Regulations Governing Assessment of Interest Expenditure on the Debts Owed by a Profit-seeking Enterprise to a Related Party in Accordance with the Condition that the Related Payments Shall Not be Considered as Expenses or Losses Article 4

(The Scope of Related Party Debts and Owner's Equity)The term "Related Party Debt" mentioned in the Regulations means the capital granted directly or indirectly by a related party that such capital should be repaid in principal and pay interest, or other compensations with the nature of an interest payment. Such forms of capital include the following:1. Loans provided directly by the related parties.2. Loans provided by the unrelated parties with the surety, backing or any other form of security of the related parties.3. Loans provided by the unrelated parties and such loans are guaranteed as being jointly and severally liable for reimbursement by the related parties. However, if such loans are regarded as the debts owed by a profit-seeking enterprise to the related parties in accordance with Paragraph 1 of Article 6, they shall be excluded.4. Other forms of capital financing with the nature of liability acquired directly from the related parties or indirectly from the unrelated parties with the surety, backing or any other form of security of the related parties.The related party debts prescribed in the preceding paragraph exclude the following:1. In the case that a profit-seeking enterprise meets any one of the following requirements, its related party debts shall be exempted:(1) The net operating revenue plus the net non-operating revenue of the income tax return for the current year is below the standard as prescribed by the Ministry of Finance (hereinafter referred to as the "MOF").(2) Both the interest expenditure filed in the income tax return of the current year and the amount of the related party interest expenditure in the current year mentioned in Article 5 are below the standard as prescribed by the MOF.(3) The taxable income of the current year before deducting the interest expenditure is negative and such losses could not apply the deduction prescribed in the proviso of the Paragraph 1, Article 39 of the ITA.2. Where the interest is reclassified as a capital expenditure in accordance with Subparagraph 7 or Subparagraph 8 of Article 97 of the “Guidelines for Examination of Profit-Seeking Enterprise Income Tax,” the loans of such interest shall be exempted.3. Where the interest is reclassified as a capital expenditure or deferred expense in accordance with Subparagraph 9 of Article 97 of the “Guidelines for Examination of Profit-Seeking Enterprise Income Tax,” the loans of such interest shall be exempted.4. Other debts as approved by the MOF.The term "Owner’s Equity" mentioned in the Regulations for a profit-seeking enterprise having its head office within the territory of the ROC means the net amount of owner’s equity in its balance sheet. However, if the net amount of the owner’s equity in its balance sheet is less than the sum of the paid-in capital and the capital reserve derived from the issuance of new shares at a premium in accordance with Subparagraph 4 of Article 30 of the “Guidelines for Examination of Profit-Seeking Enterprise Income Tax,” the owner’s equity shall be equal to the sum of the paid-in capital and such capital reserve. The owner’s equity mentioned in the Regulations for a profit-seeking enterprise having its head office outside the territory of the ROC with a branch office within the territory of the ROC means the actual paid-in working capital on which no interest is bound to be paid.