The Study on Non-arm’s-length Transfer Pricing of Profit-Seeking — A Case Study of Two Companies in Taiwan

• Main Authors: Chen-chih Hsiao, 蕭珍琪
• Other Authors: Wenyi Lin
• Format: Others
• Language: zh-TW
• Published: 2007
• Online Access: http://ndltd.ncl.edu.tw/handle/73074480762258135736

碩士 === 逢甲大學 === 經營管理碩士在職專班 === 95 === With the trend of globalization, the cross border transactions have been increased dramatically in the past couple years. To face the trend of globalization and the emerging of the China Market, the Taiwan-based enterprises also expand their operation globally. The transfer pricing issue has been one of the most critical issues concerned by the enterprises and the tax authorities of many countries. For determining arm''s length pricing or profit of controlled transactions in a fair and reasonable way, the Ministry of Finance of ROC promulgated the Regulations Governing Assessment of Profit-Seeking Enterprise Income Tax on Non-Arm''s Length Transfer Pricing on December 28, 2004. These regulations provide general guidance on the types of transactions governed by the Regulations, transfer pricing methods can be used by the enterprises and the applications for advance pricing arrangements, etc. However, there are many issues encountered, including selection of the database and benchmark by the enterprises, transfer pricing strategy for the enterprises operating in both Taiwan and China with indirect investment through the tax heaven and the update of current tax rules and directions by the Ministry of Finance of ROC, by the enterprises in applying for the new regulation. These issues might cause the conflict between the tax authority and the enterprise when applying the Regulations Governing Assessment of Profit-Seeking Enterprise Income Tax on Non-Arm''s Length Transfer Pricing. Therefore, it is important to establish more clear transfer pricing process. This article describes the related process for setting the transfer pricing policy by several enterprises and points out the potential issues of the current tax regulations. We also propose the following suggestions to the tax authority based on the study: �� There is no consistent database for the tax authorities, enterprises and accounting firms to search for the benchmark. To avoid the inconsistence in applying the transfer pricing, the tax authority should establish a database of transfer pricing for the enterprises, the accounting firms and the tax authorities to search for the benchmark. �� The tax authority should establish the rule to clearly indicate the filter processes and the assumptions for the selection of the benchmarks. �� Certain rules and directions set up by the Ministry of Finance of ROC need to be revised and update to reflect the promulgation of the Regulation.