The Taipei National Taxation Bureau of the Ministry of Finance stated that if a profit-making enterprise actually suffers bad debt losses, it should follow Article 49 of the Income Tax Law and Article 94 of the Income Tax Review Standards for Profit-seeking Enterprises (hereinafter referred to as the review standard), and according to the cause of bad debts, Annual offset against bad debts or recognition of bad debt losses.
The Bureau stated that according to Article 49, Item 5 of the Income Tax Law and Article 94 of the Auditing Standards, accounts receivable, bills receivable and various debts in arrears have one of the following circumstances, which can be regarded as actual bad debt losses : (1) The debtor's bankruptcy, escape, reorganization, reconciliation or bankruptcy declaration, or other reasons, resulting in part or all of the creditor's rights being irrecoverable. (2) The creditor's rights are overdue for two years, and the principal or interest has not been collected after collection. When a profit-seeking enterprise has bad debt losses due to the aforementioned reasons, it shall prepare the relevant supporting documents stipulated in Article 94, Subparagraphs 6 to 8 of the Auditing Standards, and offset the bad debts in the year in which they occur. Annual bad debt loss.
The Bureau pointed out that the reasons for the bad debt losses listed above are different, so when bad debts actually occur, the year and the documents that should be obtained for offsetting bad debts or recognizing bad debt losses are also different. For example, if the debtor is a profit-making enterprise in Taiwan, if part or all of the creditor's rights cannot be recovered due to the debtor's bankruptcy and escape, it should obtain a postal service "undeliverable" certificate of deposit. The definite business address legally registered with the competent authority, if the debtor has another definite business address, proof documents shall be provided, and the bad debt losses shall be reported in the year of return of the certificate deposit letter. If the debtor has no reasons such as bankruptcy, escape, reorganization, reconciliation, or bankruptcy declaration, but cannot collect the principal or interest only because the debt has been collected for more than 2 years, a letter of deposit with "delivered" from the postal service should be obtained , The certificate deposit letter returned on the grounds of refusal or the death of the person or the collection certificate pursued by the court, and the "delivery year" of the certificate deposit letter or collection certificate is the year for bad debt loss presentation.
The bureau called on profit-seeking enterprises to have different application due to different causes of bad debts. When examining uncollectible claims and reporting bad debt losses, profit-making enterprises should pay attention to the applicable circumstances and prepare relevant supporting documents to protect themselves. rights and interests. If you have any difficult questions about taxation, please inquire with the local competent tax collection authority (toll-free service number: 0800-000-321).
(Contact person: Section Chief Chen of the First Review Section; Tel: 2311-3711 extension 1262)
Date Updated: 109-01-30 Press Release
Article 94
Bad debt loss:
1. Provision for bad debts is limited to accounts receivable and bills receivable, excluding discounted bills. However, when the bill is not cashed when it expires and the holder exercises the right of recourse in accordance with the law and the profit-seeking enterprise pays for it, it may be set aside as a bad debt allowance or as a bad debt loss depending on the actual situation.
2. The balance of provision for bad debts shall not exceed 1% of the balance of accounts receivable and bills receivable; if it is a financial industry, the balance of its claims shall be estimated according to the above limit.
3. For-profit enterprises that are legally allowed to report actual bad debt ratios that exceed the standards in the preceding paragraph may estimate them within the limits of the average ratios that are legally allowed to report actual bad debt ratios in the previous three years.
4. For profit-seeking enterprises that use the gross profit percentage method to calculate profit and loss for installment sales, their receivable creditor's rights; for profit-loss calculations that adopt the ordinary sales method, the creditor's rights for the difference between the installment sales price and the current sales price shall not be listed. Allowance for doubtful debts.
5. Accounts receivable, bills receivable, and various debts in arrears, if any of the following circumstances occur, it is deemed that bad debt losses have actually occurred, and should be offset against bad debts in the year in which they occur.
(1) Part or all of the creditor's rights cannot be recovered due to the debtor's bankruptcy, escape, reorganization, reconciliation or declaration of bankruptcy, or other reasons.
(2) The creditor's right is overdue for two years, and the principal or interest has not been collected after collection. The calculation of the two-year overdue creditor's right shall be calculated from the day following the date when the creditor's right was originally due to be repaid; the same shall apply to the debtor who repays part of the debt after the above-mentioned due date.
6. If the debtor in item 1 of the preceding paragraph goes bankrupt or goes into hiding, so that part or all of the creditor's rights cannot be recovered, a letter of deposit of proof that the postal service cannot be delivered shall be obtained, and the following regulations shall be followed:
(1) The debtor is a profit-making enterprise, and the letter of deposit should include the exact business address of the profit-making enterprise before it closed down or moved away; If the actual business address does not match, this is not the case if the creditor proposes that the debtor has another proof of the actual business address and it is found to be true. If the debtor is an individual and has registered for a change in household registration, the tax collection agency shall check the household registration information to confirm it; if the debtor is unknown, there shall be a transcript or certificate of the debtor's household registration issued by the household registration agency.
(2) If the debtor lives abroad, he shall obtain the certification document issued by the competent authority of the debtor's location to register the business address before the debtor's bankruptcy or escape, and shall be verified by Chinese embassies, consulates, commercial representatives or foreign trade agencies; the registered business address shall be consistent with the debtor's If the actual business address does not match, the creditor may submit a reply letter issued by the Ministry of Economic Affairs' foreign business personnel to verify the debtor's actual business address before bankruptcy or escaping, or other documents sufficient to prove that the debtor has another actual business address, which shall be verified by the taxation agency .
(3) If the debtor resides in the mainland area, he shall obtain the certificate issued by the competent authority of the debtor's location to register the business address before the debtor's bankruptcy or escape, and shall be verified by an institution or group entrusted by the Mainland Affairs Council of the Executive Yuan to handle matters related to the exchanges between people in the Taiwan area and the mainland area If the registered business address is inconsistent with the debtor's real business address, the creditor may submit other documents sufficient to prove that the debtor has another real business address, which shall be verified by the tax collection agency.
7. If the obligor in Item 1 of Subparagraph 1 is declared reorganized, reconciled, or bankrupt, or due to other reasons, part or all of the obligee’s rights cannot be recovered, the following evidence shall be presented for identification:
(1) For reconciliation, if it is a court reconciliation, including the reconciliation of the court before bankruptcy or the reconciliation in litigation, there should be a court reconciliation record or ruling; if it is a reconciliation of a chamber of commerce or an industry association, there should be a reconciliation record .
(2) For the declaration of bankruptcy or legal reorganization, there should be a court ruling.
(3) When applying for compulsory enforcement by the court, if the debtor's property is insufficient to pay off the debt or has no property available for compulsory enforcement, there shall be a certificate of creditor's right issued by the court.
(4) If the debtor is liquidating in accordance with foreign laws and regulations, relevant documents proving the completion of liquidation and the verification or certification of the Chinese embassy or consulate, commercial representative or foreign trade agency shall be required in accordance with foreign laws and regulations.
8. If the creditor’s right under Item 2 of Subparagraph 5 is two years overdue, and the principal or interest cannot be collected after the creditor calls for collection, the postal service shall obtain a letter of deposit for delivery and return it on the grounds of rejection or death of the person. The deposit letter or the proof of collection to the court.
[Related Administrative Rules]1. These principles are formulated for the purpose of establishing consistency in the examination and determination of bad debt losses of profit-seeking enterprises by state taxation bureaus in various regions, and reducing disputes between taxpayers and taxpayers.
2. The identification and review of bad debt losses of profit-seeking enterprises shall be handled in accordance with Article 49 of the Income Tax Law, Article 94 of the Income Tax Review Guidelines for Pro-profit Enterprises and relevant laws and regulations.
3. Accounts receivable, bills receivable, and various creditor's rights in arrears of a profit-seeking enterprise shall be deemed to have actually incurred bad debt losses if one of the following circumstances occurs:
(1) Due to the debtor's bankruptcy, escape, reorganization, reconciliation, declaration of bankruptcy, or other reasons, part or all of the creditor's rights cannot be recovered.
(2) The creditor's right is overdue for two years, and no principal or interest has been collected after collection.
For the bad debt loss mentioned in the preceding paragraph, if the profit-seeking enterprise has made provision for bad debt in accordance with the law, it shall first offset the bad debt provision in the year in which it occurs, and the insufficient balance shall be listed as the bad debt loss of the current year; if no provision for bad debt is made If it occurs, it should be recognized as a bad debt loss in the year in which it occurs.
4. For the determination of part or all of the creditor’s rights as stipulated in Subparagraph 1 of Paragraph 1 of the preceding point because the debtor went bankrupt or escaped, a letter of deposit of undeliverable postal services shall be obtained, and the following provisions shall be followed:
(1) If the debtor is a profit-making enterprise, the letter of deposit should include the exact business address of the profit-making enterprise before it closed down or moved to another unknown place, so as to determine the bad debt loss. The so-called real business address is based on the place of business legally registered with the competent authority on the date of collection; if it is inconsistent with the debtor's real business address, if the creditor submits the debtor's other proof of the debtor's real business address, and it is found to be true, it will not be This limit. If the debtor is an individual and has registered for change of household registration, the tax collection agency shall check the household registration information to confirm it; if the debtor is unknown, there shall be a transcript or certificate of the debtor's household registration issued by the household registration agency.
(2) If the debtor lives abroad, he shall obtain the certificate of the debtor's actual business address issued by the competent authority in the place where the debtor is located, and have it verified by the Chinese embassy, consulate, commercial representative or foreign trade agency abroad, or the Ministry of Economic Affairs stationed abroad. The reply letter from the business personnel to verify the exact business address of the debtor before it went bankrupt or escaped into hiding is used to recognize bad debt losses.
(3) If the debtor resides in the mainland area, the debtor's local competent authority shall obtain the certificate of the debtor's real business address before the debtor went bankrupt or escaped, and shall be verified by an institution or group entrusted by the Mainland Affairs Council of the Executive Yuan to handle matters related to the exchanges between people in the Taiwan area and the mainland area. If it is true, it shall be recognized as a bad debt loss.
(4) The competent authority in the place where the debtor is located in the preceding two paragraphs issues a certificate of the exact business address of the debtor before the debtor went bankrupt or escaped, and after being verified by the relevant unit, the year when the deposit letter is returned shall be the year for reporting bad debt losses.
(5) The auditing agency checks that the changes in the debtor's business tax registration master file are "general cancellation", "annulment (cancellation) registration", "unauthorized suspension of business and other relocation unknown", "notified to the competent authority for cancellation of registration", "still notified". If there is a violation of "suspended deregistration registration" and "application for cancellation (pending liquidation completion)", or the company's status as "dissolution", "annulment" or "revocation" announced by the competent authority on commercial and industrial registration information, so that it is impossible to exercise collection, it can be determined Because the debtor has bankruptcy or escaped.
5. Where part or all of the creditor's rights cannot be recovered due to the debtor's reorganization, settlement or bankruptcy declaration, or other reasons as stipulated in Subparagraph 1, Subparagraph 1 of Point 3, the following certificates shall be presented for confirmation:
(1) For reconciliation, if it is a reconciliation of the court, including the reconciliation of the court before bankruptcy or the reconciliation of the lawsuit, there should be a reconciliation transcript or ruling from the court; if it is a reconciliation of a chamber of commerce or an industry association, there should be a reconciliation transcript .
(2) For the declaration of bankruptcy or legal reorganization, there should be a court ruling.
(3) If the application is for compulsory enforcement by the court, and the debtor has insufficient property to pay off the debt or has no property available for compulsory enforcement, there shall be a certificate of creditor's right issued by the court.
(4) If the debtor is liquidating in accordance with foreign laws and regulations, relevant documents proving the completion of liquidation and certificates from Chinese embassies, consulates, commercial representatives or foreign trade institutions shall be required in accordance with foreign laws and regulations.
6. If the obligatory rights stipulated in subparagraph 1, subparagraph 2 of point 3 are overdue for two years, after collection, the principal or interest has not been confirmed, and the following regulations shall be followed:
(1) If the creditor's right is overdue for two years, and the creditor has called for collection, if the principal or interest cannot be collected, a letter of deposit that has been delivered by the postal service or a collection certificate to file a lawsuit with the court shall be obtained. If the year in which the deposit letter or collection certificate is mailed is different from the delivery year, the year in which the certificate deposit letter or collection certificate is delivered shall be the year for reporting bad debt losses.
(2) The collection certificate of the court’s action mentioned in the preceding paragraph, including the certification documents of the procedure of applying for payment order, compulsory execution or prosecution according to law.
(3) If the creditor's right is overdue for two years, if the profit-seeking enterprise obtains the certificate deposit letter returned by the postal enterprise on the ground of "rejection", if the creditor presents the creditor's right proof document and checks that it is true, the certificate deposit letter will be returned to the current year as a stay Account losses are presented for the year.
(4) If the debtor lives in a foreign country or the mainland area, and the deposit certificate or other proof documents have been delivered upon collection, the profit-seeking enterprise shall present the relevant proof documents (such as contract, export declaration, etc.) to prove the debtor's exact business address .
7. Cases that have not been verified and determined on the date of publication of this principle shall apply; cases that have been verified and determined shall not be changed.
[Related Press Release]The Southern District State Taxation Bureau stated that according to Article 94, paragraph 5, of the profit-seeking enterprise review criteria, accounts receivable, notes receivable, and various debts in arrears, if one of the following circumstances occurs, it will be regarded as an actual bad debt loss, and The allowance for bad debts should be offset in the year in which they occur. (1) Due to bankruptcy, escape, reorganization, reconciliation, declaration of bankruptcy, or other reasons, part or all of the creditor's rights cannot be recovered. (2) The creditor's rights are overdue for two years, and the principal or interest has not been collected after collection.
The bureau checked the profit-seeking business income tax declaration of bad debt losses of more than 6 million yuan in XX, which manufactured plastic sheets in its jurisdiction. After in-depth investigation, the company sold the goods to Company A in 1992, but Company A was unable to pay due to poor management. The company failed to collect the principal and interest of the payment for the goods despite repeated collections by the company. The company believed that Company A had closed down and escaped, and took a letter of deposit that could not be delivered by the postal service as a proof document. However, after investigation, debtor company A’s business tax registration master file change was “suspension of business and postponement”, which was inconsistent with the provisions of “closure and escape”, and more than 1 million yuan of tax due was excluded.
The bureau further stated that according to the provisions of item 4, item 5 of the "Principles for the Determination of Bad Debt Losses of Profit-seeking Enterprises by State Taxation Bureaus in All Regions of the Ministry of Finance", the audit agency's inspection of the changes in the debtor's business tax registration master file is "general cancellation" , "annulment (cancellation) of registration", "unauthorized suspension of business and other relocation unknown", "notification of cancellation of registration to the competent authority", "suspension of cancellation of registration due to default" and "application for cancellation (pending liquidation completion)" or the competent authority With regard to commercial and industrial registration data publicizing the status of the company as "dissolution", "annulment", or "revocation", so that it is impossible to exercise collection, the debtor can be determined to have closed down or fled. In this case, a certificate of deposit that cannot be delivered by the postal service shall be taken as a supporting document.
The Bureau reminds profit-seeking enterprises that when declaring bad debt losses, if the debtor has closed down or escaped and obtains a letter of deposit from the postal service that has not been delivered, they should pay attention to the debtor's business tax registration information or the company's status in the competent authority's commercial and industrial registration to avoid being subject to Exclude and pay taxes.
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