Weitian Technology Co. Ltd (AKA ProLight Opto Technology Corp), a Taiwanese company active in the global LED industry, claimed that factors affecting market prices had not been fully considered while determining the prices of products sold to its subsidiary in Shanghai, and that this had caused major losses in the subsidiary. To account for these losses, at the end of 2015, a year end adjustment was made, which was reported as a tax deductible sales allowance in the tax returns. The tax authorities denied the deduction. An appeal was filed by the company with the Supreme Administrative Court in 2019. Judgement of the Supreme Administrative Court The court dismissed the appeal. Deductions for the year end adjustment could not be allowed in this case for the following reasons: A year end adjustment is a mechanism provided to MNEs to achieve an arm’s-length result when the agreed terms and conditions pertaining to the price-relevant factors are changed. Documents must demonstrate the reasons for making the adjustment, the method for the adjustment, and the terms and conditions of the adjustment. Weiwei Technologies provided only internal approvals and debit notes. There were no documents showing conditions or terms, whether price-relevant factors had been concluded by both parties, or how the adjustment would occur for each transaction. Click here for English Translation Taiwan 109-661 Click here for other translation ...