Article No. 25 of Taiwan Income Tax Act

Any profit-seeking enterprise having its head office outside of Taiwan, and which is engaged in international transport, construction contracting, providing technical services, or machinery and equipment leasing, etc., in Taiwan, 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 international transport business, or 15% of its total business revenue for one engaged in any other businesses as its income derived within Taiwan regardless whether or not it has a branch office or business agent in Taiwan. In such cases, however, the regulation in Article 39 regarding the deduction of losses cannot be applied.

(1)	Requirements Engaging in one of the following business in Taiwan, and the cost and expense is hard to apportion and calculate. (a)    International Transport. (b)    Construction Contracting. (c)    Providing technical services. (d)    Leasing of machinery and equipment.
(2)	Whether the companies are operated by the head office, the fixed business place outside or inside of Taiwan, for the profit-seeking enterprise that fulfills the aforementioned requirements, and they are engaging the business of international transport, construction contracting, providing technical services, leasing of machinery and equipment, the profit-seeking enterprise could apply to calculate the income tax according to the Paragraph No. 1, Article No. 25 of Taiwan Income Tax Act. (This is applicable to the foreign operators that having a fixed business place inside or outside of Taiwan.)
(3)	This regulation is not applicable to the applicants of the following identities: (a) The applicant is the practitioner of profession or a member of the business offices. For example: lawyer, certified public accountant, architect, technician, physician, pharmacist, obstetrician, author, broker, scrivener, artisan, performer, and any other person who makes a living with craftsmanship or art. (b) The applicant is the legal person, companies, institutions or group from Mainland China, it does not belong to the profit-seeking enterprise that head office located outside of Taiwan. Therefore, this is not applicable to this regulation. (c) The applicant that established the profit-seeking enterprise at the tax exempt or the countries/areas with a lower tax burden, should notice whether the personal services being transferred to the income of profit-seeking enterprise, or whether the Taiwan individual or the Taiwan profit-seeking enterprise transferred the income outside of Taiwan by the name of the foreign companies, results in tax evasion or tax reductions. Once it is proved, this situation is not applicable to this regulation.

(1)

The scope of the technical services, including planning, design, installation, testing, maintenance, commissioning, consulting, auditing, supervision, certification, personnel training, etc.

(2)

For the provision of the technical services, shall pay special attention to the following matters: （a） The reports or documents produced from the services provided, the copyright is belonging to the author, therefore, the company should separate the royalty income from the value of the contract or the documents and royalty income not applicable to this regulation. （b） Provision of the service of signal transmission, signal uplink and download of the programs, belongs to the technical service. However, if the service content including the authorization of the programs or videos used, the receiving remuneration belongs to the royalty income, it should divide from the contract value and not applicable to this regulation. （c） The provision of the catering service belongs to the technical service. However, if the service involves the provision of the special recipes, the remuneration belongs to the royalty income, it should divide from the contract value and not applicable to this regulation. For the chef hired or manpower supporting services, once proved that there are the personal services or manpower dispatch services, the remuneration does not belong to the technical services, it should divide from the contract value and not applicable to this regulation. （d） Market research services are technical services. If the models and software used in the preparation of the survey report are providing for the use of the purchaser of the service, it belongs to the royalty income. The royalty income should separate from the value of the contract and not applicable to this regulation. （e） Education training services are technical services. If the training materials or courses involve the provision of the exclusive technical information or secret methods, the remuneration belongs to the royalty income. The royalty income should separate from the value of the contract and not applicable to this regulation. （f） Group management services, including accounting system, management service, marketing strategies, inventory business, legal affairs, goal setting, control procedures, asset management, asset management, warehouse management, engineering project management, debt credit control, service quality control, should be checked on case by case with the service evidence. As proved that the remuneration received by the manager that providing the services of administrative affairs do not belong to the remuneration of the technical service, it should divide from the contract value and not applicable to this regulation. For the way that signing a service contract, transferring the surplus of the Taiwan Company outside of Taiwan, or the internal control or decision behaviour of the company group, or using the management modal or procedure of the affiliated company, the relevant income does not belong to the remuneration of the technical service are not applicable to this regulation. （g） The income of underwriting fee or the handling fee received by the foreign underwriter or depository from the Taiwan company or the company shareholders, the income received from the technical services provided is applicable to the Paragraph No. 1, Article No. 25 of Taiwan Income Tax Act. The remuneration of the intangible asset, or the nature of bonus, or the income does not relevant to the service level, does not belong to the remuneration of the technical service and not applicable to this regulation.

(1)	Application Form. A contract will require an application form.
(2)	A copy of the signed contract. If the signed contract is not in Traditional Chinese version, a translated version is required.
(3)	An original copy of the Power of Attorney.

(1)	The contract content involves up to two business scopes mentioned in 2 (2), should be reviewed separately, the content approved and applicable shall state separately in the approval letter.
(2)	If the contract stipulates that the actual travel expenses, accommodation fees and other miscellaneous expenses are borne by the applicant, the total expenses shall be included in the contract, and allowed to be used, the approval letter will add on the relevant texts. For the remuneration that recognized as the royalty is not applicable to the regulation of Article No.25 of the Taiwan Income Tax Act.
(3)	The aforementioned royalty refers to the business rights, copyrights, patents, trademarks, business names, brand names, designs or models, plans, secret methods, business secrets, or information or know-how related to the industrial, commercial or scientific experience, various franchise rights, marketing network, customer information and other rights with the property values, the remuneration for others to use. Secret methods, including various methods, techniques, processes, recipes, programs, designs, or other information that could be used for productions, sales, or management, and involving such information that not generally known and has actual or potential economic value.
(4)	If the contract does not have a clear deadline or conditions, the jurisdiction tax authority could base on the information available, approve the income tax amount within a period of the applicant according to the regulation of Article No.25 of the Taiwan Income Tax Act, or indicate in the approval letter mentioned that if there is change of the content of the contract, the applicant should apply separately and obtain approval from the tax authority before continue applicable.

If the applicable transaction contact of the applicants is involving the special transactions, the jurisdiction tax authority should pay attention to the following regulations:

(1)

Income related to the Electric Data Processing (EDP), should handle according to the follow principles: (a) Electronic data processing and storage costs: Rental of the server room, if the remuneration is received according to the time used or the space used, the revenue belongs to the rental income of equipment. Data processing or the usage of area internet, if services are provided according to the demand of users, and charged according to the number of users, or cost apportioned, or reasonable add on price as the final price, the remuneration received are belongs to the remuneration from the technical services. Provision of client lists, business information, or other proprietary information, these are belonging to the royalty income. (b) System development and maintenance Authorization of system/application software and authorization of source code, the remuneration received is belonging to the royalty income. Development of customized system, if the system is owned by the purchaser (or Co-owned), the purchaser will not need to make a further payment, this belongs to the remuneration of technical service. If the system is owned by the seller, or remuneration received according to the number of production or sales amount, are belongs to the royalty income. The remuneration received from the technical consultation, system management, maintenance and test, personnel training, is belonging to the remuneration of the technical services. (c) Telecommunication service charges Transmission of telecommunication, if services are provided according to the demand of users, and charged according to the number of users, or cost apportioned, or reasonable add on price as the final price, the remuneration received are belongs to the remuneration from the technical services. Rental of the hardware, such as server room, cable, etc., the revenue belongs to the rental income of equipment. The remuneration received from the line construction, setup and installation is belonging to the remuneration of the technical services. If the company providing the raw material of the line, belongs to the construction contracting. (d) Provision of the services that does not involve the professional skills and knowledge, such as providing service of troubleshooting the database system, retrieval of data and transmission of information, etc. these are not the technical services.

(2)

If there is situation as below, will belong to the manpower services, not applicable to the Article No.25 of Taiwan Income Tax Act. (a) The dispatched personnel are under the instruction, supervision, or performance evaluation by the local dispatching organization. (b) Foreign dispatching organizations are not burdened with the responsibilities of service defects by the personnel (borne by the local dispatching organization or employee, or covered by the relevant liability insurance). (c) The service contents in the contract are unclear. (d) The dispatched personnel will review and approved by the local dispatching organization before dispatch to the service location. (e) The foreign dispatching organization act as the coordinator of the administrative affairs or agent and does not provide any technical assistance in the process.