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FAQs for Taiwan Tax

Individual Income Tax(8)

What is salary and wages Income ?


Salary and wages mean all income received for services rendered or work performed, including salaries, remunerations, wages, allowances, annuities, endowments, bonuses, retirement payments, pensions and/or any other similar subsidies or compensations. But non-ROC residents staying in the ROC for less then 90 days within a taxable year, whose remunerations were derived from employers outside the ROC, are exempt from the above mentioned.




When is tax payment due ?


The tax payment periods for aliens are different for different lengths of resident status in Taiwan. For an individual staying in Taiwan for not more than 90 days, the income tax payable shall be withheld directly at the time of payment by the withholder in accordance with the withholding rate. However, in the case that an individual has sole or additional income deriving from sources to which such procedure for withholding is not ordinarily applied,, such as for income occurring from property transaction, occasional trade, interest from mortgages, etc., he or she should declare such income and pay such tax as may be found owing before his or her departure. For an individual staying in Taiwan over 90 days but less than 183 days the income tax payable shall be withheld directly at the time of payment by the withholder in accordance with the withholding rate. (The employer is responsible for the preparation of a "Withholding & Non-Withholding Tax Statement" which will be required for use by the taxpayer at the time he or she is filing a tax return.) Furthermore, income derived from abroad for services rendered within Taiwan, or any income, to which such procedure for withholding as described above is not ordinarily applied, such as the income occurring from property transaction, occasional trade, interest from mort-gages, etc., should be declared and such tax as may be found owing paid before departure. Any individual staying in the Republic of China for 183 days or more shall file the annual income tax return of the previous year during the period from 1st May to 31st May of the current year. However, any individual who intends to leave Taiwan in the interim of the year, and will not return within the same year, shall file his or her income tax return one week before his or her departure.




Who are considered to be practitioners of profession?


Layers, certified public accountants, architects, technicians, physicians, pharmacists, obstetricians, authors, brokers, scriveners, tax agents, performers, artisans and others that make a living with craftsmanship or art are all considered to be practitioners of profession.




What would happen if a foreigner does not file income tax?


A foreigner should file his/her income tax if he/she has Taiwan source income. Foreigners no longer need a tax certificate issued by tax authorities in accordance with the revised Immigration Act for leaving Taiwan. In case a foreigner fails to file income tax return, such taxes will be charged a penalty rate of a maximum of three times the amount of the tax payable and the tax authorities will inform the National Immigration Agency to deny exit clearance to the foreigner in accordance with the stipulation of Paragraph 2, Article 72 of the Income Tax Act.




When are foreigners required to file their income tax returns in Taiwan?


As the duration within a taxable year (From January 1st to December 31st) that foreigners stay in Taiwan varies, the following three points can be used as a guide for foreigners’ reference to file their income tax returns: 1.For foreigners staying in Taiwan for less than 90 days, the income derived from sources in Taiwan shall be withheld according to the withholding tax rate and paid at the respective sources. The taxpayer need not file an income tax return. However, if one has income gained from property transaction, occasional trade, etc., he/she should declare and pay tax prior to departure. For those who keep staying in Taiwan through May 31st of the current year, they are supposed to file their last year’s income before the said time. 2.For foreigners who stay in Taiwan over 90 days, but less than 183 days, the income derived from sources in Taiwan shall be withheld according to the withholding tax rate and paid at the respective sources. However, incomes derived from overseas earned through providing services in Taiwan will have to be reported prior to departure. For those who keep staying in Taiwan through May 31st of the current year, they are supposed to file their last year’s income before the said time. 3.Foreigners staying in Taiwan over 183 days in one calendar year will be required to file their annual income of the previous year to the Tax Bureau and pay the corresponding taxes during the period from May 1st to May 31st of the current year. However, those leaving the country in the middle of the year will be required to file income earned in that year prior to departure. Mandatory time of filing individual income tax returns for the preceding fiscal year is from May 1st to May 31th (If May 31th falls on Sunday, national holiday or any other holiday, the due day extends to the next workday).




How shall R.O.C. residents and non-R.O.C. residents file their annual income tax returns?


R.O.C. residents deriving income from Taiwan sources, including remunerations paid by employers outside Taiwan for services rendered in Taiwan, must file their income tax returns before departure or file annual income tax returns for the previous year from May 1st to May 31st in the current year. Income tax returns must be submitted to the tax authorities. Their income tax shall be declared and assessed by a progressive rate based on net consolidated taxable income, which shall be the annual gross consolidated income minus the exemptions and deductions. Non-R.O.C. residents receiving income from Taiwan sources shall have their income tax computed and paid according to the withholding tax rate. For incomes which do not need to be withheld, such as earnings from the transactions of property, the taxpayers need to file income tax returns in accordance with the proper withholding tax rates. Furthermore, Non-R.O.C. residents who stay in Taiwan over 90 days within one taxable year, remunerations paid by foreign employers shall be declared and taxed at the rate of 18%.




What are the withholding tax rates for “non-residents of the R.O.C.” ?


The tax rate shall be as follows: 1.The withholding tax rate on dividend distributed by a company, profitdistributed by a cooperative, earnings payable by a profit-seeking enterprise organized as a partnership to its partners each year, or earnings from a profit-seeking enterprise organized as a sole proprietorship each year is 20%.(From Jan. 1st 2018, the withholding tax rate is 21%.) 2.The withholding tax rate on salaries is 18%. In the case that the monthly salaries in full amount are equal to or lower than one and a half times of the monthly baseline salary as assessed by the Executive Yuan, the withholding tax rate is 6% . 3.The withholding tax rate on commissions is 20%. 4.The withholding tax rate on interest is 20%. However, the kinds of interest listed below shall be withheld in accordance with the associated regulations: (1)The portion of the pecuniary amount realized by short-term commercial papers at their maturity in excess of the selling price at their initial issuance is deemed as income from interest and shall be withheld by 15%. (2)The interest distributed from beneficiary securities or asset-backed securities issued in accordance with the Financial Asset Securitization Act or the Real Estate Securitization Act shall be withheld by 15%. (3)The interest accrued from government bonds, corporate bonds and financial bonds shall be withheld by 15%. (4)The interest derived from repo (RP/RS) trade whereby an individual purchases short-term commercial papers or securities as listed in the preceding items a., b. or c. shall be withheld by 15% of the net amount of the sale price at maturity in excess of the original purchase price. 5.The withholding tax rate on rentals is 20%. 6.The withholding tax rate on royalties is 20%. 7.The withholding tax rate on cash awards or payments given in contests or prizes won by chance is 20%. However, taxation is exempted when the prize is not more than NT$2,000 from lottery tickets or uniform invoices issued under the auspices of the government. 8.The withholding tax rate on the remuneration to a professional practice is 20%. 9.After deducting any regulated exemption, retirement payments or pensions shall be withheld at the rate of 18%. 10.The withholding tax rate on payment of reward for information or accusation is 20%.




If an ROC citizen is married to an alien, where should they file income tax returns?


If they choose to file a joint return (no matter whether the alien is resident or non-resident) and choose the ROC citizen to be the taxpayer, they can file their income tax returns with the tax authorities located in the district where they live, or they may file at the Foreign Taxpayers Office of the National Tax Administration if they choose the alien to be the taxpayer. However, no matter where they file tax returns, their income should be filed jointly.





VAT(6)

How to deduct and declare the business tax if the enterprise has lost the purchasing Uniform Invoice?


If an enterprise has lost deduction copy or reception copy the GUI, either a photocopy of the duplicate stub stamped by the original seller or a photocopy of the lost GUI stamped by the own enterprise can be used as purchase proof for the tax or accounting purposes.




In Taiwan there is the lottery receipt system and I would like to know can I check my company's uniform receipts.


The lottery receipt system is a policy that encourages the end customers to get the uniform invoice after shopping. Every two month, people who have the uniform invoice can check the uniform invoice number online to see if they won the lottery. If you pay by cash, the store issue you a uniform invoice. If you pay by " EasyCard," the store issue you electrical uniform invoice. You can register your " EasyCard " online, so when you win the lottery, you will receive a notice from “EasyCard” system.
Check the below link:
https://translatingtaiwanlit.com/2017/09/06/taiwans-receipt-lottery-get-virtual-receipts-and-connect-to-your-bank-account/

However, if you ask the store to type your company's tax id on the uniform invoice, you lost the opportunity to participate the lottery receipt system. Because all receipts and uniform invoices for business and organization are tax deductible, the government does not need to encourage the business to get the uniform invoice. Since the uniform invoices are with your company's tax id, they cannot participate the lottery receipt system.




What to do if my customer ask to return the goods after the issuance of uniform invoices?


In the event of sales return, swap, or allowance after the issuance of uniform invoices, business entities selling the goods or services shall complete the requirements set forth below upon the occurrence of such events. And for swaps, business entities shall reissue a new uniform invoice in the actual amount of the goods swapped with the purchaser. 1. With a business entity as purchaser:
(1) Where the sales amount for the issued uniform invoice has not yet been declared, business entities shall retrieve the receipt and deduction copies of the original invoice and attach them onto the retention copy of the same invoice with the word “nullified” added. Where the original uniform invoice contains the name and uniform serial number of the purchaser, purchaser’s certificate of sales return, purchase return or allowances on purchased merchandise may suffice.
(2) Where the sales amount for the issued uniform invoice has been declared, purchaser's certificate of sales return, purchase return or allowances on purchased merchandise is required; such a case however shall be limited to instances where the original uniform invoices contain the name and uniform serial number of the purchaser. 2. With a non-business entity as purchaser:
(1) Where the sales amount for the issued uniform invoice has not yet been declared, business entities shall retrieve the receipt copy of the original invoice and attach it onto the retention copy of the same invoice with the word “nullified” added.
(2) Where the sales amount for the issued uniform invoice has been declared, business entities shall obtain the purchaser's certificate of sales return, purchase return or allowances on purchased merchandise, and shall in addition thereto, retrieve the receipt copy of the original uniform invoice issued. Where the retrieval of the receipt copy is not possible, a copy of said receipt copy may be used in replacement. In the event that both parties have established a sale and purchase agreement and where the original uniform invoice contains the name and address of the purchaser, the retrieval of the receipt copy of the original uniform invoice is not necessary.
The certificate of sales return, purchase return or allowances on purchased merchandise set forth in the preceding paragraph shall contain four copies of a same form, with the first and second copies for use by the business entity selling the goods or services as output tax deduction declaration and accounting voucher respectively, and the third and fourth copies for use by the purchaser as input tax deduction declaration and accounting voucher respectively.




If a business fail to declare the deduction of VAT at the period the transaction heppend, can it declare next period? What is the limitation period to declare VAT deduction?


Input VAT is the tax that you pay on purchase transactions. Output VAT is the tax that your customer pays on sales transactions. The amount of VAT payable or overpaid by a company is the difference between the output tax in a tax period and the input tax in the same period. A company, whether or not it has sales, shall file a bimonthly tax return on its sales amount and tax payable or overpaid of the preceding two months together with the competent tax authority prior to the fifteenth day of the following period. If a business fail to declare the deduction of VAT at the period the transaction heppend, it can declare next period or te years when receiving the Uniform Invoice(GUI). According to the 29th Article of the Business Tax Laws, for the companytthat has not yet declared a VAT deduction, the time limit for the deduction of the input tax voucher is ten years. For example, A company obtained the GUI on 24 May 2017. Te deduction limitation period is 10 years and the time limit is extended to July 15, 2027.




Requirements to qualified for zero tax rate in VAT for services related to export or services provided in Taiwan and used abroad


The Tax Authority pointed out that two requirements to qualified applied for zero tax rate in VAT filing

  1. Services provided in Taiwan and used aboard: the service provider must be in Taiwan, and the place of use is outside Taiwan
  2. Provide the related documents: approval of payment received, inward remittance, foreign exchange. In case, the tax authority may ask you to provide the email, contract related to the transaction.

It has often been found that some business has mistakenly declared their taxable sales at zero-rated sales, resulting in a tax penalty.

The Tax Authority exemplifies a real case that AAA company in Taiwan provide marketing and agent service for foreign companies to sells goods in Taiwan.

Foreign companies remit commission monthly abroad to AA company if AA companies achieve the sales goals. However, AA Company mistakenly declared the monthly foreign remittance aboard as zero tax rate in VAT. AA company was later found and punished by the tax authority. The brokerage activities is provided in Taiwan and, so it is not applicable to the zero tax rate in VAT.




Input tax from buying a vechile under nine seats shall not declare for VAT deduction


In Business Tax Law, If a company buy a vehicle under nine seats, which not for sale and not providing passenger carrying business, the Input tax incurred by buying vehicle shall not declare the VAT deduction. For example, a business buys an SUV or sedan for its executives to use. The input tax cannot be deducted from the output tax while filing VAT return. However, if the business rents a vehicle under nine seats, the input tax can be deducted from the output tax while filing VAT return. Since such rule, the long term renting business in Taiwan are so popular. If the first digit in the license plate is “r”, it means that car is business rental car.





Company Income Tax(4)

What is the definition of the term “fixed place of business” used in the Income Tax Act?


The term "fixed place of business" as used in this Act refers to fixed places for the operation of business, including administrative offices, branch or sub-branch offices, business offices, factories, workshops, warehouses, mining fields, and construction sites; however, this shall exclude warehouse or storage sites used exclusively for the purchase of goods and maintenance shops not used for processing or manufacturing products.




How can one calculate the taxable income if a foreign company engage in international transport, construction contracting, providing technical services , or machinery and equipment leasing, etc. and receive remuneration from a Taiwanese enterprise?


A foreign company with its head office outside Taiwan, and which is engaged in international transport, construction contracting, providing technical services, or machinery and equipment leasing, etc. in the territory of the R.O.C., and the cost and expenses of which are difficult to calculate may apply for approval to consider 10% of its total business revenue, in the case of an enterprise engaged in international transport business, or 15% of its total business revenue, in the case of an enterprise engaged in the other businesses, as its income derived within the territory of Taiwan. regardless whether or not it has a branch office or business agent in the territory of Taiwan.




What is the income from sources in the Republic of China in accordance with Income Tax Act?


The term "income from sources in the Republic of China" used in the Income Tax Act refers to income of the following categories: 1.Dividends distributed by companies incorporated and registered in accordance with the Company Act of the Republic of China and by foreign companies authorized by the government of the Republic of China to operate within the territory of the Republic of China; 2.Profits distributed by profit-seeking enterprises organized in the form of a cooperative or a partnership within the territory of the Republic of China; 3.Remuneration for services rendered within the territory of the Republic of China, provided that this shall not apply to remuneration obtained from employer(s) outside the territory of the Republic of China and the individual not residing in the Republic of China but staying in the Republic of China for a period of no more than ninety days during a taxable year; 4.Interest obtained from governments of various levels of the Republic of China, from juristic persons within the territory of the Republic of China and from individuals residing in the Republic of China; 5.Rental obtained from lease of property situated within the territory of the Republic of China; 6.Royalty obtained from patents, trademarks, copyrights, secret formulas and franchises by virtue of their being made available for use by other persons within the territory of the Republic of China; 7.Profits from the transaction of properties within the territory of the Republic of China; 8.Remuneration for services performed by personnel sent abroad by the government of the Republic of China on overseas missions and for services rendered abroad by employees in general; 9.Profits from operation of industry, commerce, agriculture, forestry, fishery, animal husbandry, mining, and metallurgy enterprises within the territory of the Republic of China; 10.Awards or grants obtained from participating in various skill contests, games, or lotteries, etc. within the territory of the Republic of China; 11.Any other income obtained within the territory of the Republic of China. (Article 8 of the Income Tax Act)




If a company not have a fixed place of business or any business agent in Taiwan, how does it pay taxes?


In case a company has no permanent establishment or business agent within the territory of Taiwan, in the event of having income within Taiwan as provided in Article 88, the tax withholder shall withhold the income tax payable in accordance with prescribed withholding rates; in case the taxpayer has income which does not fall within the withholding scope as provided in Article 88, the tax agent shall be responsible for calculating and compiling his or her annual income into related profit and loss categories and levying relevant tax rates on them respectively, in accordance with regulations, during the tax return filing period from May 1 to May 31 every year. (Article 73 of the Income Tax Act)





Other


Company Registration(2)

What company information is publicly available?


A: Taiwan Company Registry Website only reveals the following information:

Company Name, Amount of Capital, Name of directors, Location of Company, Date of Registration, Business Scopes.

The shareholder list, annual report, and articles of incorporation are private and cannot be found in Taiwan Company Registry Website or any other website.

Please check the following link:

https://findbiz.nat.gov.tw/fts/query/QueryBar/queryInit.do?request_locale=en




When is the due date to remittance the capital once I get the investment approval from MOEA?


The effective time for capital transfer after the investment approval is one year. After one year, the investment approval is invalid, you have to apply for the investment approval again.




What are the power and resposiblities of the responsible person of a representive office?


The responsible person’s powers and responsibilities:
The Company Act does not clearly define the powers of a responsible person. However, it is clear that a responsible person is authorized to perform all acts regarding the general administration of the branch office according to the head office’s aims and objectives. This may include:

  • Conserving the branch office’s assets;
  • Executing powers of attorney on the company’s behalf;
  • Authorizing legal representation of and litigation by the company;
  • And executing any legal transactions that are within the nature and scope of that company’s business.

Chops

The responsible person’s chop is required on numerous company documents and is regarded as a signature. In this sense, the responsible person plays a very important role in the branch office daily operations. Consequently, any person in possession of the legal representative’s chop may exercise their power to bind the company. In order to prevent unauthorized use, branch office should restrict access to the responsible person’s chop by keeping records of who used the chop, at what time, and for what purpose.

Responsibilities

The responsible person is liable for failure by the company to make required filings by Company Act.

The responsible person may be personally liable for wrongful or fraudulent trading in the context of insolvency of the company;

The responsible person has responsibilities under Labor Law.

The responsible person can be liable for any tax due that the branch office is unable to pay not pay.

The responsible person can be liable if the financial statement is fraud, misrepresentations and Insufficient record keeping

The responsible person may be subject to fines and penalties accrued by the company.

Reference:

Company Act Article 380

· A foreign company which cancels or nullifies all of its branch offices in the Territory of the Republic of China shall complete liquidation of its business within the territory of the Republic of China or right and obligation incurred by its branch offices. Any outstanding obligation shall still be discharged by such foreign company.
The aforesaid liquidation shall be undertaken, unless a liquidator is otherwise designated by the foreign company, by the responsible person of the foreign company within the territory of the Republic of China or the managerial officer of its branch office. The provisions of this Act pertaining to the process of liquidation applicable to different classes of companies shall apply mutatis mutandis to such foreign companies according to their respective nature.

Article 381

· The property of a foreign company within the territory of the Republic of China shall not be moved out of the territory of the Republic of China during the time of liquidation and shall not be disposed of except by the liquidator in the execution of the liquidation.

Article 382

· The responsible person, managerial officer of its branch office or the designated liquidator of a foreign company within the territory of the Republic of China who acts in contravention of the provisions of the two preceding articles shall be jointly liable with such foreign company in respect of the transactions done within the territory of the Republic of China or obligation contracted by its branch office.