Email Consultation
Running a Taiwan Branch: Deducting Head-Office Overhead and Sending Profits Home
← Back to InsightsLegal Information

Running a Taiwan Branch: Deducting Head-Office Overhead and Sending Profits Home

7 min read

A Taiwan branch can deduct a share of its head office's overhead. The share is normally set by revenue. The proof has to come from the head office's own books: a financial report certified by a qualified CPA where the head office is located, filed together with the branch's annual corporate income tax return. All of this sits in Article 70 of Taiwan's audit regulations for profit-seeking enterprise income tax (營利事業所得稅查核準則; unofficial English name).

Taiwan treats the branch as part of its head office. A 1987 Ministry of Finance ruling (台財稅第7586738號) treats a foreign company's Taiwan branch as a unit of the head office and its Taiwan profit as part of the head office's profit. That is why overhead charges, payments to head office and profit remittances work differently for a branch and a subsidiary. The general comparison is in Entering the Taiwan Market: Key Differences Between a Subsidiary and a Branch.

Registration, separate books and the May return

Without a branch registration, a foreign company may not do business in Taiwan in its own name, and the person who does so faces criminal penalties (Company Act, Article 371). Under Article 372, the company must set aside dedicated operating funds for the branch and appoint a representative in Taiwan. If that representative later returns the funds to the head office, or lets the head office take them back, that is a criminal offence too. The set-up steps are covered in Setting Up a Company in Taiwan.

Only Taiwan income is taxed. Article 3, paragraph 3 of the Income Tax Act taxes a business with its head office outside Taiwan on its profit-seeking enterprise income within Taiwan, and Article 41 requires its fixed place of business in Taiwan to keep separate books and compute its own income. The branch files its own return for the previous year between May 1 and May 31 with the tax office where it is registered (Article 71, paragraph 1; Enforcement Rules, Article 49, paragraph 2). As of October 2026 the rate is 20% (Article 5, paragraph 5).

What about a loss year? A 1975 ruling (台財稅第32565號), concerning Taiwan branches whose head offices were in the United States and Hong Kong, allows a branch that keeps separate books under Article 41 to use the loss carryforward in Article 39. The carryforward now runs ten years. Article 39 also requires complete books and a blue return or CPA-certified return, filed on time, for both the loss year and the year of the deduction.

For business tax (Taiwan's VAT), the branch is a business entity in its own right (Business Tax Act, Article 6, item 3). The Ministry of Economic Affairs' branch registration procedure lists tax registration with the local National Taxation Bureau as the step after the company and branch registration.

Two conditions for an overhead allocation

Article 70, paragraph 1 lets a foreign company's Taiwan branch take a share of the management expenses of its foreign head office or regional headquarters. The tax office accepts the actual amount if two conditions are met.

First, where the head office or regional headquarters does no outside business itself but has separate operating divisions, those divisions must bear a share of the non-operating departments' management expenses alongside the branches. Loading the whole cost onto the branches fails this test.

Second, the head-office management expenses must not already be built into the branch's purchase costs. And the branch must not pay interest on funds the head office supplies for the branch's operations. A branch that buys goods from head office should first check whether its purchase prices already include overhead.

Revenue drives the split. Under paragraph 2, the allocation follows the operating revenue of each operating division of the head office or regional headquarters and of each branch. In special circumstances the branch may apply to its tax office for approval of another reasonable basis. Picture a US head office with US$50 million of non-operating overhead whose Taiwan branch earns 3% of the combined revenue of its operating divisions and branches: the Taiwan share is US$1.5 million (an invented example).

What goes in with the return

Paragraphs 3 and 4 set the paperwork. With its annual return, the branch files a financial report of the head office or regional headquarters, certified by a qualified CPA where that office is located and showing the office's total operating revenue and its management expenses. A certificate from the foreign tax authority may be filed instead. If another allocation basis was approved, the report must also show that basis, the calculation method and the amount allocated to each operating division and branch.

Missing figures? If the financial report does not show the management expenses or the allocation details, the branch must also file an audit report from a CPA where the head office is located that contains them (paragraph 4).

Amounts allocated under Article 70 are outside Taiwan's transfer pricing regulations (營利事業所得稅不合常規移轉訂價查核準則), paragraph 5 says. For a US head office, only Taiwan's domestic rules apply here: as of October 6, 2026 there is no comprehensive US–Taiwan income tax agreement in force, only a 1988 shipping and air transport arrangement (Ministry of Finance agreement list). A Vietnamese head office can also point to Article 7(3) of the Taiwan–Vietnam tax agreement, concluded between the Taipei Economic and Cultural Office in Hanoi and the Vietnam Economic and Cultural Office in Taipei. It allows "as reasonable deductions expenses which are incurred for the purposes of the business of the permanent establishment, including executive and general administrative expenses so incurred, whether in the Party in which the permanent establishment is situated or elsewhere."

Other costs incurred abroad: the September 2026 order

Costs other than overhead allocations are handled by two older Ministry of Finance rulings. A 1997 ruling (台財稅第861924459號) covers foreign enterprises doing design, contracting or other engineering work in Taiwan through a branch or site. A 1999 ruling (台財稅第881896532號) covers a foreign head office that provides services directly to Taiwan customers in Taiwan, with the branch keeping the books and filing the combined return. Both let costs incurred abroad be proven by a CPA-certified head-office report. Both also required certification by a Taiwan mission abroad or a government-authorized body.

That step is gone. An order of September 16, 2026 (台財稅字第11500617350號) rewrote both rulings. The new wording accepts a head-office financial report certified by a qualified CPA where the head office is located, showing the amount, nature and calculation or allocation method of the foreign costs, or a certificate from the foreign tax authority. Under the rewritten 1997 ruling, if the report is not provided or the tax office doubts it, the office may, with approval, ask for books and documents under Article 83 of the Income Tax Act; if they are not produced, it may assess income from the information it has or from the industry profit standard. The order does not say from which return it applies.

Interest and other payments to head office

Interest on head-office funds is the first trap. A branch that pays interest on money the head office supplied for its operations no longer meets condition two of Article 70.

Money the head office borrowed from a third party is another matter. In a 1975 ruling (台財稅第36379號), a head office had borrowed from another oil company to fund its branch's offshore oil exploration in Taiwan. The Ministry said that if the branch could prove to its tax office that the whole loan was used for the branch, the interest paid by the head office could in principle be deducted by the branch.

Payments can also run the other way. A 1999 ruling (台財稅第881958163號) treated fees that a foreign bank's Taipei branch paid to a project team belonging to its head office as the head office's Taiwan-source income, to be included in the branch's return and taxed there.

Royalties to head office are harder to call. None of the statutes or rulings checked for this column deal with them directly, so it is worth confirming the treatment with the competent National Taxation Bureau or a Taiwan CPA before a licence is signed.

Sending profits home

No withholding applies. The 1987 ruling says that apart from the corporate income tax on its Taiwan profit, the branch has no profit-distribution issue and need not withhold tax. Point 2 of the Ministry's source-of-income principles (amended October 13, 2023) also leaves branch remittances out of the definition of dividends. Taiwan adds a 5% surtax on undistributed earnings from tax year 2018 (Income Tax Act, Article 66-9), but a business whose head office is outside Taiwan is exempt from computing and filing it (eTax Q&A 2814, updated April 27, 2026).

By comparison, a subsidiary paying dividends to a foreign parent withholds 21% on payments from January 1, 2018 (eTax Q&A 1503); agreement rates are discussed in Taiwan Subsidiary Dividends to a US Parent. How the branch's income and the Taiwan tax count at home is for a US or Vietnamese tax adviser to confirm.

If the branch is about to claim an overhead allocation for the first time, or is weighing an application for a different allocation basis, Hovering International Law Firm can be reached at wei@hoveringlaw.com.tw. Before that, check whether the head office's CPA report states total revenue and management expenses as separate figures; if it does not, paragraph 4 calls for a separate audit report.

Official sources

Checked: October 6, 2026

Frequently Asked Questions

Can a Taiwan branch allocate head-office overhead by headcount instead of revenue?
The default in Article 70, paragraph 2 of Taiwan's audit regulations for profit-seeking enterprise income tax is revenue: the operating revenue of each head-office operating division and each branch. A branch with special circumstances may apply to its tax office for approval of another reasonable basis. If approved, the head-office financial report must also show the basis, the calculation method and the amount allocated to each division and branch.
Does the head-office report need to be authenticated by a Taiwan representative office?
Article 70 asks for a head-office financial report certified by a qualified CPA where the head office is located, or a certificate from a foreign tax authority; its text does not list authentication. Two Ministry of Finance rulings on other costs incurred abroad used to require certification by a Taiwan mission or an authorized body as well. The order of September 16, 2026 (台財稅字第11500617350號) rewrote both, and the new wording has no such step.
Is there Taiwan withholding when the branch sends after-tax profit to its US or Vietnamese head office?
No. A Ministry of Finance ruling of March 9, 1987 (台財稅第7586738號) says that once the branch has paid corporate income tax on its Taiwan profit, there is no profit-distribution issue and the branch need not withhold. A business whose head office is outside Taiwan is also exempt from computing and filing the undistributed-earnings surtax (eTax Q&A 2814, updated April 27, 2026).

This article provides general information and is not legal advice on any individual matter.

Related reading