Enforcement Rules for the Act Governing Relations between Peoples of the Taiwan Area and the Mainland Area Article 21

For any juristic person, organization, or other institution of the Taiwan Area permitted by the competent authorities pursuant to Article 35 of the Act before June 30, 2002 to invest in the Mainland Area through a company or enterprise it establishes in a third area, Paragraph 2 of Article 24 of the Act may apply to investment income distributed by such company or enterprise in the third area on or after July 1, 2002, regardless of the year when such income is generated.For any juristic person, organization, or other institution of the Taiwan Area permitted by the competent authorities pursuant to Article 35 of the Act on or after July 1, 2002 to invest in the Mainland Area through a company or enterprise it establishes in a third area, the provisions in the preceding Paragraph applies to investment income distributed by such company or enterprise in the third area on or after the date of permission.Provisions regarding the deduction of tax payable and calculation thereof under Paragraph 2 of Article 24 of the Act are as follows:1. Taxable investment income under the Income Tax Act of a company or enterprise in a third area refers to the investment income amount distributed by said company or enterprise in a third area;income from sources in the Mainland Area is not required to compute separately to consolidate tax returns.2. The amount of income tax paid in the Mainland Area and a third area refers to:(1) Dividend income tax paid in the Mainland Area on investment income from sources in the Mainland Area of a company or enterprise in a third area.(2) Corporate income tax paid in a third area on investment income from sources in the Mainland Area of a company or enterprise in a third area, computed according to the following formula:Corporate income tax of the year paid by the company or enterprise in a third area × investment income from sources in the Mainland Area of the year / total income of the company or enterprise in a third area of the year. (3) Dividend income tax paid in a third area on investment income distributed by a company or enterprise in a third area.3. With regard to dividend income tax paid in the Mainland Area as prescribed in Item 1 of the preceding Subparagraph and the corporate income tax paid in a third area on investment income from sources in the Mainland Area as prescribed in Item 2 of said Subparagraph, after the certificates prescribed in Paragraphs 4 and 5 are obtained, deductions within the prescribed limits may be made regardless of the year when such tax is paid.Any juristic person, organization, or other institution of the Taiwan Area claiming deduction of paid income tax pursuant to the provisions of the preceding Paragraph shall present the following supporting documents, in addition to the certificate of tax payment prescribed in Subparagraph 5:1. Financial statements or related documents sufficient to substantiate the amount of investment income derived from sources in the Mainland Area.2. Relevant documents sufficient to substantiate the amount of investment income derived from sources in the Mainland Area as part of the income of a company or enterprise in a third area for the year, including financial statements or related documents containing all of such income, cost and expense amounts, as audited by certified accountants of a third area or the Taiwan Area.3. Financial statements or related documents sufficient to substantiate the amount of investment income distributed by a company or enterprise in a third area.Any juristic person, organization, or other institution of the Taiwan Area deducting income tax paid in the Mainland Area and a third area pursuant to Paragraphs 1 and 2 of Article 24 of the Act shall obtain certificates of tax payment issued by the Mainland Area and by the third area. Certificate of tax payment issued by the Mainland Area shall be verified by the institution or private organization prescribed in Article 7 of the Act; certificate of tax payment issued by a third area shall be notarized by R.O.C. embassies, consulates or representative offices abroad or other institutions authorized by the Ministry of Foreign Affairs.The increased taxable amount computed based on the applicable tax rates in the Taiwan Area, after including the income derived from sources in the Mainland Area, as referred to in paragraph 3, Article 24 of the Act, shall be computed according to the following formulas:1. In regard to profit-seeking enterprise income tax: (Income from sources in the Taiwan Area + income from sources in the Mainland Area as prescribed in Paragraph 1 of Article 24 of the Act + investment income of a company or enterprise in a third area as prescribed in Paragraph 2 of Article 24 of the Act ) × tax rate = payable tax on income generated within the R.O.C. for the profit-seeking enterpriseIncome from sources in the Taiwan Area × tax rate = payable tax on income from sources in the Taiwan Area for the profit-seeking enterprisePayable tax on income generated within the R.O.C. for the profit-seeking enterprise － payable tax on income from sources in the Taiwan Area for the profit-seeking enterprise = increased payable tax after including income from sources in the Mainland Area and investment income of a company or enterprise in a third area.2. In regard to consolidated income tax: [(Income from sources in the Taiwan Area + income from sources in the Mainland Area) － exemptions － deductions ] × tax rate － progressive difference = payable tax on consolidated income (Income from sources in the Taiwan Area － exemptions － deductions) × tax rate － progressive difference = payable tax on consolidated income from sources in the Taiwan AreaPayable tax on consolidated income － payable tax on consolidated income from sources in the Taiwan Area = increased payable tax after including income from sources in the Mainland Area