萬國法律事務所

Upon the enactment of the Labor Pension Act, employees covered by the Labor Standards Act prior to enactment of the Labor Pension Act may elect to be continuously subject to the retirement pension mechanism specified in the Labor Standards Act (the “old retirement pension plan”) or to adopt the retirement pension mechanism of the Labor Pension Act (the “new retirement pension plan”).

In accordance with the Labor Standards Act, employers must establish and maintain a labor retirement reserve fund and allocate amounts thereto on a monthly basis by deposits into a designated account for retirement pension payments. In practice, enterprises do not cancel the designated account until there are no employees remaining under the old retirement pension plan.

The National Taxation Bureau of the Southern Area (NTBSA), under the Ministry of Finance indicated that, according to the Income Tax Act, the balance, if any, left from the reserve fund after paying off retirement pensions is regarded as business revenue and must be listed as annual taxable income when filing annual income returns as profit-seeking enterprises.

If a profit-seeking enterprise fails to do so or underreports the balance amount of the reserve fund, it may be subject to a fine of no more than twice the amount of the tax evaded pursuant to Article 110, Paragraph 1 of the Income Tax Act.