萬國法律事務所

The Legislative Yuan recently passed the amendments to Article 39 of the Income Tax Act, effective as of 2009, whereby the period for businesses to offset losses and profits will be extended from five years to ten years. Approximately 60,000 businesses with complete accounts using a blue tax return or a CPA-certified return can benefit from such extension.

Under the former rules, the period for offsetting business losses and profits is five years. For many years the American Chamber of Commerce and the European Chamber of Commerce have recommended prolonging this offset period. In extending the offset period to ten years, the government took into account the needs of certain industries which require significant capital (such as the insurance industry), or which necessitate long periods of research and development (such as the biotechnology sector). These industries often require more than five years before becoming profitable and as such cannot benefit from the offset between losses and profits under the former rules.

The Taxation Agency of the Ministry of Finance (MOF) indicated that, in Asia, only Hong Kong and Singapore have adopted an unlimited offsetting period and other Asian countries such as Japan, Korea and Mainland China all have a five-year offsetting system. Since an unlimited offsetting period is deemed of little meaning to businesses, the MOF judges appropriate to extend the offset period to ten years.