Measures and Tax Relief Provisions in Response to the COVID-19 Pandemic

In response to the impact of the COVID-19 pandemic on the economy and businesses, the Executive Yuan has enacted the Special Act for COVID-19 Prevention, Relief, and Revitalization (Relief Act) to stimulate domestic economic activities and assist businesses in overcoming difficulties. The measures include epidemic compensation, relief subsidies, financial relief, and cost reduction. The Relief Act is effective until June 30, 2022. The tax provisions for epidemic relief and exemptions are as follows:

I. Exemption of various subsidies affected by the pandemic from income tax

According to Article 9-1 of the Relief Act and the Ministry of Finance’s Order No. 10904629980 issued on November 25, 2020, individuals, medical institutions, profit-seeking enterprises, educational, cultural, public welfare, charitable organizations or groups affected by the COVID-19 pandemic are exempted from income tax on various relief subsidies received from the government. The related necessary costs incurred by medical institutions, profit-seeking enterprises, or organizations and groups can be verified and recognized without being separately attributed or apportioned to the exempted income. When the government agencies provide tax-exempt subsidies, no separate declaration is required.

Therefore, profit-seeking enterprises that receive the aforementioned tax-exempt income should adjust and reduce it in their annual profit-seeking enterprise income tax returns, and the related cost expenses can also be verified and recognized.

II. Double deduction of employee quarantine leave salary expenses

According to §4 of the Relief Act, salaries paid by government agencies, institutions, schools, corporations, or groups to employees for quarantine leave applied according to regulations or for leave taken due to instructions from the Central Epidemic Command Center are eligible for a double deduction. The deduction is based on the actual salary amount for the number of leave days, verified after deducting government subsidies. When filing the tax return, in addition to providing proof of the salary amount, isolation, quarantine, or other supporting documents must be attached. Furthermore, please note the following:

1. 1. Salary during the quarantine period should be calculated based on actual payments, including wages, salaries, regular allowances received for work, without deducting income tax, insurance premiums, or labor union fees. The number of leave days should exclude regular holidays and rest days, and the calculation should be based on the actual amount paid by the employer. For example, if Mr. A, an employee of Company A, has a monthly salary of 60,000 NT dollars, the daily salary would be 2,000 NT dollars (60,000 NT dollars ÷ 30 days). If Mr. A was placed under home quarantine from April 1 to April 14, with 6 days falling on regular holidays and rest days (April 2-5, April 11, April 12), and he took 8 days of quarantine leave, if Company A only paid him half of his salary for the 8 days, which is 8,000 NT dollars, then the deduction would be twice the actual payment, amounting to 60,000 NT dollars, subtracted from the taxable income for the year.
2. 2. The reason for leave must be beyond the employer’s control. For example, if the Central Epidemic Command Center has announced that people returning to a certain area should be quarantined, but the employer still assigns the employee to go, the deduction cannot be applied.
3. 3. Tax benefits cannot be duplicated. For example, the same salary cannot be simultaneously eligible for both double deduction and deduction as research and development personnel salary.
4. 4. Measures and tax relief provisions in response to the COVID-19 pandemic.

III. Verification and declaration of relief expense reduction

The Relief Act also provides several expense reduction measures, such as interest and handling fee exemptions for loans or reductions in water and electricity fees. Profit-seeking enterprises should pay based on the reduced amount. When filing tax returns, the reduced amount should be deducted as an expense reduction. For example, if Company A originally had to pay 30,000 NT dollars for water and electricity fees but received a 10,000 NT dollar reduction under the Relief Act, when filing the corporate income tax return, the actual payment of 20,000 NTD should be recognized as the current period’s water and electricity expenses.