Taiwan's Ministry of Finance has issued a notice confirming and clarifying the net profit rate reduction for companies impacted by the COVID-19 pandemic that experienced a reduction in net operating income of at least 30% in 2021 as compared to 2020 or 2019. For qualifying companies that are eligible to apply a net profit rate the standard net profit rate for the respective industry is reduced by 20% (i.e., 80% of the standard profit rate applies). For example, if the standard net profit rate is 6%, the net profit rate will be 4.8% for 2021 for companies meeting the 30% income reduction condition.
In determining whether a company qualifies for the net profit rate reduction, it is clarified that net operating income in 2021 is compared to either 2019 or 2020, and the minimum 30% reduction condition only needs to be met in comparison to one of those years. For example, if a company's net operating income was TWD 10 million in 2019, TWD 8 million in 2020, and TWD 6 million in 2021, the reduction compared to 2019 would be 40% and the reduction compared to 2020 would be 25%. Since the minimum 30% reduction condition was met compared to 2019, the company qualifies for the net profit rate reduction.