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On 23 September 1999 the Ministry of Finance issued a ruling to explain the sequence in which investment expenditure from different years should be declared when claiming tax credit under Article 6 of the Statute for Upgrading Industries (SUI). The main points are as follows:
When filing its final corporate income tax return for a particular year, an enterprise wishing to claim investment tax credit must first offset investments made within the current year, up to a limit of 50% of the corporate income tax otherwise due. If the amount eligible to be offset from the current year is less than 50% of its corporate income tax for that year, the enterprise may further offset amounts outstanding from the four previous years, in any sequence and the amounts from the fourth previous year are not subject to the 50% limit. Amounts from the first three previous years must be added to the amount offset for the year being filed for, and the combined total must not exceed the 50% limit. If the amount eligible to be offset from the current year is 50% or more of the corporate income tax due for that year, the enterprise may only further offset amounts from the fourth previous year, which is not subject to the 50% limit.
To illustrate this with an example: Company A is filing its final corporate income tax return for 1999. It still has amounts of investment tax credits, not yet offset against tax, from investment expenditure made in previous years: NT$1.2 million from 1995, for the purchase of automatic machinery; NT$700,000 from 1996, for R&D expenditure; NT$800,000 from 1997, for the purchase of energy-saving equipment and automatic machinery; and NT$500,000 from 1998, for the purchase of pollution control equipment. In 1999, it also made qualifying investments in the purchase of automatic equipment and in personnel training, which entitle it to investment tax credit of NT$300,000. Suppose that before offsetting these investments, Company A's corporate income tax liability for 1999 is NT$3 million, the amount of investment tax credit it can claim against this liability can be calculated as follows:
NT$3,000,000 (1999 tax payable) ─ NT$300,000 (tax credit from 1999) ─ NT$1,200,000 (outstanding tax credit from 1995) ─NT$1,200,000 (outstanding tax credit from 1996 to 1998 = NT$2,000,000; maximum available tax credit = NT$3,000,000 x 50%─NT$300,000 = NT$1,200,000, in any sequence from each of those three years) = NT$300,000 (tax payable)
