Foreign companies’ branch offices in the Republic of China (“Taiwan Branch”) reporting foreign head office’s management expenses should meet relevant requirements for tax deductibility

National Taxation Bureau of Northern Area (“NTBNA”)
(Taoyuan News) The National Taxation Bureau of Northern Area (“NTBNA”), Ministry of Finance indicated that multinational corporations, in order to increase competitiveness, provide their global affiliates  with centralized management services (such as IT management, risk management, IT system support, etc.) to integrate resources for greater efficiency within the group so as to achieve the group’s overall operation target.  To cope with this increasing international trend, the “Regulation Governing Assessment of Profit-Seeking Enterprise Income Tax Article 70” stipulates that if a Taiwan branch can comply with relevant requirements of the tax regulations, its appointment of foreign head office’s or regional headquarters’ (“RHQ”) management expenses, after being verified and approved, is allowed a tax deduction.
The NTBNA explained that a Taiwan branch is allowed to deduct its apportionment of a foreign head office’s or RHQ’s management expenses if the following requirements are met:
1. The foreign head office or RHQ business is not open to the public but has an operating department.  This operating department shall share management expenses of the foreign head office’s or RHQ’s non-operating department with other affiliates within the group.
2. The apportionment of the head office’s or RHQ’s management expenses should not be included in the Taiwan branch’s purchasing cost, and the head office or RHQ makes funding to the Taiwan branch for its working capital needs available without any finance charge to the Taiwan branch.
3. The apportionment of management expenses shall be calculated on the basis of each income share of the head office’s or RHQ’s operating department and branch divided by the total company’s revenue.  If there is any special situation, the applicant shall report to the competent authority for approval on a reasonable allocation basis.
The NTBNA reminds foreign businesses that there are suitable criteria for a Taiwan branch to report its apportionment of the head office’s or RHQ’s management expenses, and the applicant should provide relevant financial reports and related information which should be verified by local consulate offices or other government-authorized institutes, or certified by a foreign tax authority, to protect its own interests. If you have any question, please visit the website of the Bureau at for more information on the relevant aspects of this issue or call our toll-free number 0800-000321. The Bureau is pleased to provide further consultation services for your inquiries.