Can 20% withholding tax rate paid from Taiwan be reduced or zero tax rate?
Apply for business profit tax exemption application service under Article 7 of the Tax Agreement; apply for the 3% withholding tax rate for technical service fees stipulated in Article 25; apply for the withholding tax under Article 8 of the Income Tax Law of the Republic of China. Tax rate (below 3%) application service.
Contact Person:
Jerry Chu, Dupty General Manager
Tel: +886-2-2717-0515 E103
Mobile: +886-939-357-735
Email : tpe2ww.gtx@evershinecpa.com
Q:
The 20% withholding tax rate paid by Taiwanese companies to overseas companies is quite high. Under what circumstances can the tax rate be reduced or zero tax rate?
Answer:
The first scenario: DTA zero tax application
Taiwan has a DTA (Double Taxation Agreements) with the country. If Taiwan does not have a permanent establishment, it will apply for zero tax according to Articles 5 and 7 of DTA. The procedure for applying for zero tax rate is the country where the payee (Payee) is located, to apply for COR (Certificate Of Resident), and in Taiwan to apply for a tax treaty exemption withholding application, and attach documents such as contracts. This applies to Business Profit, Technical Service Fee and Professional Service. But this overseas, because of the need to apply for COR, only legal persons can do it, not individuals.
Taiwan DTA zero withholding tax exemption application Services click me read more
Taiwan and other countries’ tax treaties click me read more
The second scenario: 25 tax reduction applications
Taiwan and the country have not entered into a DTA or You are redeemed to have PE in Taiwan. If it is a Technical Service Fee, including market research, inspection and other services, then apply for income tax 25, which applies 2% to 3%.
Article 25-1 of the Taiwan Income Tax Law Application service for preferential technical service fees click me read more
The third scenario: Application for tax reduction and exemption of Article 15-1.
Taiwan does not have a DTA with the country or You are redeemed to have PE in Taiwan. If it is Business Profit or Professional Service, apply for Article 15-1, and the applicable industry and industry profit rate * contribution rate * corporate income tax rate (20%) = withholding tax rate. The tax rate is also usually below 3%.
Taiwan Tax Benefit application on Article 15-1 click me read more
The fourth scenario :the collection and payment of VAT business tax, patent annual fee, etc.
This part can be paid by Taiwanese companies to overseas companies , and then through whom to pay to Official Patent Office or Taxation Bureau. The overseas companies will then need to provide a proof of payment to the Taiwanese companies.
Because this part has a clear payment certificate, even if there is no-signed DTA country with Taiwan, there will be adopted zero tax rate withholding tax rate.
Q:
With which countries does Taiwan have DTA (Double Tax Agreement) avoidance of double taxation agreements?
answer:
| Australia | Germany | Luxembourg | Singapore |
| Austria | Hungary | Malaysia | Slovakia |
| Belgium | India | Netherlands | South Africa |
| Canada | Indonesia | New Zealand | Sweden |
| Denmark | Israel | North Macedonia | Switzerland |
| Eswatini (‘Swaziland’) | Italy | Paraguay | Thailand |
| France | Japan | Poland | United Kingdom |
| Gambia | Kiribati | Senegal | Vietnam |
*Saudi Arabia was signed DTA with Taiwan in 2022/01
Q:
When a Taiwanese company wants to remit the remittance, can it remit the full amount before applying for approval?
A:
Only the collection and payment of VAT business tax, patent annual fee, etc. can be paid in full. This part can be paid by Taiwanese companies to overseas companies and paid to the Patent Office of the Taxation Bureau. The overseas company will then need to provide the Taiwanese company with a proof of payment.
Because this part has a clear payment certificate, even if there is no DTA country, there will be no problem.
For remittance of other nature, there are two standard methods:
(1) 20% of the remittance must be withheld before applying for approval, and then apply for tax refund. Usually, after the payer (Payor) pays the payee (Payee) after withholding 20%, the DTA zero tax rate application can be made by the payee (Payee) to apply for a tax refund. (2) If you want to remit the full amount to DTA overseas enterprises, you need to apply for approval before remittance.
If the full amount is remitted before the application is approved, and the information is supplemented later, if the tax bureau determines that the full amount is zero-rated, there will only be an administrative penalty.
However, if the tax bureau determines that the full or part of the amount needs to be paid 20% of the tax, it will face the risk of paying the tax and adding a fine.
Therefore, we recommend that you must apply for approval before you recognize the expenses.
Q:
What kind of services can Evershine provide in reducing the withholding tax rate for overseas remittances? Under what circumstances do Taiwanese companies engage Evershine?
Answer:
DTA zero tax rate application;
25 tax rate relief application;
15-1 tax rate relief application.
Evershine became a local service provider and applied for COR.
The collection and payment of VAT business tax, patent annual fee, etc.
When a Taiwan Entity acts as a Payor and wants to remit, the Payee must apply for a tax residency certificate.
Usually, the Payee have no experiences to apply for COR, and we can apply for it.
There is also another practice, let your Taiwan Entity pays money to the subsidiary of Evershine in the local country, and then pays the Payee in the local country.
In this scenario , the subsidiary of Evershine in the local country will apply COR for you.
In addition, for the collection and payment of VAT business tax, annual patent fees, etc., this part can be paid from Your Taiwan Entity to Taiwan Evershine, and then immediately pay out through overseas Evershine subsidiary to get a receipt. Because this part has a clear payment certificate, even if there is no DTA country, there will be no problem.
contact us:
Contact us
email to:tpe2ww.gtx@evershinecpa.com
or
Jerry Chu, Director of Global Tax, USA Graduate School Alumni (English & Chinese speaker)
Tel: +886-2-2717-0515 E103
Mobile: +886-939-357-735
6th Floor ,378, Chang Chung Rd,
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