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By Art. 49 of the Financial Holding Company Act and Art. 40 of the Business Mergers and Acquisitions Act, profit-seeking enterprises could apply for permission to file consolidated income tax returns. In the event that a profit-seeking enterprise and its subsidiaries (collectively, "Group") have jointly chosen to file a consolidated income tax return and a member of the Group has committed tax evasion and is therefore not entitled to deduct from the profit the carried-forward loss under Art. 39 of the Income Tax Act, the amount of such carried-forward loss is calculated as follows:
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Where the Group Has Net Loss
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In this scenario, if part of the Group's loss cannot be carried forward and the Group has net loss, the loss that cannot be carried forward against the Group's future profit is calculated at the percentage of the loss not able to be carried forward over the Group's total loss.
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For example, a financial holding company (Company A) files a consolidated income tax return for year 2004 on behalf of its subsidiaries. The income tax return of each company is as follows.
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| Company A |
Subsidiary B |
Subsidiary C |
Subsidiary D
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Net income of the Group |
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1 million
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-1.5 million
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1 million
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-2.5 million
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-2 million
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The Group has a net loss of 2 million. Subsidiary D is not entitled to carry the loss of 2.5 million forward. The loss to be carried forward by the Group is equal to 1.25 million, which is calculated at the percentage of subsidiary D's loss (2.5 million) over the Group's total loss (1.5 million + 2.5 mil-lion).
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1.25 million＝2 million ×〔2.5 million／（1.5million＋2.5 million）〕
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Where the Group Has Net Income
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In this scenario, if a member of the Group cannot deduct carried-forward loss under Art. 39 of the Income Tax Act, and the Group has net income, the deductable carried-forward loss is calculated at the percentage of profit not able to be deducted over the Group's total profit.
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For example, a financial holding company (Company A) files a consolidated income tax return for year 2006 on behalf of its subsidiaries. The income tax return of each is as follows.
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| Company A |
Subsidiary B |
Subsidiary C |
Subsidiary D
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Net income of the Group |
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1.5 million
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-2 million
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3 million
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1.5 million
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4 million
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Subsidiary D is not entitled to deduct from the profit the carried-forward loss. The profit to be deducted for the Group is equal to 1 million, which is calculated at the percentage of Subsidiary D's profit over the Group's total profits.
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1 million＝4 million ×〔1.5 million／（1.5 million＋3 million＋1.5 million）〕
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