Some more detailed information:
There seems to be another restricting: The CFC rules only apply for companies in “low–tax burden countr[ies]” fulfilling any of those two rules:
- Corporate income tax rate in the foreign country/jurisdiction is not more than 70 percent of the tax rate in Taiwan (20%*70%=14%)
- The foreign country/jurisdiction imposes taxes on a territorial basis (does not impose taxes on income derived from offshore, or imposes taxes only after income is remitted back onshore).
EDIT: Low-tax countries seem to be the “usual subjects”. Notably, Hong Kong is included in the list. Nothing about Estonia, though
Regarding filing taxes:
If the computed total CFC income for the tax filing household is less than TWD 1 million, then there is no need to report this income. If the current-year earning of a CFC is less than TWD 7 million, then there is no need to report this income. However, if there are a number of CFC’s and all CFC income for the tax filing household together exceeds TWD 7 million, then the full amount needs to be reported.
Also, once being taxes as CFC income, no need to pay tax on the distribution of dividends:
Computed CFC income shall only be taxed once. There is no need to report this income again in the year of dividend distribution, unless the amount distributed is higher than what has already been reported as CFC income.
EDIT2: Even more information
https://www.dot.gov.tw/Eng/singlehtml/en_214?cntId=dot_201901210002_214
EDIT 3: Another link:
The Income Tax Act was amended in July 2016 to include anti-tax avoidance rules in Article 43-3 (Controlled Foreign Company [CFC]) and Article 43-4 (Place of Effective Management [PEM]) of the Income Tax Act.
In general, profits retained at the CFC level, which is located in a low tax rate jurisdiction and without commercial substance, will be taxed in advance at the Taiwan parent company level. In the past, taxation of foreign investment income was deferred until the Taiwan parent company received dividend income. Going forward, qualified investment income will be deemed distributed and taxable in Taiwan in advance. The Regulations Governing Controlled Foreign Companies were announced by the Ministry of Finance (MoF) on 31 May 2017. On 14 January 2022, the Executive Yuan announced that the CFC Rules will come into force from 1 January 2023.
For PEM rules, under this new tax regime, if a foreign company meets all three criteria triggering the PEM definition, including (i) decision making location, (ii) record keeping and maintenance location, and (iii) actual operating location are all in Taiwan, the foreign enterprise will be deemed as having its head office in Taiwan and will be subject to tax assessment in accordance with the Taiwan Income Tax Act and other tax regulations. The Regulations Governing Places of Effective Management were announced by the Ministry of Finance in May 2017. However, the PEM taxation mechanisms have yet to take effect.