Taiwan Cross Border E-Com Tax Regulations
In the modern age, with the popularization of the internet and mobile technology, purchasing of the services online such as the usage of Cross-Border E-commerce advertisements, purchasing of online games, and videos are getting popular. When there are sales of electronic service to the natural person within the territory of Taiwan, the Cross-Border E-commerce should in accordance with the Articles No. 2-1 of the Value-added and Non-value-added Business Tax Act, the E-commerce shall be the taxpayer of the business tax, has the obligation to pay for the business tax. If the sales target is not the natural person within the territory of Taiwan, the sales person of the E-commerce should in accordance with the Articles No.36 of the Value-added and Non-value-added Business Tax Act. Unless the purchaser is a business entity which computes its tax in accordance with the provisions of Section 1 of Chapter 4 of the Value-added and Non-value-added Business Tax Act (Purchaser is the business person belongs to the General Tax Computation), the purchased services are used solely in conducting business in taxable goods or services, such services are exempted from the business tax, else, prior to the fifteenth day of the period following the period in which the payment is made, the purchaser should compute the business tax based on the payment amount in accordance with the regulated tax rate and pay for the business tax.
A non-individual purchaser that purchase the foreign services, the payment of business tax could be differentiated in two: (1) The purchaser is the business person that self-declare and pay the business tax by using the Form of “Declaration of Sales and Business Tax by a Business Entity (Form 401, 403, 404)? for the purchasing of foreign services, the purchaser will only need to fill the relevant fields in Form 401, 403, 404 and file consolidated. (2) The purchaser which is not the business person self-declare and pay the business tax (such as the small scale business entities, business executives, government agencies, etc.), if there is purchasing of the foreign services, they could visit the e-Tax Portal of the Ministry of Finance (http://www.etax.nat.gov.tw/) > Online Service > Electronic Filing and Payment of Tax > Print the tax bill with three-stage barcode (online version) > Business Tax, download “Business Tax Payment Form for the Purchasing of Foreign Services (Form 408)? self-payment for the business tax.
At the stage of the Profit-Seeking Enterprise Income Tax, the Cross-Border E-commerce sells the electronic services within the territory of Taiwan, if the income of E-commerce is the “Income received in the Taiwan? according to the Article No. 3-1 of the “Income Tax Regulations for the Cross-Border Sales of Electronic Service for the Foreign Profit-Seeking Enterprise?(The official document No. 10700522870 issued by Ministry of Finance on 11 May 2018), E-commerce should pay for the profit-seeking enterprise income tax according to the regulations. According to Article No. 3-2 of the regulations pre-mentioned, the foreign profit-seeking enterprise that provides the patents, trademarks, copyrights, secret formulas and franchises by virtue of their being made available for use by other persons in Taiwan through the internet or other electronic means, it does not belongs to the scope of the electronic service, the remuneration is counted as the "royalty". The remuneration is not applicable to the “Income Tax Regulations for the Cross-Border Sales of Electronic Service for the Foreign Profit-Seeking Enterprise? therefore, it could not compute the income tax according to the net profit ratio and profit contribution ratio, it should be taxed in accordance with the Income Tax Act.
The Cross-Border E-commerce sales the electronic service to the individual (B2C) or enterprise (B2B), there are differences on the taxation method. If the sales of electronic services are to the individual, the tax authority reminds that the Cross-Border E-commerce shall declare for the income tax in the declaration period in May. If the sales of electronic services are to the enterprises, the business person within the territory of Taiwan should deduct the tax by using the Withholding and Non-withholding Tax Statement in accordance with the Income Tax Act, before the payment of tax. For example, Company A arranges employee to go for a business trip, booking a room in the website of Agoda, before the payment of room rate, it should deduct the tax and declare at the tax authority by using the Withholding and Non-withholding Tax Statement.
The Cross-Border E-commerce should apply for the Net Profit Ratio and Profit Contribution Ratio Applicable to Cross-Border Electronic Services at the tax authority. If the country belongs are having the tax treaty with Taiwan, the foreign profit-seeking enterprise may apply for some relevant deductions.
For example, Facebook applies the Net Profit Ratio and Profit Contribution Ratio applicable to Cross-Border Electronic Services and had the approval from the Taipei Tax Authority. During the period of 3 years, from the year 2019 until 2021, the Net Profit Rate is 30% and the Profit Contribution Ratio is 100%. If the profit-seeking enterprise in Taiwan publishing an advertisement through Facebook, the original withholding tax rate is 20%, after multiplying the Net Profit Ratio and Profit Contribution Ratio with the original withholding tax rate, the withholding tax to be burdened will be 6%.
The table below summarizing the distinction between the business tax and the profit-seeking enterprise tax for Cross-Border E-commerce.
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Business Tax/ Profit-Seeking Enterprise Income Tax
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Sales Target
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Individual
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Company (Note 1)
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Declaration of Business Tax
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Cross-Border E-commerce
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Service Purchaser
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Difference of the Purchaser
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1. Purchaser is the business person belongs to the General Tax Computation
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Meets the regulations of the Articles No.36 of the Value-added and Non-value-added Business Tax Act (Note 2), exempted from the business tax
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2. Purchaser is the business person belongs to the Special Tax Computation (Note 3)
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Could not exempt from business tax (Note 4)
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Declaration of Profit-Seeking Enterprise Income Tax
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Cross-Border E-commerce (Self Declare or Entrust an Agent for filing the income tax return)
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Company ?Withholding by the company
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Note 1: The business person execute business in Taiwan. For example, Taiwan Company, small scale business entities, business executives, government agencies, etc.
Note 2: The business person that computes taxes in accordance with Section 1, Articles No.4 of the Value-added and Non-value-added Business Tax Act (Purchaser is the business person belongs to the General Tax Computation), the purchased services are used solely in conducting business in taxable goods or services.
Note 3: For example, the enterprises engaged in banking, insurance, investment trust, securities, futures, commercial paper and pawnshops, consignees of the agricultural wholesale markets, small scale business entities selling agricultural products, other small-scale business entities.
Note 4:
(1)
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The purchaser is the business person that self-declare and pay the business tax by using the Form of “Declaration of Sales and Business Tax by a Business Entity (Form 401, 403, 404)? for the purchasing of foreign services, the purchaser will only need to fill the relevant fields in Form 401, 403, 404 and file consolidated.
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(2)
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The purchaser which is not the business person self-declare and pay the business tax (such as the small scale business entities, business executives, government agencies, etc.), if there is purchasing of the foreign services, they could visit the e-Tax Portal of the Ministry of Finance (http://www.etax.nat.gov.tw/) > Online Service > Electronic Filing and Payment of Tax > Print the tax bill with three-stage barcode (online version) > Business Tax, download “Business Tax Payment Form for the Purchasing of Foreign Services
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