law and list entertainment expenses within the limit calculated by the bracket ratio of the purchase and sales amounts. At the same time, in order to encourage foreign sales to earn foreign exchange income, profit-seeking enterprises engaged in foreign sales business can list special entertainment expenses for foreign sales within a range not exceeding 2% of the total foreign sales settlement income of the current year.

The bureau gave an example, recently checking the 2013 corporate income tax return of Company A. In addition to calculating the limit based on the ratio of net purchases and sales, Company A also reported special entertainment expenses for exports of NT$160,000 (customs export of NT$8,000,000 × 2%). Upon checking, it was found that the company sold goods to profit-making enterprises in the domestic export processing zone. Although it handled customs declaration procedures in accordance with the law, the sales contract between the two parties stipulated that the quotation and payment should be in NT$, and no foreign exchange income was actually obtained. The bureau recalculated the entertainment expense limit based on the information obtained, deducted the additional tax from the special entertainment expenses of NT$160,000 for exports, and added the excess interest.

The bureau specifically reminds that profit-making enterprises should pay special attention to relevant laws and regulations when filing profit-making enterprise income tax settlement declarations, so as to avoid being excluded and paying additional taxes due to non-compliance with the regulations, which would affect their own rights and interests. If the public has any questions, they can call the toll-free service number 0800-000-321 for inquiries, or go to the bureau’s website (https://www.ntbk.gov.tw) and use the National Taxation Bureau’s smart customer service “National Taxation Assistant” for online inquiries.

Provided by: Fengshan Branch
Contact Person: Section Chief Lin Shufen Contact Number: (07) 7404001 ext. 5880
Written by: Su Yici Contact: (07) 7404001 ext. 5902