Tax Governance

■ Approach to tax

E.SUN is committed to not using tax haven and low-tax jurisdiction for tax avoidance. We refuse to transfer value through special structure and arrangement which is not in accord with arm’s length principle. We set tax governance and transfer pricing policy and regard the policies as the internal standard of tax matters.

Principles of E.SUN Tax Governance and Transfer Pricing Policies
Tax Compliance Complying with the letter and the spirit of tax laws and regulations to file tax returns and prepare related documents.
Comprehensive Decision Evaluating the impacts comprehensively and making tax strategies in accordance with local and international tax trends.
Transparency Disclosing tax information in financial reports and annual reports regularly and publicly to ensure information transparency.
Proactive communication Developing open and transparent dialogues with tax authorities to assist in improving tax systems.
Tax incentives Instead of seeking abusive tax results violating the spirit of tax laws to decrease tax burden, we use legal and transparent tax incentives.
Business structure Business structure and transactions shall reflect economic reality. No special arrangements shall be used to avoid paying tax.
Risk management Evaluating potential tax risks and adopting appropriate strategies when we make tax decision.
Commercial substance Related-party transactions shall reflect economic reality and the decision-making party shall bear risk and take reasonable profits.
Arm’s length principle The trade terms of related-party transactions should be similar to non-related-party’s.

■ Tax Governance and Risk Control Mechanism

E.SUN has robust tax governance and risk control mechanism. The Board, the highest governance unit of tax, reviews the status of worldwide tax compliance and latest tax news every 6 months to control tax risk and know global tax trend. Below are the cases under the mechanism in 2022.

Item Case Description
Tax Governance & Risk Control Mechanism Compliance and planning To fulfill tax compliance comprehensively and strengthen tax management, we made research on tax systems in the jurisdiction we operate in 2022. Besides, we designed a significant expense reconciliation form for overseas operating sites to control tax risk and established the mechanism of reporting significant tax issues to collect the financial and tax difference among jurisdictions.
Risk management The Board of Directors control the frequency and amount of tax disputes to low risk level, using risks identification and three lines of defense mechanism to oversee tax matters; the hotlines and mail boxes are established internally and externally to report illegal or unethical tax-related matters.
Succession planning We share experience on tax through internal regular meeting every week; tax knowledge is well passed down by the working papers and workflow chart.
Performance appraisal Tax personnel's performance is highly related to the annual tax work plan and evaluated by SMART principle. We prohibit tax personnel from using radical tax avoidance measures to obtain high rating.

■ Stakeholder engagement and management of concerns related to tax

To reinforce public trust, we proactively contact stakeholders to discuss tax issues and engage in public policy advocacy on tax to support the improvement of tax environment.

■ Income tax information-2022&2021

The effective tax rate of E.SUN FHC in 2022 is 20.71% which is close to the statutory tax rate (20%) and the global average banking effective tax rate (20.90%) from CSA handbook 2023. Year-over-year change in tax rate is mainly because the fair value of financial assets and liabilities changed drastically in 2022, leading the recognition of unrealized revaluation loss.

Unit: million NTD, %

2022 2021 Calculated averages
Profit before tax (A) 19,903 23,959 21,931
Reported taxes (B) 4,122 3,374 3,748
Reported tax rate (B)/(A) 20.71% 14.08% 17.09%
Adjustments (D) Temporary difference (329) 222 (53)
Tax-exempt income 74 1,636 855
Adjusted reported taxes (E)=(B)+(D) 3,867 5,232 4,550
Effective tax rate (E)/(A) 19.43% 21.84% 20.75%
Income tax paid (F) 3,956 2,270 3,113
Cash tax rate (F)/(A) 19.88% 9.47% 14.19%

■ 2022 country-by-country reporting

To realize global business strategy, E.SUN has operating sites in different tax jurisdictions. Most of the offices are located in Asia Pacific financial center, Taiwan, China, Hong Kong and ASEAN. Below is the tax information in each tax jurisdiction.

Unit: million NTD / person

Tax jurisdictions Revenues from unrelated party Net revenue Profit before tax Income tax paid Current income tax expense Revenues from related party – cross jurisdiction Number of employees Tangible assets
Taiwan 67,005 63,870 14,519 2,841 2,869 1,919 8,901-9,000 32,464
China 2,634 1,375 574 109 98 8 201-300 2,778
Cambodia 1,708 1,158 770 133 157 - 401-500 1,132
The United States 1,425 750 599 150 169 - 1-100 9
Hong Kong 3,193 2,572 2,061 274 331 1,238 101-200 24
Singapore 1,700 683 477 131 70 54 1-100 10
Vietnam 292 199 129 20 26 4 1-100 4
Australia 1,485 690 514 235 176 6 1-100 53
Myanmar 96 151 78 20 24 90 1-100 45
Japan 704 275 182 43 57 4 1-100 20

Notes: For the detailed information of current tax expense, cash tax paid, expected tax at statutory tax rate and others, please refer to the tax contribution report on official website.