Why Foreign Companies Need to Care About Taiwan VAT

Chad Hsieh
Sep 12
3 min read

Updated: Sep 25

Understanding Taiwan's VAT System

If your company is entering Taiwan, VAT and invoicing are two things you can’t ignore. Unlike some countries where businesses can design their own invoices, Taiwan requires all companies to use the Government Uniform Invoice (GUI) system, which is closely monitored by the tax authority. Every sale of goods or services is subject to Value-Added Tax (VAT) at 5%. To stay compliant, you’ll need to issue GUIs, collect and pay VAT, and file regular returns. Missing any of these steps can lead to penalties.

VAT in Taiwan – The Basics

VAT applies at each stage of the supply chain, from importation to retail. Understanding how VAT works is crucial for foreign businesses.

Output and Input VAT

Output VAT: The tax you charge customers on sales.
Input VAT: The tax you pay to suppliers on purchases.
VAT Payable: The difference between output and input VAT.

Example of VAT Calculation

Quick Example: A Taiwan branch of a foreign company sells goods worth 1,260 (including 60 VAT). It purchased raw materials for 840 (including 40 VAT). On its bi-monthly return, the branch reports 60 (output VAT) – 40 (input VAT) = 20 payable.

Filing Timeline

VAT returns are submitted every two months and are due by the 15th of the following month. For example, sales in January–February must be filed by March 15.

Government Uniform Invoices (GUI) Explained

Taiwan’s invoice system is unique. Each invoice carries a government-issued number, which is valid only for a two-month cycle. Consumers expect GUIs, not only for tax reasons but also because each one comes with a lottery number – the famous Uniform Invoice Lottery. This government scheme encourages customers to request receipts, making it harder for businesses to underreport sales.

Types of GUIs

Triplicate Invoices (for B2B): Three copies – issuer’s copy, buyer’s deduction copy, and buyer’s receipt.
Duplicate Invoices (for B2C/foreign clients): Two copies – issuer and buyer receipt.
Cash Register Invoices: Printed directly from approved cash registers, common with smaller retailers.
Electronic Invoices (E-GUI): Digital invoices transmitted to the Ministry of Finance. Now the standard format in Taiwan.

Note: Old computerized register invoices were officially phased out in 2021. For more, see our VAT and GUI complete guide.

Exempt vs. Zero-Rated VAT

Not all transactions are taxed the same way. Understanding the difference is essential for compliance.

Exempt Supplies: No VAT is charged, and input VAT cannot be claimed back. Examples include land sales, textbooks, and agricultural products.
Zero-Rated Supplies: Taxed at 0%, but input VAT can still be refunded. Examples include exported goods or services used outside Taiwan, duty-free shop sales, and international transport.

When Taiwan VAT Can’t Be Deducted

Foreign companies often make mistakes trying to reclaim VAT. Some expenses are not deductible, including:

Staff meals, travel, and entertainment.
Gifts or benefits given to employees.
Personal-use passenger vehicles.
Invoices from overseas vendors (no Taiwan VAT).
Salaries, rent, and other payments without VAT.

Compliance Checklist for Foreign Companies

Before making your first sale in Taiwan, ensure you have:

A registered VAT ID (Unified Business Number).
GUI invoice numbers allocated by the tax office.
An invoicing method (electronic platform or government-approved booklets).
A system to record and reconcile input/output VAT.

FAQs for Foreign Businesses

Q1. Do foreign companies always need to issue GUIs?

Yes. Unless specifically exempt, all companies in Taiwan – including branches of foreign firms – must issue GUIs for every transaction.

Q2. How do I get GUI numbers?

After you register your Taiwan company, you must apply to the local tax bureau. Numbers are issued for two months at a time, and unused numbers cannot be carried over.

Q3. My company provides services from Taiwan to overseas clients. Do I still charge VAT?

Many exported services qualify for zero-rated VAT (0%) if they are proven to be used entirely outside Taiwan. Documentation (contracts, remittance records, and service descriptions) must be provided.

Q4. Can I recover VAT on employee meals or client entertainment?

No. These are considered non-deductible. Only expenses directly tied to your taxable business operations qualify.

Next Steps – Let Us Help

Navigating Taiwan’s VAT and GUI rules can be tricky, especially if you’re new to the market. Mistakes in invoicing or filing can be costly.

We help foreign companies set up Taiwan company, open bank accounts, VAT registration, obtain GUI numbers, and stay compliant with local tax rules.

Contact us today – our team will guide you through every step.

Conclusion

Understanding Taiwan's VAT system is crucial for foreign businesses. By following the guidelines outlined in this article, you can ensure compliance and avoid costly mistakes. Whether you are just starting or looking to expand, having a solid grasp of VAT and invoicing will set you on the right path. If you need assistance, don’t hesitate to reach out. We are here to help you navigate the complexities of doing business in Taiwan.