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  • The threshold of disclosing intercompany transactions and providing transfer pricing reports or substitute documentation for an enterprise with fiscal year change, merger, or acquisition
    Date:2019-03-06 
    The National Taxation Bureau of the Northern Area (NTBNA), Ministry of Finance, indicates that according to domestic law, when filing tax returns, enterprises should examine if their annual revenue and intercompany transaction amount meet the threshold of disclosing intercompany transactions; if so, they should   provide their
    transfer pricing reports or substitute documentation to Taiwan tax authorities. If enterprises operate less than a full year due to a fiscal year change, merger, or acquisition, they should convert their revenue and intercompany transaction amount into a full year by proportion. Then they should determine if they meet the threshold of disclosing intercompany transactions and providing transfer pricing reports or substitute documentation.
        The Bureau provides this example: Company A changed its fiscal year end from December to March in 2017. When Company A files its tax returns for the period from January to March, Company A's three-month revenue is $120M. After conversion to a full year, Company A’s revenue will be $480M ($120/3 x 12) meeting the $300M disclosure requirement. Likewise, Company A’s three-month intercompany transaction amount with its foreign affiliated Company B is $70M. After conversion to a full year, Company A’s intercompany transaction amount with Company B will be $280M ($70/3 x 12) is above(?) meeting the $200M threshold of providing a transfer pricing report.  Accordingly, when Company A files its 2017 tax returns, it should disclose its intercompany transactions with Company B and have the transfer pricing report ready for evaluation as to whether its intercompany transactions are in compliance with the arm’s length principal.


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