COORDINATED HANDLING OF DUTIES AND TAXES

11/01/2001

---

To implement the cross-checking of customs and domestic tax records in order to prevent tax evasion, on 1 August 2001 the Ministry of Fi-nance (MOF) promulgated its Operational Guidelines for the Coordinated Handling of Customs Duties and Domestic Taxes. Their main content is as follows:

Where any of the following circumstances applies to imported or exported goods, the customs authorities should refer selected se-rious cases to the relevant authorities for re-view within one month.

1.Cases to be referred to the Department of Taxation, MOF

a.Serious cases in which an importer de-clares unusual prices.

b.Cases in which an importer refuses without proper grounds to submit to an investigation of duty-paid prices or to provide related information such as books of account or receipts, and seri-ous tax evasion is suspected.

2.Cases to be referred to the National Tax Administration (except for serious and far-reaching cases, which if necessary may be referred to the Department of Taxation, with MOF permission)

a.Full year's import records of importers who frequently declare unusual prices.

b.Full year's import records of importers of goods that present a strong tempta-tion to evade duty, who have declared unusual prices.

c.Cases in which excessively high prices are declared for imported goods, ap-parently in an attempt to evade tax by inflating costs and thereby reducing profits.

d.Attempts to avoid liability for duty by importing dutiable goods unassembled and in separately packaged consign-ments.

e.Serious cases in which importers de-clare unusually high commissions, royalty payments or other expenditures.

f.Businesses whose imports of zero-rated items or items dutiable on the basis of quantity exceed certain annual quanti-ties, values or percentages.

g.Serious cases in which the vendor and purchaser of imported goods are in a special relationship such as to influence transaction prices.

h.Serious cases in which imported goods are cleared through customs by the "no review, no inspection" (C1) procedure under false tariff numbers, in order to evade duties or controls.

i.Other serious contraventions of the relevant laws and regulations.

3.Cases to be referred to the business tax collection authorities (except for serious and far-reaching cases, which if necessary may be referred to the Department of Taxation, MOF)

a.Cases in which the declared price of imported goods appears abnormally low, and doubts exist over the correct-ness and veracity of the declared duty-paid price.

b.Where there is a large difference, in excess of normal profit and costs, be-tween the declared price of imported goods and their domestic market price, and there is no mechanism for post-payment of duty under the rele-vant provisions of the Customs Law.

c.Where there is an abnormally large in-crease in the quantities imported by an importer during a particular period of time.

d.Serious cases involving forgery or fal-sification of commercial invoices.

e.Other serious contraventions of the relevant laws and regulations.

If taxation agencies discover apparent anoma-lies in the expenditure items listed below as declared by companies in connection with imported goods, and they suspect under- or over-reporting of the duty-paid prices of such goods, they should refer such cases to the Di-rectorate-General of Customs within one month together with supporting information:

1.Commission payments;

2.Training expenditure;

3.Research expenditure;

4.Royalties or other remuneration for the exploitation of patent rights, trademark rights or copyrights;

5.Expenditure on containers and packaging;

6.Other related expenditures;

7.Overseas remittances other than payment for goods or remittance of profits by companies set up in the ROC by foreign investment, and very large overseas re-mittances other than payment for goods by domestic companies;

8.Payments for imported goods where the corresponding transaction cannot be iden-tified;

9.Other overseas remittances where there are apparent grounds for suspecting false inflation of costs;

10.Serious cases in which the vendor and purchaser of imported goods are in a spe-cial relationship such as to influence transaction prices;

11.Where abnormal sums are paid to or in-voiced by vendors for the use or disposal of imported goods;

12.Where some payments for goods are made indirectly;

13.Where the following goods or services are provided free of charge or at reduced cost to a vendor of imported goods, for use in the production or sale of the goods:

a.Raw materials, component parts, as-semblies or similar;

b.Tooling, dies, molds or similar;

c.Production consumables; and

d.Engineering, development, craft, de-sign or similar services provided over-seas; and

14.Where for the year in question an importer has purchase receipts for imported goods but no receipts for payment of import du-ties to Customs.