Investment Strategy of Overseas Subsidiaries in The Electronics Industry – The Comparison between Prior - and Post- Implementation of Transfer Pricing Regulations

• Main Authors: Ya-Chen Liao, 廖雅貞
• Other Authors: Li-hua Kao
• Format: Others
• Language: zh-TW
• Published: 2009
• Online Access: http://ndltd.ncl.edu.tw/handle/96511195920662655028

碩士 === 中原大學 === 會計研究所 === 97 === In the face of escalating globalization, multinational corporations effectively utilize their resources, avoid risks of exchange rate and inflation, and maximize their global returns through measures of transfer pricing. In order to cope with the global prevalence of transfer pricing as means of tax evasion, Taiwan authorities enacted “Regulations Governing Assessment of Profit-Seeking Enterprise Income Tax on Non-Arm’s Length Transfer Pricing” on Dec 28th, 2004, stating that all transaction activities between subsidiaries must determine the prices based on the “arm’s length principle”, or the tax authority may re-estimate their taxable income and request additional tax payment in compliance with it. Such regulations have caused formidable impact on Taiwanese and other cross-national enterprises. This research attempts to locate whether the implementation of such regulations has changed the investment patterns in oversea subsidiaries from parent companies, and influenced on the tax strategies of multinational corporations, such as setting up offshore holding companies in tax heavens and retaining their profits in oversea operation sites through transfer pricing. The obtained data are the locations of oversea subsidiaries, their business items, return on investment, and the related party transactions between parent companies and their oversea subsidiaries. The primary analytical tool used here is Microsoft Excel and the binomial distribution of the related data is represented as contingency table. The findings about the changes of investment strategy in oversea subsidiaries adopted by Taiwan’s electronic parent companies after the implementation of the regulations are as follows: 1. The parent companies have re-arranged the oversea subsidiaries after the enforcement of such regulations. 2. The distribution of locations of these subsidiaries has become more diffuse and their number has also increased. 3. The investment income of the oversea subsidiaries is increasingly allocated to the tax heavens. 4. The parent companies tend to retain their returns in the tax heavens. 5. The electro-optical industry tends to adopt transfer pricing tactics during purchase and sale transactions.