Issues: A Stitch in Time

The finance ministry puts an advance tax ruling system into effect.

 

In response to a Taiwan White Paper recommendation from the AmCham tax committee, the Ministry of Finance from January 1 this year put guidelines into effect for what is known as an advance tax ruling system. Under the guidelines, enterprises may apply to the ministry for an explanation of their potential tax liabilities on projects to be implemented in the coming year under any one of three conditions Ð planned investments of at least NT$200 million (US$6 million), not including the cost of land; initial transnational business transactions with a value of at least NT$50 million (US$1.5 million), or "cases that have a major economic impact for Taiwan."

The most significant aspect of the system is that it binds the ministry to provide a reply within a limited period of time, ensuring that prospective investors can gain a full understanding of the tax implications of a given project in time to make informed business decisions. The time limit that the AmCham tax committee had proposed, modeled on the system in use in Canada, was two months from the date of application, with another two months for an extension if more time is needed to prepare a reply. In the guidelines adopted by the finance ministry, a somewhat lengthier time period of three months, plus another three months for the extension, is being employed.

While welcoming the introduction of the system, Lorene Chen, chair of the Amcham tax committee, expressed hope that the timeframe could be accelerated since "half a year is quite a long time" for a company to wait for a ruling. The committee members also find that the stipulated minimum monetary amounts for cases to be considered represent an unduly high threshold. "I'm not aware of any other country that sets this kind of monetary threshold at all," she says.

The ministry has explained this approach as necessary to prevent its limited personnel from being inundated with requests for rulings. AmCham has suggested that imposing an application fee would be a more effective way of winnowing out less serious requests, but government agencies need to obtain legislative approval before they can add a new charge for services. One more item to add to the Legislative Yuan agenda.