Taiwan Court Upholds Cost-Plus Method in Contract Manufacturing Dispute

December 2020

Taiwan’s Supreme Administrative Court reviewed a dispute concerning Weitian Technology’s pricing of contract manufacturing services for a foreign affiliate. Tax authorities applied the Cost-Plus Method, asserting that Weitian’s margins fell below independent benchmarks.

Although the taxpayer argued that the TNMM was more appropriate due to functional differences, the Court held that Cost-Plus better reflected the economic reality of its limited-risk manufacturing activities.

By endorsing the Ministry of Finance’s approach, the Court confirmed Taiwan’s preference for direct, cost-based analyses when functional profiles are straightforward.

The decision reinforces a pragmatic, compliance-oriented standard in Taiwanese transfer pricing, affirming the authorities’ ability to challenge broader profit-based methods where simpler economic relationships prevail.

Read the Full English Translation Here: Taiwan vs Weitian Technology Co. Ltd. December 2020, Supreme Administrative Court, Case No 109 Pan Tzu No. 661 - TPcases