taiwan pocket tax book 2011
TRANSCRIPT
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Introduction to
Taiwan tax rules
Taiwan Pocket Tax Book 2011
www.pwc.com/tw
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FOREWORD
Welcome to Taiwan Pocket Tax Book 2011. This booklet
provides quick and easy access to information on various tax
rules in Taiwan. The information in this booklet is based on
current taxation regulations and practices, including certain
legislative proposals and measures as at 28 March 2011, unless
otherwise specified.
This booklet is intended to provide a general guide and is not
aimed to provide a comprehensive understanding of Taiwan’s
prevailing tax system. Readers should not act on the basis of
this publication without seeking formal professional advice.
We have also included for your reference a list of some of ourkey specialists at the back of this book as a quick guide to help
you locate the right person for your questions.
We hope you find this book useful and handy!
Steven Go
Leader – Tax and Legal ServicesPwC Taiwan
May 2011
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BUSINESS INCOME TAX 02
Taxpayers and tax rates 02Corporate tax system 03
Tax return filing requirements 09
Withholding taxes 15
Double taxation agreements 18
Tax incentives 21Transfer pricing rules 23
Alternative minimum tax 28
Taxation of shareholders 30
PERSONAL INCOME TAX 32
General overview 32Residency 33
Personal income tax rates 33
Exempt income 35
Exemptions and deductions 37
Fringe benefits 42Incentive compensation plans 42
Capital gains 43
Dividends 43
Filing 44
Payment of taxes 45 Alternative minimum tax 45
CONTENTS
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VALUE ADDED TAX 47
General overview 47
Tax rates 48
Zero-rated goods and services 49
Exempted goods and services 50
Filing and payment of taxes 55
Introduction to selective goods and services tax 56
SECURITIES TRANSACTION TAX 57
General overview 57
Tax rates 57
STAMP TAX 58
General overview 58
Scope of taxation 58
Tax rates 60
CUSTOMS DUTIES 61
Duty rate 61
Customs duties exemptions 61Declaration 61
COMMODITY TAX 62
General overview 62
Commodity tax exemptions 62
Filing and payment of taxes 63Commodity tax rates 63
PwC IN TAIWAN 65
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1 PwC Taiwan
Significant changes in Taiwan tax laws:
Corporate tax
rate reduced to
17% effective
from 1 January
2010.
Tonnage tax
effective from2011 onwards.
Thin capitalisation
rules effective from
2011 onwards.
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Taiwan Pocket Tax Book 2
BUSINESS INCOME TAX
Taxpayers and tax rates
Business income taxpayers are classified as follows:
Profit-seeking enterprises: This refers to enterprises operated
by public, private, or joint public and private interests that
have a registered business name or place of business and are
organised in the form of a sole proprietorship, partnership,company, or any other form of organisation. Profit-seeking
enterprises in Taiwan are divided into two categories:
• Prot-seeking enterprises with head ofces within
Taiwan; and
• Prot-seeking enterprises with head ofces outside
Taiwan but having income derived from sources in
Taiwan.
For Taiwan income tax purposes, a permanent establishment
(“PE”) refers to a foreign enterprise which has a fixed place of
business or business agent in Taiwan.
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Business income tax
Corporate tax rates
With effect from 1 January 2010, profit-seeking enterprises
are taxed at the following:
The corporate income tax rate prior to 1 January 2010 was
25%. In addition to regular tax calculations, Taiwan profit-
seeking enterprises and foreign companies with a PE in
Taiwan are subject to a separate alternative minimum tax
calculation in accordance with the Income Basic Tax Act.
In addition, a 10% profit retention tax is imposed on anycurrent earnings that remain undistributed by the end of the
following year.
Corporate tax system
Resident enterprises are taxed on worldwide income.
Non-resident enterprises are taxed on income derived from
Taiwan sources.
Taxable income
The taxable income of a profit-seeking enterprise is calculated
from net income, which is defined as gross annual revenues
after the deduction of costs, expenses, losses and taxes.Except for certain exempt items, income from all sources
Taxable income Tax rate
Up to NT$120,000 0%
NT$120,001 and above 17%
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Taiwan Pocket Tax Book 4
Business income tax
(business income, rents, interest, royalties, and capital gains
realised from property sales, etc) is subject to income tax. To
determine a company’s taxable income, its accounting income
is adjusted by taking into account non-taxable income, non-
deductible expenses, allowable provisions, and losses carried
forward, etc.
Certain income are taxed separately on a final withholdingtax basis, these include interest income on short-term bills,
beneficiary certificates from financial asset securitisation
and real estate securitisation, prize money obtained from
government lotteries, and reward money obtained from
informant activities, etc. Other income is included in taxable
income and subject to final tax assessment.
There is no separate capital gains tax in Taiwan. Gains or
losses on the disposal of capital assets are included in the
taxable income of the enterprise. However, gains from the
sale of land as well as gains from sales of Taiwanese securities
and futures are exempt from income tax. The losses and
expenses incurred in the sale of land, securities and futuresare accordingly not tax deductible.
However, Taiwan resident companies and foreign companies
with a PE in Taiwan are required to include any tax exempt
gains arising from securities and futures transactions in their
alternative minimum tax calculation in accordance with the
provisions of the Income Basic Tax Act.
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Business income tax
Exempt income
Categories of income exempt from income tax include, but are
not limited to:
• Capital gains from the sale of land;
• Capital gains derived from securities and futures
transactions;
• Dividends received by a Taiwan company from another
domestic prot-seeking enterprise;
• Certain technical service fees received by foreign entities
for construction of power plants, subject to government
approval;
• Business income obtained within Taiwan by a foreignenterprise engaged in international transportation,
provided reciprocal treatment is granted by the home
country of the foreign enterprise to a Taiwan-based
transportation enterprise operating in its territory.
Capital gains derived from sale of land,securitiesand futures transactionsare exempt from regularincome tax assessment.
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Deductions
In general, expenses or losses incurred in the ordinary course
of business are tax deductible, except where these are not
substantiated by adequate and acceptable documents.
The main documentation requirements for tax deductions are
as follows:
• Overseas purchases: Required evidence includes
commercial invoices from foreign suppliers, customs duty
receipts, import declarations, and remittance
documentation, etc; and
• Domestic purchases: Except for small-scale business
enterprises whose monthly sales do not exceed
NT$200,000 and certain professional practitioners, allprot-seeking enterprises are required to use government
unied invoices (“GUIs”). These invoices are the
predominant form of documentation necessary to support
deductions of local expenditures.
For other deductible expenses supported by receipts from
small-scale business enterprises, the total claimed asdeductions may not exceed 3% of total manufacturing and
operating expenses.
For payments made to professional practitioners, the required
withholding tax must be applied to such payments, and
receipts or remittance slips must be obtained accordingly.
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Business income tax
Non-deductible items
Expenses and losses incurred that are unrelated to the
operations of a company are not tax deductible. Except
for provisions for labour retirement funds, allowances for
doubtful accounts or provisions for foreign investment
losses, etc, as specified in the provisions of related laws,
or specially approved by the Ministry of Finance (“MOF”),unrealised expenses and losses may not be claimed as
tax deductible expenses. The deductible provisions and
allowances mentioned above must be recorded on the books
at the balance sheet date in order to qualify for deductibility,
i.e., these provisions cannot be made off the books for tax
purposes only.
Thin capitalisation rule
In January 2011, Taiwan introduced a new thin capitalisation
rule. From 2011 onwards, deductible interest expense on
inter-company loans is capped at a prescribed debt-to-equity
ratio to be determined by the MOF.
The new rule generally applies to profit-seeking enterprises,
except banks, credit cooperatives, financial holding
companies, bills finance companies, insurance companies and
securities companies.
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Business income tax
Tonnage tax system
In January 2011, Taiwan introduced a new tonnage tax regime.
From 2011 onwards, a qualifying enterprise engaged in
maritime transportation having its head office in Taiwan may
apply to re-base the taxation of their maritime transportation
income from the regular income tax system to a lump sum tax
calculated on the net tonnage of their fleet.
Once the application is approved, the qualifying enterprise
must remain under the tonnage tax system for 10 consecutive
years and cannot elect to switch to the regular income tax
system at its discretion. Furthermore, loss carry forwards and
tax incentives are not eligible under the tonnage tax system.
The tonnage tax will be computed with reference to an
assumed “daily profit” multiplied by 365 days and the
prevailing corporate income tax rate (currently 17%). The
“daily profit” is assessed as follows:
Net tonnage Daily profit
For each complete 100 net tons up to 1,000 NT$67For each complete 100 net tons from 1,001 to 10,000 NT$49
For each complete 100 net tons from 10,001 to 25,000 NT$32
For each complete 100 net tons above 25,000 NT$14
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Business income tax
The tonnage tax will only apply to income from maritime
transportation. However, if the qualifying enterprise
has income other than income derived from maritime
transportation, such income will still be taxed pursuant to the
relevant rules of the Income Tax Act.
Tax return filing requirements
The tax year in Taiwan generally runs from 1 January to31 December. Profit-seeking enterprises must obtain prior
approval to adopt a fiscal year other than the calendar year.
Tax payments are filed on a self-assessment basis.
All Taiwan resident profit-seeking enterprises, as well as
foreign companies with a PE in Taiwan, must file annual
returns with the tax authority no later than five months after
the end of the tax year (no extension is permitted). Penalties
are imposed for late filing and failure to file a return, and
interest is charged on late payments.
The income tax returns of a business enterprise must include
the forms prescribed by the National Tax Administration(“NTA”) and relevant supporting documents.
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Types of returns
Profit-seeking enterprises must file one of the following
income tax returns:
• Blue return – Used by prot-seeking enterprises duly
authorised by the tax authorities and designed to
encourage honest reporting of their income.
• Ordinary return – Used by all prot-seeking enterprises
not entitled to use a blue return.
Taxpayers that file blue returns are able to carry forward
losses for a period up to 10 years for losses incurred from 2003
onwards even without a CPA’s certification of their income tax
returns. Additionally, the tax limit for entertainment expenses
is higher than that for an ordinary return.
Certification
Submission of audited financial statements with tax returns is
not required. Certain companies must have their income tax
returns certified by licensed CPAs, including:
• Banks, credit cooperatives, insurance, investment trustcompanies, short term bill and nance companies, capital
leasing companies, and companies engaged in securities
and futures;
• Public companies;
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• Companies that have received approval for corporate
income tax exemption in accordance with the Statute for
Encouragement of Investment or the Statute for
Upgrading Industries and have annual net revenues and
non-operating income in excess of NT$50 million;
• Companies that have led a consolidated income tax
return in accordance with the Financial Holding Company
Act or Business Mergers and Acquisitions Act; and
• Companies other than those listed above whose annual
net revenues and non-operating income are in excess of
NT$100 million.
In addition, taxpayers may volunteer to have their income tax
returns certified. The following benefits are offered to profit-
seeking enterprises that have their tax returns certified by a
licensed CPA:
• They may receive all benets given to prot-seeking
enterprises ling a blue return, including carrying
forward prior year tax losses.
• The tax ofce will rst direct inquiries to the CPA whocertied the return and review the CPA’s working papers
rather than the company’s records.
If a non-resident corporate taxpayer has or is deemed to have
a PE within the territory of Taiwan, the PE will need to keep
separate accounting books as well as file income tax returns
and pay income tax on the non-resident corporate taxpayers’behalf.
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Assessments
The tax authorities conduct tax audits by examining the
tax returns, accounting books and supporting documents
according to the “Assessment Rules for Income Tax Returns
of Profit-Seeking Enterprises”. After a tax audit has been
completed, the taxpayer may be called upon to explain
questionable items and present additional supporting
documents to the tax authorities. If the tax authorities come
up with a different assessment, they will issue a formal
assessment notice to the taxpayer, who then has the option
of paying the tax as assessed or undergoing a tax appeal
procedure provided under the relevant tax provisions.
Assessment periodIf a taxpayer has filed an income tax return within the time
limit prescribed, and has not evaded tax by fraud or any other
improper means, the tax authority may examine the return
at any time within five years after the filing date, even if it
had already confirmed the assessment. This period can be
extended by 2 additional years in cases of fraudulent filing.
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Consolidated returns
Group enterprises meeting certain criteria under the Financial
Holding Company Act and Business Mergers & Acquisitions
Act may file consolidated tax returns for the Taiwan parent
and its first tier Taiwan subsidiaries. For other enterprises,
group returns are not filed. Consequently, the losses of one
affiliate cannot be used to offset the profits of another.
Enterprises with foreign branches should include branch
operations in their returns. However, credit for the income tax
paid on income derived from sources outside Taiwan can be
claimed to the extent allowed by the tax laws, but normally
not to exceed the income tax payable in Taiwan as a result of
inclusion of this offshore income.Payment
Tax is paid on a self-assessment basis in two instalments. A
company with a calendar year end must pay provisional income
tax equal to 50% of the tax liability declared for the previous
year between 1 September and 30 September. However, if
the taxpayer meets certain requirements, it can opt to pay the
provisional tax based on its taxable income for the first six
months of the current tax year. The second payment is made
when filing the annual return. The return is then reviewed by
the tax authority and a final assessment is issued.
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Penalties are imposed for late filing and failure to file a return.
The taxpayer is also required to pay interest on any unpaid
taxes from the date following the original due date to the date
of payment. The interest charge is based on the prevailing
one-year time deposit interest rate set by the Directorate
General of the Postal Remittances & Savings Bank each year.
Interest may be waived if the amount is under NT$1,500.
Branch versus subsidiary
In general, taxable profits of branches and subsidiaries
of foreign companies are computed in a similar fashion.
However, whilst withholding taxes are levied on dividends
distributed by subsidiaries, there is no withholding tax on the
remittance of after-tax profits by a branch to its foreign headoffice. The withholding tax levied on dividends paid to foreign
shareholders is 20% absent any tax treaties. Consequently,
a branch structure is currently tax-effective for trading and
service industries, but it should be noted that a branch cannot
enjoy any tax incentives.
Losses As a general rule, companies which keep a complete set of
accounting books and records that are in order, use blue
returns, or have their returns certified by a CPA may carry
losses forward for 10 years for tax losses incurred from 2003
onwards. Losses may not be carried back.
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Substance-over-form rules
Although Taiwan does not have a codified general anti-
tax avoidance rule, Taiwan has formalized the concept of
substance-over-form under Article 12-1 of the Tax Collection
Act on 13 May 2009, where the economic substance of the
transaction shall be considered.
The onus is on the tax authorities to ascertain the facts and
substance of the transaction, as well as its tax effect. The
taxpayer, on the other hand, is obligated to provide relevant
assistance required by the tax authorities.
Withholding taxes
Withholding taxes on wages, interest paid to non-financial
institutions, rentals, commissions, royalties, cash awards,
and professional fees, etc must be paid to the tax authorities
within ten days after the close of the month in which the
payment was made to resident individuals or corporates (if
necessary). The withholders should prepare withholding
certificates and submit them to the collection authority for
verification by the end of January of the following year. If thetaxpayer is not a resident individual or is a foreign enterprise
with no PE in Taiwan, the tax withholder should submit
the taxes withheld and prepare the withholding certificates
within 10 days from the date the payment is made.
The table in the next page summarizes withholding tax rates
in Taiwan.
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Type of income Residentindividuals (%)
Residentcompanies(%)
Non-residentindividuals andcompanies (%)
Dividends N/A N/A 20
Commissions 10 N/A (1) 20
Rentals 10 N/A (1) 20
Interest 10 10 15, 20 (2)
Royalties 10 N/A (1) 0, 20 (3)
Technical fees 10 N/A 0, 3, 20 (4 & 5)Prizes/Awards (6) 10, 20 10, 20 20
Professional fees 10 N/A 20
Notes:
1. Commissions, rentals, and royalties received by resident enterprisesthat issue GUIs are exempt from withholding tax.
2. For non-resident enterprises, a 15% withholding tax applies to interest
income derived from short-term bills, securitised certificates, corporatebonds, government bonds or financial debentures, as well as interestderived from repurchase transactions involving these bonds orcertificates. The rate in all other cases is 20%, unless reduced under atax treaty.
3. Royalties received by foreign enterprises with IPs registered in Taiwanthat are specially approved in advance by the government are exemptfrom income tax.
4. A 3% withholding tax may be applicable if approved by the tax authority.5. Technical service fees received by foreign enterprises in relation to
the construction of power plants for power generating companies andapproved by the government are exempt from income tax.
6. For prizes or awards from contests and games won by chance, thewithholding tax rate is 10% for resident individuals and enterprises and20% for non-resident individuals and enterprises. However, cash awardsless than NT$2,000 from lottery tickets issued by the governmentare not subject to withholding tax. Whereas, cash awards more than
NT$2,000 from lottery tickets issued by the government are subject to20% withholding tax. This applies regardless whether resident or non-resident individuals and enterprises are involved.
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According to the MOF Guidelines For Determining Taiwan
Sourced Income under Article 8 of the Income Tax Act issued
in September 2009, fees for services rendered exclusively
offshore by foreign enterprises with no PE in Taiwan are
regarded as non Taiwan-sourced income which shall not
be subject to withholding tax. On the other hand, a foreign
enterprise with no PE in Taiwan is subject to withholding tax
if it receives Taiwan-sourced income from service fees, rental
income, business profits, awards/grants and other income.
However, the foreign enterprise may appoint a tax agent
in Taiwan to claim a tax deduction for costs and expenses
incurred (supported by evidentiary documents), and it may
apply for a tax refund within five years from the payment date.
Foreign operations
Income tax is levied on the total income of profit-seeking
enterprises that have their head office in Taiwan, regardless
whether that income was derived inside or outside of Taiwan.
If a company pays income tax on income derived outside
of Taiwan by the foreign branch in accordance with the tax
laws of the country from which that income was derived,
the amount of such tax paid may be deducted from its profit-
seeking enterprise income tax, provided that such deductions
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cannot exceed the amount of tax which, if computed at the
applicable domestic tax rate, is increased by the inclusion of
income from abroad. Any profit-seeking enterprise whose head
office is outside of Taiwan but which maintains a fixed place of
business or business agent in Taiwan must pay income tax on
income derived from sources in Taiwan.
Double taxation relief
Certain taxes imposed by foreign governments on income
recognised by a domestic taxpayer are allowed as a credit
against income taxes to be paid in Taiwan. Credit for foreign
taxes will be allowed provided the domestic taxpayer can
present evidence of the tax payment from the tax authorities
of the foreign government and evidence of attestation by the
Taiwanese diplomatic representative office or other approved
organisation in the foreign country.
Double taxation agreements
Taiwan has currently entered into bilateral double taxation
agreements with 20 countries. These treaties generally follow
the Organisation for Economic Co-operation and Development
(“OECD”) model and their contents are summarised in the
following table:
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Withholding taxes under double taxation agreements
Country Dividends (%) Interest (%) Royalties (%)
Non-treatycountries
20 15, 20 20
Australia 10, 15 (1) 10 12.5
Belgium 10 10 10
Denmark 10 10 10
France 10 10 10
Gambia 10 10 10
Hungary 10 10 10
Indonesia 10 10 10
Israel 10 7, 10 (5) 10
Macedonia 10 10 10
Malaysia (4) 12.5 10 10
Netherlands 10 10 10
New Zealand 15 10 10
Paraguay 5 10 10
Senegal 10 15 12.5
Singapore 40 (2) N/A 15
South Africa 5, 15 (3) 10 10
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Country Dividends (%) Interest (%) Royalties (%)
Swaziland 10 10 10
Sweden 10 10 10
United Kingdom 10 10 10
Vietnam 15 10 15
Notes:
1. 10% for shareholders that are companies (other than partnerships) withat least a 25% shareholding.
2. The total tax burden of corporate income tax and dividend withholdingtax must not exceed 40% of the total profits of the company.
3. 5% for shareholders with at least a 10% shareholding.
4. The withholding tax rate on technical service fee is reduced to 7.5%.
5. 7% of the gross amount of the interest arising in a territory and paid onany loan of whatever kind granted by a bank of the other territory.
The MOF has issued the Assessment Rules Governing
Applicability of Double Taxation Agreements (“DTA
Assessment Rules”) on 7 January 2010, replacing the previous
Guidelines for the Application of Double Taxation Agreements.
The DTA Assessment Rules introduced more stringentmeasures to verify whether applicants of tax treaty benefits
are tax residents of treaty countries and bona fide beneficial
owners of Taiwan-sourced income.
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In addition, the MOF also issued Tax Ruling Tai-Tsai-Shuei No.
09604506050 on 11 January 2007 which provides guidance
on assessment and income attribution rules of PEs defined
under DTAs. The ruling also specifies how taxes should be
paid (i.e. via withholding tax or filing of tax return) where
remuneration is received by a foreign entity located in a treaty
country with a PE in Taiwan.
Tax incentives
Certain tax incentives are provided to investors if they are
located in prescribed areas such as science parks, economic
processing zones, free trade zones and so on.
Most tax breaks were previously offered under the Statute
for Upgrading Industries (“SUI”), which expired at the end of
2009 and is currently replaced by the Statute for Innovating
Industries (“SII”) issued on 12 May 2010.
Additional tax incentives are available under the Business
Mergers and Acquisitions Act, the Financial Institutions
Merger Act and other laws and regulations.
Notwithstanding the expiry of the SUI, companies can
still apply for tax incentives under the SUI if the requisite
approvals had already been obtained from the government
before the expiry date. On the other hand, the main tax
incentive offered under the SII consists of R&D investment
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tax credit (“ITC”). The key differences between the R&D ITC
offered under the SII and the expired SUI are summarized
below:
Statute for Innovating
Industries
Statute for Upgrading
Industries (expired on 31
December 2009)
Creditable
amount
15% of qualified R&D
expenditure of thecurrent year.
35% of R&D expenditure of
the current year, and 50% ofthe portion in excess of theaverage R&D expenditure ofthe prior two years.
Deadlinefor applyingtax credit
Current year 5 consecutive years fromthe current year
Tax creditceiling Not exceeding 30% ofthe tax payable in thecurrent year. UnutilisedR&D credits will beforfeited, and cannot becarried back or carriedforward.
Together with other types ofITCs, the total ITC appliedshall not exceed 50% of thetax payable in the currentyear. However, the ceilingis not applicable in the lastyear.
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Transfer pricing rules
The key legislation on related-party transactions in Taiwan,
dating from December 2004, is "Regulations Governing
Assessment of Non-arm's Length Transfer Pricing of Profit-
Seeking Enterprises".
The types of transactions are:
• transfer or use of tangible or intangible property;
• rendering of services;
• use of funds; and
• other types of transactions assessed by the MOF.
Arm’s length principle
Transactions concerning revenue, cost, expenses, profit or loss
allocations between an enterprise and other local and foreign
businesses that it is associated with, and those between an
enterprise and another enterprise by which it is directly or
indirectly owned or controlled, must conform to the arm's
length principle.
Related-party definitions
The TP Assessment Rules provide specific definitions of
related parties. In addition to a 20% equity ownership
threshold, the MOF has adopted the “substantive management
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and control” and “material influence” concepts in defining
what constitute a related party.
Previously, the burden of proof in showing that a transaction is
not conducted at arm’s length rested with the tax authorities.
Under the current rules, the burden of proof has been placed
on the taxpayer, who is obligated to disclose information on
related party transactions and prepare certain documents tocomply with the relevant laws and regulations when filing
their tax return.
Pricing methods
As an indication, we provide the applicable methods for
pricing the transfer and use of tangible property, which
includes the following:
• comparable uncontrolled price method (“CUP”);
• resale price method (“RPM”);
• cost plus method (“CP”);
• comparable prots method (“CPM”);
• prot split method (“PSM”); and
• other methods approved by the MOF.
The profit level indicators (“PLI”) of the CPM include:
• Return on Operating Assets (“ROA”);
• Return on Sales (“ROS”);
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• Berry Ratio (“BR”); and
• Full Cost Mark-up.
Documentation requirements
The disclosure of related party transactions in annual tax
returns and the preparation of transfer pricing reports
are required if certain thresholds are met. The following
documents should be prepared:
• A comprehensive business overview;
• A description of the organisation structure;
• A summary of related party transactions;
• A transfer pricing report;
• A statement of afliation (in the case of a subsidiary) and
consolidated business report of afliated enterprises (of a
parent company), as stipulated in Article 369-12 of the
Company Act; and
• Other documents concerning related parties or controlled
transactions that may affect pricing.
The transfer pricing report should include the following items:
• Industry and economic analysis;
• Functional and risk analysis of all the participants in the
controlled transactions;
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• A description of compliance with the arm’s length
principle;
• A description of the search for comparables;
• Description of the selected transfer pricing method and
the related comparability analysis;
• Transfer pricing methods adopted by the other related
participants; and
• A description of the most appropriate method used to
evaluate whether the result of the controlled transactions
is at arm’s length and also its conclusion, including
selected comparables, difference adjustments and their
assumptions, arm’s length range, the conclusion of the
evaluation, and the transfer pricing adjustment if thecontrolled transactions are not at arm’s length.
In general, all required documents should be provided in
Chinese, though English documentation may be acceptable if
approved by the tax authorities.
Safe harbour rules
The MOF established a safe harbour rule in December 2005
(revised in November 2008) to help alleviate taxpayers’
compliance costs. Companies which have controlled
transactions below certain thresholds may replace their
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Business income tax
transfer pricing report with other evidentiary documents to
prove that the results of such transactions are consistent with
arm’s length results.
Penalties
The tax authorities can adjust the income of taxpayers whose
controlled transactions fall outside the arm’s length range,
and penalties may be imposed for failure to comply with thearm’s length principle.
Advance pricing agreements
If the transactions undertaken by a business with related
parties satisfy the following criteria, the taxpayer may apply
for and establish an advance pricing agreement (“APA”) with
the tax administration:
• The total amount of the transactions covered under the
APA is at least NT$1 billion, or the annual amount of such
transactions is at least NT$500 million;
• No signicant act of tax evasion has been reported in the
past 3 years;• The required documentation for APA application has been
well prepared; and
• Other criteria specied by the MOF are satised.
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Taxpayers deemed qualified to apply for an APA should file an
application before the end of the first fiscal year to be covered
by the APA. The tax authorities will notify the taxpayer in
writing within one month whether the application is accepted.
Once the application is accepted, the taxpayer must provide
all required documents and reports within one month from
the date the notification is received.
In general, an APA is valid for three to five years. Where an
enterprise’s business nature has not materially changed, a
one-time extension of up to five years can be requested.
Alternative minimum tax
Taiwan imposes a so-called alternative minimum tax (“AMT”)
under the Income Basic Tax Act, effective from 1 January
2006. There are two AMT systems, one for companies and one
for individuals.
The AMT applies to all Taiwan resident companies, as well as
foreign companies with a PE in Taiwan, if they earn certain
income that is tax exempt, or if their annual basic income (that
is, income subject to AMT) exceeds NT$2 million.
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Business income tax
The following entities are not subject to AMT:
• Sole proprietors and partnerships;
• Non-prot organisations;
• Government-owned enterprises;
• Foreign enterprises with no PE in Taiwan; and
• Businesses undergoing a liquidation ling or declared
insolvent.
If the regular income tax is greater than the AMT, no special
action is required. If the AMT is greater than the regular
income tax, taxpayers have to calculate and pay AMT based
on the following formulae:
• Income subject to AMT = Regular taxable income +
add-back items
• AMT = (Income subject to AMT - NT$2 million) x 10%
The add-back items include approved exempt income
under tax incentive schemes, tax exempt capital gains fromsecurities and futures transactions, and tax exempt offshore
branch profits of banking institutions.
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Taxation of shareholders
Domestic shareholders
- Dividends
The so-called imputation tax system was introduced to
eliminate double taxation on earnings of a corporation.
Profits of resident corporations are currently taxed at 17%
(effective from 2010 onwards). This tax can be distributed
to resident individual shareholders to offset their individual
income tax.
The dividends received by a resident corporation from its
investment in another resident corporation are not included
in its taxable income.
If a Taiwan enterprise invests in foreign corporations,
dividends declared by the invested foreign corporations must
be included in taxable income, and any related foreign tax
credits may be used within prescribed limits.
- Capital gains
Gains from the sale of Taiwanese securities are exempt from
income tax assessment.
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Foreign shareholders
- Dividends
Dividends paid to foreign shareholders are subject to
withholding tax at 20%, unless reduced under double taxation
agreements.
- Capital gains
Although gains from the sale of securities are exempt from
income tax, under the Income Basic Tax Act, companies (i.e.,
resident companies in Taiwan and foreign companies with a
PE in Taiwan) who sell domestic marketable securities have
to calculate an income basic tax amount and compare such
tax amount with the regular income tax amount, then pay the
higher of the two taxes calculated. Please refer to the formulae
laid out under “Alternative Minimum Tax” section for more
information on the AMT calculations.
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PERSONAL INCOME TAX
General overview
Individual income tax is levied on the Taiwan-sourced income
of both resident and non-resident individuals, unless exempt
under the provisions of the Income Tax Act and other laws.
Income received for services rendered in Taiwan is considered
to be Taiwan-sourced income subject to tax regardlessof whether such income is paid by a local or an offshore
employer. However, income received for services rendered
in Taiwan is not considered Taiwan-sourced income if a non-
resident individual resides in Taiwan for less than 90 days in
a calendar year and the compensation is paid by an offshore
employer.
Starting from 1 January 2010, the alternative minimum
tax, based on the Income Basic Tax Act, will apply to the
overseas income of resident individuals, including qualifying
expatriates.
The tax year in Taiwan is on a calendar year basis. Individual
taxpayers should file an annual income tax return with the
Taiwan tax authority before 31 May of the following year,
with no extensions allowed.
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Personal income tax
Residency
An individual is considered resident in Taiwan for income tax
purposes if the individual domiciled or ordinarily resided in
Taiwan; or if not domiciled but resided in Taiwan for 183 days
or more in a taxable year. Residents are taxed at progressive
rates from 5% to 40% and are entitled to claim certain
exemptions and deductions.
Non-residents, or foreigners who stay in Taiwan for less
than 183 days in a calendar year, are in general subject to
withholding tax on their Taiwan-sourced income. A non-
resident alien is subject to 18% or 20% withholding tax on
remuneration related to services rendered in Taiwan received
from a Taiwan-registered entity.
Personal income tax rates
The following table summarises residency conditions and
personal income tax rates in Taiwan:
Non-resident Resident
Length of stay Less than 183 days 183 days or more
Personal exemption No Yes
Deductions No Yes
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Non-resident Resident
Tax rates
In general15% ~ 20%,depending onincome type
Progressive tax rates for 2011 tax year:
Net TaxableIncome (NT$)
Tax Rate (%) ProgressiveDifference(NT$)
0 ~ 500,000 5 0
500,001 ~1,130,000
12 35,000
1,130,001 ~2,260,000
20 125,400
2,260,001 ~4,230,000
30 351,400
4,230,001 orhigher
40 774,400
Non-resident individuals who reside in Taiwan for less than183 days are subject to withholding tax at a rate of 18% on
wages and salaries, 20% on dividends, commissions, rental
income, royalties, professional fees and prizes and awards
obtained from contests or lotteries. From 1 January 2010, a
15% withholding tax applies to interest income derived from
short-term bills, securitised certificates, corporate bonds,
government bonds or financial debentures, and interest from
repurchase transactions involving these bonds or certificates.
The rate in all other cases is 20%.
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Exempt income
Income which are exempted from income tax include, but are
not limited to the following:
• Compensation for death or injury and that obtained
pursuant to the National Compensation Act.
• Pension or compensation for death received in accordance
with applicable acts or regulations by the bereaved family
of a person who died in performing ofcial duties.
• Payment for special disbursement, allowance in kind or
cash in lieu thereof, and housing allowances received
from the government by public servants, teachers,
military personnel, policemen and labourers; and that
portion included in the uniform-scale salary receivedby employees of state-run organizations representing
allowance in kind and housing allowance.
• Compensation payment made under life insurance, labour
insurance and insurance for public servants, military
personnel and teachers.
• Scholarships and subsidies granted by governments
of Taiwan or foreign governments, international
institutions, educational, cultural, and scientic research
organizations or associations, and other public or private
organizations for encouragement of advanced studies,
research or participation in scientic and professional
training, except for the scholarships or subsidies receivedas remuneration for services rendered to the grantors.
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• Income, derived by virtue of ofce, of foreign diplomatic
ofcials, consular ofcials and other persons entitled to
treatment accordable to diplomatic ofcials in the service
of foreign embassies, legations and consulates in Taiwan.
• Income, derived by virtue of ofce, of employees, other
than diplomatic ofcials, consular ofcials and persons
entitled to diplomatic treatment, who, being nationals of
a foreign country, are employed by the embassy, legationor consulate of their country or by subsidiary agencies
thereof in Taiwan; provided, that reciprocal treatment is
accorded by the foreign country concerned to employees
of Chinese nationality employed by the embassy, legation
or consulate of Taiwan or by subsidiary agencies thereof,
in the foreign country concerned.
• Salaries paid by foreign governmental agencies,
organizations or educational and cultural institutions
to foreign technicians and professors of universities
and colleges for services rendered within Taiwan under
technical cooperation or cultural and educational
exchange agreements made by and between such foreign
governmental agencies, organizations or educational andcultural institutions and those of Taiwan.
• Income earned by an individual from the sale of land, or
by an individual from the sales of apparel or furniture for
household use.
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• Individual income derived from written articles,
copyright, musical compositions, musical productions,
dramas, cartoons, or remuneration for speeches and
lectures on an hourly basis. However, the total amount
of such income for the whole year shall not exceed NT$
180,000.
• Various payments paid to personnel engaged in handling
various kinds of examinations held by governmentalagencies or academic organizations as commissioned by
such agencies and entrance examinations held by public
and private schools of various levels.
Exemptions and deductions
Exemptions are available for a resident taxpayer, his/her
spouse and dependents. A resident taxpayer also has the
option to claim either a standard deduction or itemised
deductions and may claim additional special deductions.
Eligibility for and limits on itemised deductions are subject
to change, so it is wise to seek up-to-date guidance before
filing your return. Non-residents are not eligible for the above
exemptions and deductions.
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Exemptions
Exemption item Exemption amount Supporting documents
Taxpayer NT$82,000 None
Spouse NT$82,000 Copy of marriage certificate.
Dependents notover 20 years of
age
NT$82,000 Copy of birth certificate.
Dependentsover 20 yearsof age and stillstudying in anapproved collegeor university
NT$82,000 1. Copy of birth certificate.
2. Copy of tuition receipt andvalid student ID.
Dependents over60 years of age
NT$82,000 1. Copy of the birth certificateof the taxpayer / spouse.
2. Document certifying theparent is supported by thetaxpayer / spouse.
Dependents over70 years of age
NT$123,000 1. Copy of the birth certificateof the taxpayer / spouse.
2. Document certifying theparent is supported by thetaxpayer / spouse.
3. Documents evidencingthe parent’s livingarrangements.
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Personal income tax
Deduction item Maximum deduction Supporting documents
Charitable donations Limited to donationsto Taiwan-registered non-profitorganizations of20% of annual grosstaxable income.
Original receipts.
Insurance premiums Limited toNT$24,000 for eachperson per year forlife insurance andlabour insurancepremiums. There is
no ceiling for healthinsurance premium.
Original receipts.
Medical andmaternity expenses
No limit. Original receipts issuedby a qualified hospitalor clinic.
Itemised deductions
Taxpayer status Deduction amount Supporting documents
Single taxpayer NT$76,000 None
Married, filing jointly NT$152,000 Copy of marriagecertificate
Standard deductions
Note: A taxpayer can claim either the standard deduction or itemized
deductions, depending on whichever gives a higher total deduction amount.
There is no ceiling on the itemised deduction total.
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Deduction item Maximum deduction Supporting documents
Calamity losses No limit. Certificate issued bylocal tax office.
Interest paid on loansfor the purchase ofan owner-occupiedresidence in Taiwan.*
Limited toNT$300,000 for atax filing unit.
• Interest paymentreceipt.
• Title deed.
• Documents
evidencing theresidence was owneroccupied in the taxyear.
Rental expense forthe lease of a self-use residence inTaiwan.*
Limited toNT$120,000 for atax filing unit.
• Rental contract withthe name of thetaxpayer as lessee.
• Rental payment
receipt issued by thelandlord.
• Documentsevidencing theresidence was forself-use in the taxyear.
* Either “interest paid on loans” or “rental expense” is to be claimed.
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Personal income tax
Deduction item Maximum deduction Supporting documents
Salaries and wages Limited toNT$104,000 perperson, or actualsalary and wageincome received,whichever is lower.
None.
Property transactionlosses
Limited to propertytransaction gainsfor the same taxyear. Any residualbalance may becarried forward forthree years.
• Certificate issued bylocal tax office.
• Purchase and salescontracts showingthe purchase andsales price andother relevantdocumentationdetailing the relevantcosts and expensesincurred.
Savings andinvestment
Limited toNT$270,000 per taxfiling unit.
None.
Disability (mental orphysical) NT$104,000 pertaxpayer, spouse,and dependent, ifhandicapped.
Copy of a psychiatrist’sdiagnosis certificateor copy of DisabilityIdentification.
Dependent childtuition
NT$25,000 perdependent childif studying in anapproved college oruniversity.
Student certificate ortuition receipts issuedby the dependent child’scollege or university.
Special deductions
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Fringe benefits
Fringe benefits are considered part of salaries and wages
under Taiwan income tax law. Fringe benefits to individual
taxpayers in the form of cash allowances are generally taxable
regardless of the nature of the benefits. Fringe benefits
provided directly by the employer without cash payment
to the employee are also taxed unless the recruitment ofa foreign employee satisfies certain criteria for special tax
incentives applied to foreign professionals.
Incentive compensation plans
Common incentive compensation plans are stock bonuses,
stock options, restricted stocks/units, and employee stock
purchase plans. For an individual who is assigned by a foreign
company to work in its subsidiary, branch or representative
office in Taiwan, and who exercises stock options issued by the
foreign company, the other income derived from exercising
those options will not be considered Taiwan sourced income
if he/she does not render any services in Taiwan during the
period from the date the options are granted to the date they
are vested. However, as of this writing, there is no specific tax
ruling for restricted stocks/units. Taxpayers are advised to
contact their tax consultants regarding equity compensation
received.
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Personal income tax
Capital gains
Taiwan does not impose a separate capital gains tax, as all
gains, unless specifically exempt by law, are assessed as
ordinary income and subject to regular income tax. Gains
from the sale of land, and Taiwan securities and futures,
are currently exempt from income tax. However, resident
individuals must include any gains attributable to sales of
unlisted securities in Taiwan in their alternative minimum tax
calculation.
Gains on sale of other properties are subject to regular
income tax but gains on sale of land are subject to Land Value
Incremental Tax rather than income tax.
Dividends
Taiwan operates an imputation tax system to ensure that
dividends received by resident individual shareholders are
taxed only once, as part of individual income.
For resident individuals, dividends received are not subject to
withholding tax. The gross dividend received is included in anindividual’s taxable income, and the associated imputation tax
credit (for the corporate tax paid by the company distributing
the dividend) can be used to offset its income tax liability. Any
excess credit is refundable to resident individuals.
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For non-resident individuals, dividends received are subject to
20% withholding tax, absent any available tax treaty.
Filing
Resident individuals are required to report all of their Taiwan-
sourced income, irrespective of the payment location of
such income, and to file an annual income tax return with
the Taiwan tax authority between 1 May and 31 May of thefollowing year, with no extension allowed.
For resident individuals, a consolidated individual income
tax return must be filed with respect to Taiwan-sourced
income. Husbands and wives must file joint returns if both
have resided in Taiwan for more than 183 days in a taxable
year. However, a spouse can opt to calculate taxes due on
that spouse’s salaries or wages separately. The income of any
dependents for whom the taxpayer has claimed a personal
exemption must also be included in the joint tax return.
An individual has no filing obligation if he/she resides in
Taiwan for less than 90 days in a calendar year, and receivesincome from a Taiwan-registered entity which has been
subject to withholding tax, or income from an offshore
employer.
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Personal income tax
Payment of taxes
Taiwanese employers are required to withhold income tax on
locally paid monthly salaries. Any additional tax due must
be paid before the actual return is filed. Thus, a tax payment
receipt must be obtained before filing a return.
Alternative minimum tax
In addition to regular tax calculations under the Income Tax
Act, Taiwan also imposes AMT on individuals who are tax
residents in Taiwan (including expatriates who stay in Taiwan
for 183 days or more in a tax year). Effective from 1 January
2010, the overseas income of resident individuals will be
included in the AMT calculation.
Resident taxpayers with AMT taxable income of more than
NT$6 million may be subject to AMT at the current rate
of 20%. Under the Income Basic Tax Act, a taxpayer must
calculate the amount of AMT due on income subject to AMT
after adding back certain items and compare the result with
the regular income tax amount. If the AMT tax payable isgreater than the regular tax payable, the taxpayer has to
calculate and pay AMT based on the following formulae:
• Income subject to AMT = Regular taxable income + add-
back items
• AMT = (Income subject to AMT - NT$6 million) x 20%
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The add-back items include qualified insurance benefits,
capital gains from unlisted securities or beneficiary
certificates, non-cash charitable donations, and foreign-
sourced income totalling NT$1 million or more.
Except for overseas income, the other items have been
included in the AMT calculations since 1 January 2006.
Although the inclusion of foreign-sourced income will
increase the AMT burden, any foreign taxes paid on offshore
income may be credited against AMT payable, with certain
limitations.
Resident foreignersmay be subject to AMTon worldwide income ,
with foreign tax creditsavailable subject to a limit.
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VALUE ADDED TAX (VAT)
General overview
Business tax generally applies on the sale of goods and
services within Taiwan as well as the importation of goods
into Taiwan. Business tax consists of valued-added tax (“VAT”)
and non-VAT:
• VAT – applicable to general industries. The current rate is5%. The seller collects VAT from the purchaser at the time
of sale (output tax), deducts from that amount any VAT
paid on purchases (input tax) and remits the balance to
the government. Thus, the VAT in most cases does not
represent an additional cost to the enterprise; rather, the
cost is passed on to the end consumer.
• Non-VAT (also known as gross business receipts tax or
GBRT) – applicable to nancial institutions, special
vendors of beverages and food, and small scale business
enterprises. Their sales, based on gross receipts, are
subject to various business tax rates.
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Value added tax
Tax rate Goods/Services
0% This rate applies to exported goods, goods sold by duty-free shops, goods sold to enterprises inside exportzones, science-based industrial parks, bonded factoriesor bonded warehouses, services relating to exports orservices supplied within the territory of Taiwan but used in
foreign countries, and certain international transportationoperation. Effective from January 2011 onwards, the scopeof “bonded areas” is expanded to include agriculturalbiotechnology parks, free trade zones, logistics centresand other government-approved areas administered bycustoms.
0.1% This rate applies to consignees of agricultural wholesalemarkets and small scale business entities which sellagricultural products.
1% This rate applies on reinsurance premiums of insuranceenterprises. This rate also applies to small scale businessentities and other businesses approved by the MOF.
2% This rate applies to financial institutions engaged inbanking, insurance, investment trust, securities, futures,commercial paper and pawnshops.
3% This rate applies on payments made by a Taiwanesefinancial institution for purchase of services exclusivelyfor their authorized businesses from a foreign financialinstitution with no fixed place of business in Taiwan.
Tax rates
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Value added tax
Tax rate Goods/Services
5% This standard rate applies generally on all domestic salesof goods and services, and importation of goods. This ratealso applies on transactions not connected exclusivelywith financial institutions’ core business.
15% This rate applies to night clubs or restaurants providingentertainment show programs.
25% This rate applies to saloons, tea rooms, coffee shops and
bars providing hostesses to entertain customers.
Zero-rated goods and services
The following are the goods and services which are zero-
rated:
• Export of goods.
• Services provided in connection with exports or services
provided within Taiwan but used in foreign countries.
• Goods sold by duty-free shops.
• Sales of machinery and equipment, materials, supplies,
fuel and work in process to export enterprises inside the
export processing zone, to enterprises inside the Science-based Industrial Park, or to bonded factories or bonded
warehouses supervised by the Taiwan customs authority.
• International transportation, provided reciprocal tax
treatment is granted by the home country of the foreign
international transportation company.
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• Vessels and aircrafts used in international transportation
and deep-sea shing boats.
• Sale of goods or maintenance services to vessels and
aircrafts used in international transportation and deep-
sea shing boats.
• Sales of goods or services to enterprises located within
bonded areas for their business operation.
• Goods sold by enterprises located in bonded zones to
enterprises located in taxable zones, where the goods are
exported directly instead of delivered to taxable zones.
• Goods sold by enterprises located in bonded zones to
enterprises located in taxable zones, where the goods
are delivered to and stored by enterprises located in free
trade zones, bonded warehouses, or logistics centres, for
subsequent export.
Exempted goods and services
The following are goods and services which are exempted
from business tax:
• Sale of land.
• Water supplied to farmland for irrigation.
• Medical services, medicine, ward lodging and meals
provided by hospitals, clinics and sanitariums.
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Value added tax
• Rearing and nursing services offered by the nursing
homes for children, the elderly or handicapped.
• Education services offered by schools, kindergartens,
other educational and cultural institutions, including
cultural services offered under government’s
consignment.
• Textbooks authorised by education authorities for use at
various levels of schools and important specialised
academic writings awarded by the government according
to the law.
• Goods or services sold by student-run shops of vocational
schools which do not serve outsiders.
• Newspapers, magazines, newsletters, advertisements,television and broadcasting programs produced and sold
by legally registered newspaper and magazine publishers,
news agencies, television and broadcasting stations,
excluding the advertisements sold by newspaper
publishers and advertisements broadcasted by television
stations.
• Goods or services sold to their members by cooperatives
managed in accordance with the law; and business
consigned by government to said cooperatives.
• Goods or services sold to their members by farmers’,
shermen’s, workers’, commercial and industrial
associations in accordance with the law, business
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Value added tax
consigned by the government to said associations, and the
management fee charged in accordance with Article 27 of“The Agricultural Products Market Transaction Act” for
the use of an agricultural products wholesale market and
in which the share ownership of farmers’ associations,
shermen’s associations, cooperatives and government
institutions accounts for more than 70%.
• Proceeds from goods sold in tenders, charity sales andcharity shows held by charity and relief institutions
organised according to the law, provided that the total
proceeds are solely used by said institutions after
deducting the necessary expenditures for the tenders,
charity sales and charity shows.
• Goods or services sold by employee welfare organisationsof government bodies, state enterprises and social
organisations which are organised and operated under
relevant laws and are not open to the public.
• Goods or services sold by prison workshops and their
nished goods stores.
• Services rendered by post and telecommunication ofcesin accordance with the law; and business consigned under
government mandate.
• Monopoly goods sold at statutory prices by state-owned
monopoly industries and by business entities which are
authorised to sell the monopoly goods.
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Value added tax
• Service of consigned sale of stamp tax tickets and postage
stamps.
• Goods or services sold by peddlers or hawkers.
• Feed and unprocessed raw agricultural, forestry, shery
and livestock products, and by-products; the agricultural,
forestry, shery and livestock products, and by-products
of farmers’ and shermen’s harvests sold by farmers andshermen.
• Fish caught and sold by shermen.
• Sales of rice and wheat our and the service of husking
rice.
• Sales of xed assets which are not regularly traded by
business entities which compute their business tax
according to Section II of Chapter 4, i.e. nancial
institutions, etc.
• Insurance policies accepted by insurance enterprises for
insurance promoted by the government, covering
military, government and education entities’ employees
and their dependents, labourers, students, farmers,shermen, exports, compulsory automobile third party
liability insurance, and reinsurance premiums paid out by
insurance enterprises from premiums received by the
same, and life insurance policy reserves, annuity
insurance policy reserves and health insurance policy
reserves, provided, however, that this does not include
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income, other benets and return of policy reserves
received on termination of life insurance, annuity
insurance and health insurance.
• Bonds issued by all levels of government and securities
upon which a securities transaction tax has been imposed
in accordance with the law.
• Residual or obsolete goods sold at tenders by all levels ofgovernment.
• Sales of weapons, warships, aircraft, tanks and
reconnaissance communication equipment for military
use to defence agencies.
• Fertilizer, pesticides, veterinary drugs, agricultural
machinery, transportation equipment for farmland, andfuel and electricity used by such machinery and
equipment.
• Fishing boats for coastal or inshore shery and machinery,
equipment, shing nets and fuel used by shing boats.
• Interest on the ow of funds between head ofce and
branch ofces of banking enterprises, the revenue ofinvestment trust enterprise derived from trust funds in
the manner designated by the settler, provided the settler
bears the risk of loss and enjoys the proceeds, and
unredeemed items where the proceeds arising from their
sale by pawnshops does not exceed the aggregate of
principal and interest receivable.
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• Gold bars, gold bricks, gold foil, gold coins and gold
ornaments, excluding the processing fee.
• Research services supplied by academic, scientic
research institutions which are established under the
approval of the government.
• Sales amount of enterprises operating nancial
derivatives products, corporate bonds, nancial bonds,
New Taiwan Dollar interbank call loans and foreign
currency call loans, excluding commissions and service
charges of these products.
Any business entity which sells the aforementioned exempt
goods or services can apply to the MOF to waive the
exemption and compute its business tax according to the
provisions of Section I of Chapter 4, i.e. taxes payable or
deductible / refundable is based on the difference between
input VAT and output VAT. However, once approved, no
changes can be made within three years.
Filing and payment of taxes
An enterprise, whether or not it has sales, must generally file
a bi-monthly VAT return with the collection authority by the
15th day of each odd month for the two preceding months.
The tax payable must be paid before filing the return.
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The head office and other fixed place of businesses of the
same enterprise located in Taiwan must file separate bi-
monthly returns to the local tax authorities. However,
enterprises may apply for approval from the MOF to file a
consolidated VAT return if they compute their business tax
according to the provisions of Section I of Chapter 4.
An agent of a foreign transport enterprise which has no fixedplace of business in Taiwan must file VAT returns and pay VAT
for outbound passengers and cargo.
With an aim to curb real estate speculation, the
government is currently reviewing a draft bill for
selective goods and services tax of 10% to 15% to be
applied on real estate properties purchased not for
self use and sold within 2 years, as well as various
luxury products such as upscale automobiles, yachts,
private jets, fur, ivory, high-end furniture and golf
club membership. The tax bill will also include tax
exemptions, for example sale of first house for self use.
The new law is expected to be implemented as early as
June 2011.
Introduction to selective goods and services tax
(“luxury tax”)
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SECURITIES TRANSACTION TAX
General overview
Trading of Taiwanese securities shall be subject to securities
transaction tax and is payable by the seller of securities.
Chargeable securities include shares issued by companies,
corporate bonds and other securities offered to the public
with government approval.
Trading of corporate bonds and financial bonds issued by
Taiwanese issuers or companies are temporarily exempt from
securities transaction tax assessment until 31 December 2016.
Tax rates
The applicable securities transaction tax rates are as follows:
• 0.3% on gross proceeds from the sale of shares issued by
companies.
• 0.1% on gross proceeds from trading in corporate and
nancial bonds (temporarily exempt) and other securities
approved by the government.
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STAMP TAX
General overview
Stamp duty is chargeable on certain documents drawn up
within the territories of Taiwan and not on transactions.
Scope of taxation
The types of documents subject to stamp tax include:
• Receipts for monetary payments.
• Contracts or deeds for the purchase and sale of movable
properties.
• Contractual agreements for the completion of specic
tasks.
• Contracts for the sale, transfer and partition of real estate.
The following documents are exempted from the levy of stamp
tax:
• Documents executed by all levels of government agencies
and townships (at town, city and district levels).
• Monetary receipts executed by public or private schools.
• Documents executed by government-owned or private
enterprises internally and not involved in rights or
obligations with third parties, including those issued for
internal use between the head ofce and branches.
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Stamp tax
• Debit notes sent out for claim of payments or audit
purposes.
• Duplicates or transcripts where a tax stamp has been
afxed to the original document.
• Bus tickets, train tickets, boat tickets, air tickets and other
tickets for carriage of passengers or cargo.
• Receipts issued for the sale of self-grown agriculturalproducts (including agriculture, forestry, sheries and
livestock) by farmers, or receipts issued by farmer's
associations or wholesalers at the rst wholesale level on
behalf of farmers.
• Receipts identifying payment of salaries or wages.
• Receipts identifying payment of social benets, payments
to the family of a deceased person, or pensions.
• Receipts for taxes or donations to the government issued
by collecting agencies.
• Receipts issued by voluntary handlers of government
grants at the time of reimbursement.• Receipts identifying tax refunds.
• Receipts issued for the sale of tax stamps.
• Receipts for donations received issued by entities
organised for educational, cultural, public/ social
welfare, or for charitable purposes.
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Stamp tax
• Receipts issued by the Agricultural Land and Water
Association to its members for payment of irrigation
services.
• Contracts for the construction or repair of ships or boats
engaged in international transport.
Tax rates
• Receipts for monetary payments:
- 0.4% of the amount received per piece, with revenue
stamp to be affixed by the issuer.
- 0.1% of the money deposited by the bidder, with revenue
stamp to be affixed by the issuer.
• Contracts or deeds for the purchase and sale of movableproperties: NT$12 per piece with revenue stamp to be
afxed by the contractor or issuer of the deed.
• Contractual agreements: 0.1% of the contract price, with
revenue stamp to be afxed by the contractor or issuer of
the deed.
• Contracts for the sale, transfer and partition of real estate:
0.1% of the contract price, with revenue stamp to be
afxed by the contractor or issuer of the deed.
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CUSTOMS DUTIES
Customs duties are levied on imported goods. The customsduty is payable by the consignee or the holder of the bill of
lading for imported goods, and is based on the dutiable value
or the volume of goods imported.
Duty rate
Customs duty rates fall into three categories:
• MFN rate - for all WTO members and other countries with
a reciprocal relationship with Taiwan.
• Preferential rate - for specied underdeveloped or
developing countries and those countries which have
signed a free trade agreement with Taiwan (namely El
Salvador, Guatemala, Honduras, Nicaragua, Panama) andother developing countries.
• General rate - applied to jurisdictions other than the
above.
Customs duties exemptions
Certain goods are exempt from customs duty as provided
in the Customs Act. Customs duty and VAT exemptions also
apply to goods imported into designated bonded areas as
highlighted in “Value Added Tax” section.
Declaration
The duty payer must declare the imported goods to the
Customs within 15 days following the arrival date of the
transportation carrier on which the goods were carried.
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COMMODITY TAX
General overview
Commodity tax (excise duty) is levied under the Commodity
Tax Act on goods listed in the Act when manufactured
domestically or imported from abroad. The taxpayers are as
follows:
• manufacturer of commodities produced domestically;
• manufacturer of commodities manufactured under a
consignment contract; or
• importer of commodities.
The taxable value of a taxable commodity includes related
packing costs. The taxable base for imported commodities istheir customs duty paying value plus import duty and dues.
For domestically produced commodities, the taxable value
is the manufacturer’s selling price less the commodity tax
included in the price.
Taxable commodities include rubber tires, cement, beverages,
flat glass, oil and gas, electric appliances and vehicles.
Commodity tax exemptions
Commodity tax is exempt in the following circumstances:
• raw materials used for manufacturing other taxable
commodities.
• export goods.
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Commodity tax
• goods for exhibition but not for sale.
• goods supplied for troop morale.
• goods supplied directly for military use with the approval
of the Ministry of National Defence.
Filing and payment of taxes
The commodity tax is payable by the 15th of the next monthfor goods shipped from the factory in the current month.
Manufacturers should set up and keep accounting books,
documents of evidence and accounting records for accurate
calculation of the commodity tax. For imported taxable
commodities, the importer shall file with the Customs office,
and the commodity tax is collected by the Customs officetogether with customs duties.
Commodity tax rates
Type of commodity %
Rubber tyres (other than those for large buses and trucks) 15
Rubber tyres for large buses and trucks 10Non-alcoholic beverages (other than fruit and vegetable juices) 15
Fruit and vegetable juices 8
Cement (a)
Plate glass 10
Oil and gas (b)
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Commodity tax
Type of commodity %
Refrigerators 13
Electric ovens 15
Television sets (colour) 13
Air conditioners – controlled by centralised system 15
Air conditioners – powered by electricity 20
Dehumidifiers 15 (c) Videotape recorders 13
Phonographs 10 (d)
Tape recorders 10
Audio equipment combination sets 10
Cars with engines under 2000 c.c. 25
Cars with engines above 2000 c.c. 30
Motorcycles 17
Trucks 15
Notes:
(a) NT$280-600 per ton.
(b) NT$110–6,830 per kiloliter or NT$690 per ton depending on the oil or gastype.
(c) Dehumidifiers used in factories are exempt from commodity tax.
(d) Portable phonographs less than 32cm are exempt from commodity tax.
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PwC in Taiwan
PwC Taiwan, with the largest tax practice in Taiwan, hasbeen well-regarded as a leading tax and legal firm in Taiwan.
We have received various awards and recognition, including
International Tax Review’s Awards for Taiwan Transfer Pricing
Firm of the Year (2008) and Taiwan Tax Firm of the Year
(2009 and 2010). Blending our skills of tax specialists with
our associate law firm, PwC Legal, PwC Taiwan is able to actas a one-stop service provider offering comprehensive tax and
legal services.
Our industry specialization enables us to identify trends and
customise solutions for your sector of interest. Each line of
service is staffed with qualified experienced professionals and
leaders in our profession. These resources, combined with ourstrong global network of member firms, allow us to provide
the support you need in Taiwan and other foreign countries.
7 offices in Taiwan
2,400 people
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PwC in Taiwan
Our services include the following:
• International tax consultation and planning services
• Merger & acquisition services
• Global transfer pricing services
• Financial industry tax consultation services
• China investment and tax consultation services
• Domestic tax consultation and planning services
• International assignment solutions
• Personal tax services
• Shareholder equity and investment services
• Tax and business litigation services
• General accounting and relevant outsourcing services
• Corporate income tax and VAT compliance services
• IP legal and tax consulting services
• U.S. tax services
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PwC Taiwan offices
Contacts for enquiries:
Name Title E-mail Address
Corporate Income Tax / Other Tax
Elliot Liao Partner [email protected]
Rosamund Fan Director [email protected]
Taipei
27F, 333 Keelung Rd., Sec. 1Taipei, Taiwan 11012
Tel: +886 2 2729 6666
Fax: +886 2 2757 6371
Chungli
22F-1, 400 Huanbei Rd.
Chungli, Taiwan 32070
Tel: +886 3 422 5000
Fax: +886 3 422 4599
Hsinchu
5F, 2 Industry East 3 Rd.
Hsinchu Science Park
Hsinchu, Taiwan 30075
Tel: +886 3 578 0205
Fax: +886 3 577 7985
PwC Legal, Hsinchu Office
E-1, 1 Lising 1st Rd.
Hsinchu, Taiwan 30078
Tel: +886 3 500 7077
Fax: +886 577 3308
Taichung
31F, 345 Taichung Port Rd., Sec. 1Taichung, Taiwan 40309
Tel: +886 4 2328 4868
Fax: +886 4 2328 4858
Tainan
12F, 395 Linsen Rd., Sec. 1
Tainan, Taiwan 70151
Tel: +886 6 234 3111
Fax: +886 6 275 2598
Southern Taiwan Science Park
Room 2C, 2F-1, 17 Nan-ke 3rd Rd.
Tainan, Taiwan 74147
Tel: +886 6 234 3111
Fax: +886 6 505 0808
Kaohsiung
22F, 95 Minzu 2nd Rd.
Kaohsiung, Taiwan 80048
Tel: +886 7 237 3116
Fax: +886 7 236 5631
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Name Title E-mail Address
Worldtrade Management Services
Yishian Lin Partner [email protected]
Jay Lin Senior Manager [email protected]
International Assignment ServicesLucy Ho Partner [email protected]
Susan Teng Senior Manager [email protected]
Indirect Tax
Lily Hsu Partner [email protected]
Li-Li Chou Director [email protected]
Transfer Pricing
Wendy Chiu Partner [email protected]
Violet Lo Director [email protected]
Financial Services
Richard Watanabe Partner [email protected]
Kuan-Pin Chang Director [email protected]
M&A Tax
Elaine Hsieh Partner [email protected] Liu Senior Manager [email protected]
Legal Services
Eric Tsai Partner [email protected]
Ross Yang Partner [email protected]
China Tax
Elliot Liao Partner [email protected]
Patrick Tuan Senior Manager [email protected]
U.S. Tax
Wendy Chiu Partner [email protected]
Albert Chou Director [email protected]
Japanese Business Development
Richard Watanabe Partner [email protected]
Kenji Okuda Director [email protected] Business Development
Taewoo Kim Consultant [email protected]
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