Newsletter
TRANSFER OF EMPLOYEES' PENSION FUNDS
In a ruling dated 25 March 1999, the MOF pro-vided that when a profit-seeking enterprise to which the Labor Standards Law (LSL) applies transfers employees to another business entity, and the pension fund allocations made in respect of these employees are transferred to the re-ceiving enterprise and declared by it as cur-rent-year income, then where the receiving en-terprise pays all the money so received into a worker pension reserve fund account in the same accounting year, the amount so paid may be de-clared as current-year expenditure, and is not subject to the percentage restrictions which normally apply to employee pension fund allo-cations.
But it was a matter of doubt whether an enter-prise which is unable to complete such a pension fund allocation in the same accounting year as it receives and declares pension funds for trans-ferred workers, but makes it in a subsequent year, can declare it as expenditure in the same way.
In response to this doubt, the MOF has now stated in a ruling dated 15 June 2000 that where, in the course of restructuring, a business entity takes on employees transferred from an affiliated enterprise and receives their pension funds, and declares these pension fund monies as cur-rent-year income for the year in question, but is not able to pay them in full into a worker pension reserve fund account in the same accounting year in accordance with the MOF 25 March 1999 ruling, then where it is found on inspection that the tax brackets applicable to the company in the year in which it declared the income and that applicable in the year of payment into the reserve fund account are the same, and there is no evi-dence of tax evasion or avoidance, such pay-ments can still be declared as expenditure.