Taiwan Tax Benefit Application Services on Article 25

If your country have not signed DTA (Double Taxation Agreement) with Taiwan  “or”  you  are considered as PE in Taiwan, when your Taiwan clients(as a Payer) or your Taiwan subsidiary(as a Payer) pay service fees to  you (as a Payee), you might be able to use 2 or 3% withholding tax rate, instead of 20%, upon approval of  Taiwan Tax Benefit Application on Article 25 from Tax bureau.

e-mail: tpe4ww.25@evershinecpa.com
or
Contact us in working hours  (Taipei and China Time Zone)
Director Jerry Chu, USA Graduate School Alumni and a well-English speaker
Mobile: +886-939-357-735
Tel No.: +886-2-2717-0515 ext. 103

For enterprises that received approval for the tax benefit, the withholding tax rate on its income from Taiwan will be significantly reduced from 20% to 3% or 2%. Businesses whose headquarters are outside of Taiwan must apply for the tax benefit described in Article 25 of the Income Tax Act with the Ministry of Finance and 15% of its business revenue within Taiwan would be the taxable income.

Article 25(ATC 25) of Taiwan’s Personal Income Tax Law states:
Any profit-seeking enterprise having its head office outside the territory of the Republic of China, and which is engaged in
1)international transport,
2)construction contracting,
3)providing technical services, or
4)machinery and equipment leasing, etc.,
in the territory of the Republic of China, and the cost and expenses of which are difficult to calculate may apply for approval from the Ministry of Finance,
or the Ministry of Finance may make the decision to consider 10% of its total business revenue for an enterprise engaged in the international transport business,
or 15% of its total business revenue for one engaged in any other businesses as its income derived within the territory of the Republic of China regardless whether or not it has a branch office or business agent in the territory of the Republic of China.
In such cases, however, the regulation in Article 39 regarding the deduction of losses cannot be applied.

Effective Tax Rate

With ATC 25 advance ruling approval, deemed profit ratios can be summarized as follows:

Deemed Profit Ratio  Tax Rate Effective Tax Rate
1)International transport 10% 20% 2%
2)Construction Contracting 15% 20% 3%
3)Technical services 15% 20% 3%
4)Equipment leasing 15% 20% 3%

For Example:
With ATC 25 Approval
If a foreign company receives ATC 25 advance ruling approval on a technical service contract, deemed profits on an NTD 2 million contract will be NTD 300,000. Net tax payable on the contract revenue will be NTD 60,000 (NTD 300,000*20%).
Without ATC 25 approval
Applicable withholding tax on the same contract would amount to NTD 400,000 (NTD 2 million*20%).

Mechanism of Paying Tax

If the foreign company does not have a permanent establishment in Taiwan, the Taiwan customer should, in accordance with Article 88 of the Income Tax Act, deduct 3% withholding tax and remit the net amount to the foreign company.

If the foreign company has a permanent establishment in Taiwan, the Taiwan permanent establishment should issue a VAT invoice to the Taiwan customer and book the contract revenue in its accounting record. Tax is paid at the time the corporate income tax return is submitted. The due date is five months after the end of the fiscal year.

Application and Approval Timeline

ATC 25 is an advance ruling application.
Generally, we will suggest sending out the application before work kick-off, but only after the commencement date of the contract.
It takes approximately one month to obtain approval.

Experienced Professionals Serve You

We have very experienced professionals to serve clients for ATC 25 applications.
We help clients evaluate whether an advance ruling application is appropriate for their circumstances, and assist clients to formulate effective tax planning solutions.

Service Description :

We are quite familiar with this application and elapsed to provide you the services related to the Article 25 Application of Income Tax Act. Regarding to the procedure, required documents, and our service charges are described as follows:

1. Procedure
1.1 Apply to the Taxation Bureau, Ministry of Finance for the Article 25 Application of Income Tax Act.
Any amendment or extension letter to the contract will be defined as another contract and a separate service charge will be raised.
1.2 Apply to the Revenue Service Office for the stamp tax investigation.
The stamp tax of the contract is calculated by 0.1% of the contract value.

2. Required Documents
2.1 Power of Attorney (must be signed and printed on company letterhead)appointing the agent (Evershine) to handle the application.
2.2 The Certificate of Incorporation of Your Company
2.3 The copy of the contract signed between Your Company & Taiwan Client. The contract, written in Chinese. If the signed contract is in a language other than Chinese, then the contract must be translated into Chinese. There is no need to sign the Chinese translation. A brief description of the parties that signed the contract.
2.4 Any other supporting documents that the tax officer may request upon reviewing the application.

3. Service Charges
3.1 Service fee will be per contract, not including Out–of–Pocket expenses as described in below 3.2.
3.2 Out–of–Pocket expenses:
these expenses may occur by handling the application including taxi, postage, translation fee, and stamp tax, etc.

4. Payment Term
4.1 Before starting the application, you will need to pay us the total amount of the service fee.
4.2 After receiving the approval letter and stamp tax investigation letter, you need to pay us the real incurred out–of–pocket expenses.

Please notice another zero tax  rate scenario:
If your country have signed DTA (Double Taxation Agreement) with Taiwan and you  are considered as non-PE in Taiwan, when your Taiwan clients(as a Payer) or your Taiwan subsidiary(as a Payer), pay service fees (with zero  withholding tax rate)  to  you (as a Payee).
You need to apply zero tax rate exemption under DTA.
Evershine can provide the application services to you

Please refer below two webpages:
Taiwan zero tax exemption application services under DTA
Taiwan Tax treaties with other countries

Contact Persons

Jerry Chu/Manager
Jerrychu@evershinecpa.com
Director Jerry Chu, well-English speaker, USA Graduate School Alumni
+886-2-2717-0515 ext. 103 or +886-939-357735

Additional Information

Evershine has 100% affiliates in the following cities:
Headquarter, Taipei, Xiamen, Beijing, Shanghai,
New York, San Francisco, Houston, Phoenix
Tokyo, Seoul, Hanoi, Ho Chi Minh, Bangkok,
Singapore, Kuala Lumpur, Manila, Dubai,
New Delhi, Mumbai, Dhaka, Jakarta,
Frankfurt, Paris, London, Amsterdam,
Milan, Barcelona, Bucharest,
Melbourne, Sydney, Toronto

Other cities with existent clients:
Miami, Atlanta, Oklahoma, Michigan, Seattle, Delaware;
Berlin, Stuttgart; Prague; Czech Republic; Bangalore; Surabaya;
Kaohsiung, Hong Kong, Shenzhen, Donguan, Guangzhou, Qingyuan, Yongkang, Hangzhou, Suzhou, Kunshan, Nanjing, Chongqing, Xuchang, Qingdao, Tianjin.

Evershine Potential Serviceable City (2 months preparatory period):
Evershine CPAs Firm is an IAPA member firm headquartered in London, with 300 member offices worldwide and approximately 10,000 employees.
Evershine CPAs Firm is a LEA member headquartered in Chicago, USA, it has 600 member offices worldwide and employs approximately 28,000 people.
Besides, Evershine is Taiwan local Partner of ADP Streamline ®.
(version: 2022/03)

Please contact us by email at HQ4TPE@evershinecpa.com

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