| Summary: | 碩士 === 國立中興大學 === 高階經理人碩士在職專班 === 98 === The formulation of the "Regulations Governing the Assessment Rules for Non-arm''s-length Transfer Pricing of Profit-Seeking Enterprises Income Tax on Non-Arm''s-Length Transfer Pricing" has verified the arm’s-length principle and methods that both tax payers and tax collectors shall observe. When analyzing different methods of utilization, however, profit-seeking enterprises often fail to fully meet the regulations on the auditing principles of transfer pricing, which is to repeatedly test the arm''s-length methods based on the degree of comparability. Although the Transfer Pricing Report has been formulated as a formality, the risk of being audited still exists for an enterprise once it is selected for auditing.
The arm''s-length methods for the auditing principles of transfer pricing include the Comparable Uncontrolled Price Method (CUP), Comparable Uncontrolled Transaction Method (CUT), Resale Price Method (RPM), Cost Plus Method (CPLM), Comparable Profit Method (CPM), Profit Split Method (PSM), and other arm’s-length methods approved by the MOF (OM) that apply to different types of transaction. Though the arm''s-length methods in Taiwan are selected based on the principle of appropriateness and the principle of OECD Transfer Pricing (that is, to select methods that apply to traditional transactions), the CUP method has the highest level of comparability whereas the CPM method has the lowest, which is something that profit-seeking enterprises should take note of.
The following conclusions are drawn based on the findings in this research:
1. High-tech industries are capital and technology intensive. Generally speaking, such highly-profitable industries, despite leaving non-arm’s-length transaction profits in tax havens, are less likely to be audited since their reported net profits in Taiwan are already higher than the standards set by the MOF.
2. Traditional industries are labor-intensive with low profit-margin. In order to lower cost and stay competitive, they are forced to countries with lower labor costs such as China and Vietnam, and although they do not leave profits overseas, they are often audited by taxation agencies and asked to pay overdue taxes since they often fail to meet the individual transaction assessment principle or the arm’s-length principle.
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