Tangible & Intangible Asset and Business Valuation of MoF Reg. 79/2023

“Valuation for tax purposes … is a series of activities to determine the value of a valuation object at a certain time which is performed objectively and professionally based on a valuation standard,” reads a fragment of Article 1 number 6 of MoF Reg. 79/2023, quoted on Monday (9/10/2023).

An office valuation may be performed in the implementation of supervision, audits, mutual agreement procedure, advance pricing agreement, settlement of objections, reduction or cancellation of tax assessments, levying, preliminary investigations and tax crime investigations.

A field valuation may be performed in the implementation of audits, mutual agreement procedure, advance pricing agreement, settlement of objections, reduction or cancellation of tax assessments, levying, preliminary investigations and tax crime investigations. See also the infographic ‘Valuation Objects of Taxpayers’ Assets and Businesses by the DGT’'.

Pursuant to Article 5 paragraph (1) of MoF Reg. 79/2023, the value of tangible assets, intangible assets and businesses obtained from valuation includes:

1. the value of remunerations in the form of in-kind and/or fringe benefits stipulated under Article 4 paragraph (1) subparagraph a of the Income Tax Law and the elucidation thereto in respect of tangible assets and intangible assets;
   

2. income from property transfer transactions for land and/or buildings, construction service businesses, real estate businesses and land and/or building leases subject to final income tax stipulated under Article 4 paragraph (2) subparagraph d of the Income Tax Law;
   

3. the acquisition value or sales value in the event of a transfer of assets, namely the amount that should be incurred or received based on the market price stipulated under Article 10 paragraph (2) of the Income Tax Law;
   

4. the acquisition value or transfer of assets in the context of liquidation, merger, consolidation, spin-off, split-off or business acquisition, namely the amount that should be incurred or received based on the market price stipulated under Article 10 paragraph (3) of the Income Tax Law;
   

5. the basis for the transfer of assets, namely the residual value or value determined by the Director General of Taxes or the market value of assets stipulated under Article 10 paragraph (4) and paragraph (5) of the Income Tax Law;
   

6. the acquisition price or residual value of tangible assets which affects the amount of depreciation costs stipulated under Article 11 of the Income Tax Law;
   

7. the acquisition price or residual value of intangible assets which affects the amount of amortisation costs stipulated under Article 11A of the Income Tax Law;
   

8. the value for re-determining the amount of income and deductibles as well as liabilities as capital stipulated under Article 18 paragraph (3) of the Income Tax Law;
   

9. transaction prices between affiliated parties entering into an agreement with a Taxpayer and cooperating with the tax authorities of other countries as stipulated under Article 18 paragraph (3a) of the Income Tax Law;
   

10. the arm’s length value of assets in the event of a discrepancy between the elements of costs and income stipulated under Article 19 of the Income Tax Law and the Ministerial Regulation stipulating the revaluation of fixed assets for tax purposes;
    

11. the arm’s length market price for taxable goods in the form of inventories and/or assets which according to the original purpose, are not for sale and purchase, which are remaining upon the dissolution of the company stipulated under Article lA paragraph (1) subparagraph e of the Value Added Tax Law;
    

12. the selling price or consideration calculated based on the arm’s length market price if affected by an affiliation as stipulated under Article 2 paragraph (1) of the Value Added Tax Law;
    

13. the value of independent construction amounting to costs incurred and/or paid for the independent construction as the tax base stipulated under Article 16C of the Value Added Tax Law;
    

14. the market price for supplies of taxable goods in the form of assets which according to the original purpose, are not for sale and purchase by taxable persons for VAT purposes as stipulated under Article l6D of the Value Added Tax Law;
    

15. the limit price for the sales of confiscated goods at auctions stipulated under Article 2 paragraph (3) of the Tax Collection Using Distress Warrant Law;
    

16. the value of confiscated goods stipulated under Article 14 paragraph (2) of the Tax Collection Using Distress Warrant Law; and
    

17. the selling price of confiscated goods whose sales are excluded from sales by auction stipulated under Article 25 paragraph (2) of the Tax Collection Using Distress Warrant Law and Government Regulation stipulating procedures for sales of confiscated goods excluded from sales by auctions.
    

Article 5 paragraph (2) of MoF Reg. 79/2023 contains the provisions on the use of the results of the valuation. The results of the valuation may be used as:

1. the calculation basis of tax payable in the analysis or verification of tax compliance when supervision is performed;
   

2. the calculation basis of tax payable in the assessment of tax compliance when an audit is performed;
   

3. the basis for the determination of arm’s length transfer prices in the analysis and determination of negotiating positions when mutual agreement procedure is implemented;
   

4. the basis for the determination of arm’s length transfer prices in the analysis and determination of negotiating positions when advance pricing agreement is implemented;
   

5. the calculation basis of tax payable in decisions on the resolution of objections;
   

6. the calculation basis of tax payable in decisions on the settlement of the application for a reduction or cancellation of tax assessments;
   

7. the basis for the determination of the value of tangible asset collateral, the value of confiscated goods, limit price and selling price of confiscated goods whose sales are excluded from sales by auctions when levying is performed;
   

8. the calculation basis of losses to state revenues when a preliminary investigation is performed; and
   

9. the calculation basis and recovery of losses to state revenues when an investigation is performed. (kaw)