Enforcement Rules of the Income Basic Tax Act Article 10

Where a profit-seeking enterprise, in accordance with the provisions as set out in Article 49 of the Financial Holding Company Act or Article 45 of the Business Mergers and Acquisitions Act, has elected to name the financial holding company or the parent company after the merger or acquisition to act as the taxpayer for the filing of a combined profit-seeking enterprise income tax return, the amount of its basic income to be declared in the said combined profit-seeking enterprise income tax return shall be the sum of the amount of the combined taxable income as calculated in accordance with the provisions as set out in the Income Tax Act plus the aggregate amount of the incomes of each of the companies involved in the combined income tax return as indicated in subparagraphs under Paragraph 1, Article 7 of the Act.For the companies specified in the preceding Paragraph that choose the financial holding company or the parent company after merger or acquisition to act as the tax payer to file a combined profit-seeking enterprise income tax return, and if there is any loss incurred after the effective date of the Act in connection with the amount of incomes specified in Subparagraphs 1, 9, or 10, Paragraph 1, Article 7 of the Act as declared by them, and if such loss has been recognized by the collection authority, then the subtraction of such loss shall be calculated in accordance with the following provisions:1. Prior to filing the combined declaration, the loss which is incurred after the effective date of the Act in connection with income(s) added by each of the foregoing companies in accordance with Subparagraphs 1, 9, or 10, Paragraph 1, Article 7 of the Act and has been recognized by the collection authority but has not yet been subtracted may be subtracted by the order of the year of the occurrence of a loss from the corresponding current-year amount of income specified in Subparagraphs 1, 9, or 10, which is a specific additional item of Paragraph 1, Article 7 of the Act, within five years after the year in which such loss was incurred by the individual companies. If the balance of Subparagraphs 1, 9, or 10, which is a specific additional item, is negative after the subtraction, the negative balance shall not be included in the income amount.2. From the year in which the combined profit-seeking enterprise income tax return is filed, the loss which is incurred after the effective date of the Act in connection with income(s) added by each of the foregoing companies in accordance with Subparagraphs 1, 9, or 10, Paragraph 1, Article 7 of the Act and has (have) been recognized by the collection authority may be subtracted by the order of the year of the occurrence of a loss from the corresponding current-year amount of income specified in Subparagraphs 1, 9, or 10, which is a specific addition item, of Paragraph 1, Article 7 of the Act, within five years after the year in which the loss was incurred by the financial holding company or the parent company after merger or acquisition. If the balance of Subparagraphs 1, 9, or 10, which is a specific additional item, is negative after the subtraction, the negative balance shall not be included in the amount of income.3. After the combined declaration, if any of the foregoing individual companies elects to file individual income declaration due to the change in its equity shareholdings, and if it has incurred any loss in connection with any of the taxable incomes specified in Subparagraphs 1, 9, or 10, which is a specific additional item, in Paragraph 1, Article 7 of the Act within five years, and such loss has been recognized as deductible loss by the collection authority but not yet subtracted, then the said individual company filing such individual income declaration may, within five years from the year in which the same loss incurred by all companies involved in the combined income declaration, subtract by the order of the year of the occurrence of a loss, in compliance with the provisions set out in Subparagraphs 2 to 4, Article 7 of the Act, from its basic taxable income loss incurred by it at a deduction rate equal to the ratio of the loss incurred by it during each current taxation period in connection with each individual item of such income to the aggregate amount of the losses incurred by all companies in connection with the same individual taxable income as declared in the combined annual profit-seeking enterprise income tax return. After the loss incurred by one or more individual companies filing individual income declaration has (have) been subtracted in accordance with the foregoing provisions, the financial holding company or the parent company after the relevant merger or acquisition process that files the combined income declaration may keep on subtracting by the order of the year of the occurrence of a loss the remaining sum (balance) of the combined loss incurred by other companies in connection with each of the taxable incomes specified in Subparagraphs 1, 9, or 10, which is a specific additional item, in Paragraph 1, Article 7 of the Act in each taxation period during the preceding five years duly recognized by the collection authority as deductible losses but not yet subtracted from the combined amount of the basic incomes of such other companies.