In Taiwan, many companies provide professional services such as design, consulting, marketing, or research reports to overseas clients. When the client is located outside Taiwan and the services are ultimately used abroad, the company may apply to the local tax office for zero-rated VAT on exported services.

​​​​​

The core requirement is that the service must be provided in Taiwan but ultimately used abroad. Therefore, during review, the tax authority will specifically check two things:

1. How the service was delivered to the overseas client.

2. How the overseas client actually used the service.

​​​​​

Example

A Taiwanese company is commissioned by a foreign ecological research institute to produce a report on insect ecology in Taiwan. Although the research subject is in Taiwan, the final report is delivered by email to the foreign client and used abroad. In this case, even though the research object is domestic, the transaction still qualifies for the zero-rated VAT policy.

​​

In other words, as long as the service is ultimately used outside Taiwan, it meets the criteria. How the overseas client subsequently uses the information does not affect eligibility.

 

Difference Between Zero-Rated and Exempt VAT

In practice, many people confuse “zero-rated” with “exempt,” but they are very different:

• Exempt: When selling exempt goods or services, VAT is not charged. However, the 5% VAT included in supplier invoices cannot be claimed or refunded. This means input VAT becomes a cost.

• Zero-rated: Although the sales tax rate is 0%, input VAT can still be credited and even refunded within the prescribed limits. Therefore, zero-rated treatment is more favorable, as it provides a complete relief from VAT costs.

• ​

Required Documents for Application

When applying for zero-rated VAT on exported services, companies typically need to prepare:

1. A contract with the foreign client stating the service scope, duration, fee, and payment method.

2. Invoice issued by the Taiwanese company to the foreign client.

3. Remittance slip proving receipt of foreign currency.

4. Service description explaining how the service was provided and how the client used it abroad.

 

Common Pitfalls

Myth 1: Zero-rated VAT means no business income.
In reality, income from zero-rated services must still be included as business revenue and reported for income tax purposes.

​

Myth 2: Any foreign exchange income qualifies.
Some companies assume that as long as the client is overseas and foreign currency is received, zero-rated VAT applies. This is incorrect — the key is where the service is used. If both the provision and use are in Taiwan, zero-rating does not apply.
 

Example:

A Taiwanese company tests a domestic product on behalf of an overseas client. Even if foreign exchange is received, the service is performed and used in Taiwan, so 5% VAT applies.

​

Myth 3: Commission income can be treated as zero-rated.
If a Taiwanese company introduces domestic buyers to foreign suppliers and earns commission from the supplier, this is commission income, not exported service revenue, and cannot be zero-rated.

​

Myth 4: Agency services for overseas schools qualify.
For example, if a company in Taiwan helps a student apply to a U.S. university and receives commission from the school, the service is provided domestically and VAT must be charged.

​

Myth 5: Maintenance or inspection for imported equipment qualifies.
If a foreign company asks a Taiwanese company to maintain or test equipment imported into Taiwan, the service is used in Taiwan and does not qualify for zero-rated VAT.

​

Do Zero-Rated Services Require Invoices?

Although zero-rated goods and services technically do not require issuing a uniform invoice, it is recommended to issue a two-copy zero-rated invoice to avoid underreporting of income.

Practical Challenges

Even when the legal criteria are met, tax authorities may reject applications if the company is registered at a business center. While not stated in law, this issue occurs frequently in practice.

​

Official Interpretations

• Services provided in Taiwan but used abroad can qualify for zero-rated VAT (Ministry of Finance Ruling No. 800120233, 1991).

• Commissions earned for introducing domestic buyers to overseas suppliers do not qualify (Ruling No. 7545545, 1986).

• Commissions from overseas publishers for soliciting ads from Taiwanese companies are taxable at 5% VAT (Ruling No. 7525151, 1986).

 

Conclusion

Zero-rated VAT on exported services is a valuable tax benefit, but the key test is whether the service is used abroad. By preparing contracts, invoices, remittance evidence, and a clear explanation of service use, companies can improve their chances of approval. Conversely, if the income is commission-based or the service is used domestically, zero-rating does not apply and VAT must be paid.

​

​

​