Profit-making business profits of sole proprietorships and partnerships should be included in the individual comprehensive income tax return

The comprehensive income tax declaration period is about to begin in May. The Southern District National Taxation Bureau reminds that sole proprietors or partners of a partnership should report the profit of the sole proprietorship or partnership business in the current year as the profit income of the sole proprietor or partner of the partnership when declaring comprehensive income tax.

The bureau stated that starting from 2018, sole proprietorships and partnerships that are not small-scale profit-making enterprises are not required to calculate and pay profit-making enterprise income tax when filing settlement returns in accordance with Article 71 of the Income Tax Act. However, their profit-making enterprise income falls under the profit income specified in Category 1 of Article 14, Paragraph 1 of the same Act and should be included in the comprehensive income tax return by the sole proprietor or partnership partner. In addition, this income does not fall within the scope of the income information provided by the National Tax Bureau during the settlement and declaration period. The taxpayer should declare his profit income based on the annual income amount stated in the profit-seeking enterprise income tax settlement declaration form.

The bureau gave an example, in which a sole proprietorship firm A declared an annual income of NT$1.5 million in its 2013 corporate income tax settlement declaration. When filing the comprehensive income tax settlement declaration for that year, its capital owner, Mr. A, only declared the income and deduction information downloaded from the online declaration system, and omitted to report the previously drawn profits from the firm, resulting in an underreporting of NT$1.5 million in profits. The IRS discovered this and ordered Mr. A to pay additional taxes and penalties.

The Bureau specifically reminds that if taxpayers neglect to declare their profit income when filing comprehensive income tax returns, they can automatically report the amount of tax to be paid and add interest in accordance with Article 48-1 of the Tax Collection Act without being reported or investigated by investigators designated by the tax collection agency or the Ministry of Finance, and will not be punished.

Contact person for press release: Chief Jiang of the Legal Affairs Team, 06-2298128