National Taxation Bureau of Taipei Has Recently Concluded Another Advanced Pricing Agreement with a Renowned Multinational Group's Subsidiary

National Taxation Bureau of Taipei, Ministry of Finance (NTBT) expressedthat, in order to refrain the multinational enterprises from decreasing their taxable profit by affiliates' cross-border transactions, all countries in global economy have established the Transfer Pricing System for protecting the right of levying taxes. Since the transaction details among affiliates ofmultinational group are more complicated and with huge amounts, profit-seeking enterprises have to disclose such transaction in regulated forms and prepare documents concerning relevant pricing transaction report, which leads them to spend substantial manpower and costs. Moreover, in order to prevent the dispute triggered from the ex post facto investigations which might causeextra burden of tax administration,the profit-seekingenterprises may apply for the Advanced Pricing Agreement (hereinafter referred to as APA) to the tax collection authorities and negotiate controlled transaction in accordance with relevant regulations within 3 to 5 years.

NTBT further pointed that out, for the controlled transactions with huge amount and also the complex nature has been proceeded continuously among multinational enterprises, the headquarters of those multinational groups would constantly provide update information and conduct aggressive taxation policy, therefore, the evolution of transfer pricing is gaining the popularity in these years. The tax collection authorities of all countries also, based on years of experience on auditing the transfer pricing, eager to promote the auditing skill and efficiency in order to cope with the trend of international audit and incoming challenges arising from transfer pricing. The taxpayer and tax collection authority may signed the APA after both parties have concluded the comparables and its transaction result,assumptions, pricing policies, calculation methods, applicable period and other major issues, ensuring that the value generated by the enterprise corresponds to the obtained profit, preventing increasing taxation risk, as well as maintaining the stability of taxation burden among multinational groups. NTBT, after the completion of application of the APAwith KoreanGroup’s subsidiary inTaiwan, has recently concluded another APA with an internationally renowned multinational group’s subsidiary in Taiwan which is expected to create a win-win situation between both parties.

NTBT called on that, the conclusion of APA, may not only clarify the tax liabilities of multinational enterprises, but also reduce the risk of redundant review and the compliance cost of submitting relevant documents and receipts, is worthy for multinational groups to make use of it.