Q&A on Tax (VAT & CIT) Regulations for Non-Resident Entity in Taiwan
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Jerry Chu, USA Graduate School Alumni & a well-English speaker
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NR-TW-110:
Can a foreign company with Non-Resident status apply for a VAT number in Taiwan? If can, is it necessary to pay for the profit-seeking enterprise income tax?
Official website? Application form?
Answer:
According to BNA VAT Navigator 9.2.
A nonresident entity is not allowed to register the VAT number in Taiwan.
However, the following scenario allows foreign company to apply for a VAT number.
*Appointment of Taiwan enterprises to act as business agents.
*Foreign E-commerce Operators (FECOs) that provide digital services to Taiwanese natural persons are generally to register and account for VAT and do so directly or through a tax-filing agent.
Under the above circumstances, the profit-seeking enterprise income tax is required to be paid in Taiwan. For these two scenarios, please see the following for further explanation.
NR-TW-120:
If the foreign entity with Non-Resident status applied for a VAT number in Taiwan:
What is the official name of the agent?
What qualifications does the agent need?
Is the agent jointly and severally liable to the Taiwan tax bureau?
Does the Non-Resident Entity need to pay for profit-making enterprise income tax?
Official website?
Answer:
According to BNA VAT Navigator 10.4.
In Taiwan it is called Business Agent (BA).
The business agent is jointly and severally liable to the Taiwan tax bureau.
Taiwan business agent shall be jointly and severally responsible for the VAT and CIT payable by the foreign principal.
A foreign profit-making enterprise establishes a logistics center in Taiwan, and entrusts a domestic profit-making enterprise to import, store and deliver the goods produced abroad by the foreign profit-making enterprise to domestic customers.
The domestic profit-seeking enterprise belongs to the business agent referred to in Subparagraph 2, Paragraph 2, Article 10 of the Income Tax Act.
1. In addition to acting as an agent for procurement affairs and has the right to regularly contact the business and sign contracts on behalf of the enterprise it acts as agent for.
2.Those who regularly store products belonging to the business they represent and deliver the goods to others on behalf of the business they represent.
3.The liaison personnel sent by foreign profit-making enterprises to investigate business conditions and contact quotations, who do not sign contracts or accept orders on behalf of them, are not business agents.
The appointment as a business agent can be applied in the branch of the National Taxation Bureau where the business agent is located. After the approval from the National Taxation Bureau, there is no need to apply again in the following years.
Relevant documents such as letters of appointment, application forms and schedules can be downloaded from the tax portal website of the Ministry of Finance at
eTax Portal, Ministry of Finance
To apply for tax registration-
Online application:
eTax Portal, Ministry of Finance
Non-Resident Entity is required to pay the profit-making enterprise income tax, so it needs to keep the books of accounts. If there are no accounting records, you can apply for the method by way of Industry Redeemed Profit Rate *Revenue= Corporate Income.
NR-TW-130:
Is it mandatory for a Foreign E-commerce Operators (FECOs) who provides digital services to natural persons in Taiwan, to register and pay the VAT through a tax agent in Taiwan?
If yes, is the agent jointly and severally liable to deal with Taiwan tax bureau?
What is the official name of the agent?
What qualifications does the agent need if require an agent?
Does the Non-Resident FECO entity require to pay for profit-making enterprise income tax?
Official website?
Answer:
It is not mandatory to appoint a tax agent in Taiwan, you can register and pay the VAT by yourself.
FECO in Taiwan can register and pay the VAT under foreign company name or it is also possible to appoint a business agent in Taiwan to do it.
Usually, FECO apply under the name of their own foreign entity.
Foreign companies that do not have a fixed place of business in Taiwan can register the tax online: https://www.etax.nat.gov.tw/etwmain/etw310w/cases/services/olfetwb24.
First apply for the tax registration, then apply for an account password, and finally file and pay the VAT.
If a tax agent is appointed, Taiwan business agent shall be jointly and severally responsible for the VAT and CIT payable.
Non-Resident FECO entity is required to pay the profit-making enterprise income tax, so it needs to keep the books of accounts. If there are no accounting records, you can apply for the method by way of Industry Redeemed Profit Rate *Revenue= Corporate Income.
NR-TW-140:
What are the circumstances that a Non-Resident Company in Taiwan will not be consider as having permanent establishment (PE) in Taiwan?
And what circumstances will be considered as having PE in Taiwan?
Answer:
According to BNA Country Guide 2.1&2.2.
Deemed not having PE:
(1) International trade, the import declaration and VAT payments are handled by domestic
enterprise or individual in Taiwan.
(2) Renting a warehouse in Free trade zones or bonded areas, and not sell to any domestic
consumers in Taiwan.
(3) Under domestic law, the performances of services should not in itself create a permanent establishment.
(4) Also, a nonresident corporation should not be treated as having permanent establishment in Taiwan, even though it provides services to local customers to access Taiwan websites, or download information originated in Taiwan or it provides local customers the use of internet cloud services.
Deemed as having PE:
(1) Has appoint a business agent in Taiwan:
A “business agent” refers to an agent who fulfills any of the following requirements:
- Where the agent, in addition to representing a foreign entity in purchasing goods, is authorized to regularly represent the foreign entity in making business arrangements and in signing contracts.
- Where the agent regularly keeps in storage goods of a foreign entity and delivers the same, for the foreign entity, to customers in Taiwan; or
- Where the agent regularly accepts, for a foreign entity, orders from customers.
A Non-resident Company in Taiwan register for VAT and sells goods in Taiwan, when deemed as having PE in Taiwan, it requires to file and pay for CIT.
Hence a book of accounts is required to maintain.
(2) There are invoices issued to domestic enterprise or individual in Taiwan.
(3) Having a fixed place of business in Taiwan:
A “fixed place of business” refers to a fixed place for the operation of business, including administrative offices, branches, sub-branches, business offices, factories, workshops, warehouse, mines, and construction sites; but excluding warehouses or storage sites exclusively for the purchase of products and maintenance facilities that are not for processing or manufacturing products.
Deemed as having PE and required to pay CIT:
Non-Resident FECO entity is required to pay the profit-making enterprise income tax, so it needs to keep the books of accounts.
If there are no accounting records, you can apply for the method by way of Industry Redeemed Profit Rate *Revenue= Corporate Income.
NR-TW-210:
Does Taiwan have Free Trade Zone and bonded warehouse system?
How do foreign businessmen use the Free Trade Zone to obtain tax concessions?
Answer:
According to BNA VAT Navigator 10.4 and refer to the link below:
Customs Administration, Ministry of Finance Taipei Customs
營利事業所得稅
Yes.
Imported goods are stored in a logistics center can be exempted from duty if they are re-exported in original form, after reconditioning or processing; otherwise, the goods will be taxed for importing into Taiwan.
A Logistics center provides a period of time for goods which need carry out reconditioning and simple processing prior to being imported. No duty or tax need to pay for the period.
0% duty and 0% business tax rate apply for the transaction of commodities, equipment, and services between FTZ and bonded areas.
If the sales of good is completed at the time of customs declaration in Taiwan (the ownership and risk of the goods has been transferred), it is considering an international trade and not deemed as a foreign entity carry on an business operation in Taiwan.
The business activities of foreign shippers in the free trade port zone are exempted from income tax.
Following the example of other countries’ business activities related to logistics and distribution, if it is purely produced in the bonded area, it will provide tax-free benefits.
For manufacturers from countries that have not signed a double tax agreement, if they store their goods in a bonded area or a free trade area and sell the goods from the area to local customers, it will be regarded as a form of international trade and will not constitute a permanent establishment or have the problem on source of income.
Therefore, Taiwan income tax law can introduce the concept of “free trade zones are treated as foreign countries”, so that foreign enterprises that use free trade zones for storage, simple processing and delivery of goods to domestic customers are exempt from income tax for profit-seeking enterprises.
Since bonded warehouses and bonded factories involve many other related laws and regulations that must be amended at the same time, it is suggested that this duty-free benefit be set in the “Regulations on the Management of Free Trade Port Zones” in the short term.
NR-TW-220:
Can a foreign company rent a bonded warehouse in Taiwan Free Trade Zone under the name of a foreign company?
Can a bonded warehouse held under the name of a foreign company as a holder of the entry and departure documents?
Or can it be held by a cargo agent?
Answer:
Please refer to 出口貨物代收費用徵納作業簡介 (customs.gov.tw) Introduction to collection of export goods collection fees.
Can.
The customs declaration of import and export goods can be handled by the owner of the goods himself or by entrusting a customs broker to the customs.
The ownership of the goods can be a foreign company.
If a customs broker is entrusted to handle the customs declaration, the entrusted customs broker shall submit a letter of appointment.
NR-TW-230:
Are there any similar roles as IOR (Importer Record in Germany), Tax Agent (Germany), Fiscal Representative (Netherlands), Registered Agent (USA Texas), ACP (Japan)?
How to avoid situation where the VAT cannot be deducted as input tax?
Answer:
In Taiwan, it is called a business agent BA: Business Agent.
In Taiwan, it is possible to declare at the customs in the name of a non-resident company or appoint a business agent to declare at the customs.
If you intend to sell and issue invoices to local companies in Taiwan, you will need a business agent. Or you can request local companies in Taiwan to handle the import under the name of the importer, so that the input tax is deductible.
Please refer to 營利事業代理在台無固定營業場所之物流中心辦理交易流程應代為報繳營所稅
The customs declaration of import and export goods can be handled by the owner of the goods himself or by entrusting a customs broker to the customs.
If a customs broker is entrusted to handle the customs declaration, the entrusted customs broker shall submit a letter of appointment.
A foreign profit-making enterprise without a fixed place of business within the territory of my country entrusts a Chinese profit-making enterprise (including enterprises in free trade port areas, bonded warehouse operators, etc.), calculate the domestic source income of the foreign profit-seeking enterprise within the scope of its business agent business.
In terms of business tax: foreign business operators who do not have a fixed place of business within the territory of the Republic of China entrust a domestic business agent to reserve and deliver goods owned by the foreign business operator to domestic customers in Taiwan, in accordance with Article 3, Paragraph 3, Subparagraph 5 of the Business Tax Law. If the domestic business agent sells the goods entrusted by the foreign businessperson to sell as a consignment, the domestic business agent shall issue a unified invoice as deemed sales and deliver it to the buyer.
NR-TW-240:
What are the 2 ways of dealing with custom duties and VAT when a foreign company sells to domestic customers in Taiwan from a warehouse in the bonded area in Taiwan?
What are the differences when paying for the CIT in Taiwan?
Answer:
Please refer to:
保稅區營業人銷貨至國內課稅區，處理手續如何？
Option 1: Custom declaration is handled by local companies in Taiwan, deemed import.
According to regulations, bonded goods that enter other regions within the territory of the Republic of China from the bonded area are imports. Therefore, when a business operator in a bonded area sells goods to a taxable area in the country, the buyer in the taxable area should follow the customs declaration procedures for imported goods and fill in the import declaration form. If the customs declares and the customs collects business tax according to law, the business operator in the bonded area is exempted from issuing a unified invoice. (Article 5, Paragraph 2, Article 6-1 of the Value-Added and Non-Value-Added Business Tax Law), (Ministry of Finance 75.4.19 Taiwan Caishui No. 7541699 Letter).
It is regarded as international trade and therefore CIT liability in Taiwan is not applicable here.
Option 2: Appoint a business agent in Taiwan.
A foreign business operator without a fixed place of business within the territory of the Republic of China entrusts a domestic business agent to store and deliver the goods owned by the foreign business operator to domestic customers in Taiwan. According to Subparagraph 5, Paragraph 3, Article 3 of the Business Tax Law, it is a domestic business. When a business agent sells the goods consigned by the foreign business operator, the domestic business agent shall issue a uniform invoice for the deemed sale of goods and deliver it to the buyer.
Apart from the issue on customs duties and VAT, there is also issue of the CIT applicability.
NR-TW-250:
Foreign companies rent warehouses from bonded warehouses in bonded areas in Taiwan, and then sell the items to domestic customers in Taiwan. Will this make foreign companies Non-PE into PE and need to keep accounts and pay income tax?
Answer:
Please refer to:
營利事業所得稅
(1) Transactions with other companies in the free trade zone or bonded zone are still considered overseas transactions and do not constitute a permanent establishment.
Basically, the judgment standard is similar to that of the United States. “Business (business)” is generated by the economic activities of “goods” and “people”, but the bonded area is regarded as the “income tax” outside the country, so the ownership of the goods is transferred in the bonded area. It does not constitute an issue of income from local sources.
Article 29 of the Free Port Zone Establishment and Management Regulations amends the profit-seeking enterprise income tax law: A profit-seeking enterprise (include foreign company) only engages in preparation and subsidy activities in the territory of the Republic of China, and engages in the purchase, import, storage, or transportation of goods in the area. When the goods are sold to domestic and foreign customers, 100% of the income is tax-free.
(2) If it is sold to an enterprise in Taiwan, it shall go through customs declaration procedures in its own name and pay customs duties and sales tax, which does not constitute a permanent establishment.
(3) Import customs declaration through an appointed business agent, pay customs duties and business tax, and then the business agent will issue a sales invoice to the Taiwan enterprise, which will become a PE, which needs to be recorded and paid CIT profit-making enterprise income tax.
The criteria for judging a permanent establishment are mainly aimed at:
1. The ownership of the goods is transferred within the domestic tax area; or
2. The agent has the actual power of agency, and often represents (represents) foreign manufacturers, contacts business, negotiates contracts, and accepts orders in China.
Therefore, the transfer of ownership after the goods arrive in the taxable area is a business activity, and Taiwan’s CIT profit-making enterprise income tax should be levied.
NR-TW-310:
For Amazon and other e-commerce B2C, the Taiwan government stipulates that natural persons should declare customs duties and business tax when importing. How they deal with it?
Answer:
Obviously, when a natural person acts as an importer, it will cause considerable trouble to the e-commerce operation process.
The final process may be that e-commerce platforms such as Amazon set up warehouse FBA in bonded warehouses in free trade port zones.
When it is handed over to a natural person in Taiwan, the Forwarder will directly handle the import in the name of the natural person and pay customs duties and business taxes.
When a non-resident company sells goods, it has already collected the information on Taiwanese natural persons required for customs declaration and has checked the tariff and business tax of the item and added it to the price.
When declaring at the customs, you should not use Forwarder as the business agent at the time of import customs declaration, because of this, it will result in the need to pay CIT profit-making business income tax, Corporate Income Tax, which needs to be accounted for, if not accounted for, you need to apply for Redeemed Profit Rate* Revenue＝Corporate Income Tax, CIT profit-making enterprise income tax, quite troublesome.
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Mobile: +886-939-357-735
Email: jerrychu@evershinecpa.com
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