Individual Online Sellers Should Apply for Taxation Registration

The threshold of individual online sellers who run online businesses for profit-making purpose, was based on the total “average” sales in the last six months. However, online shop transactions have become more frequent in recent years, the Taiwan Ministry of Finance issued an explanatory order at the end of January 2020, stating that the business tax threshold of online seller has been changed and based n the total sales of “each month”, i.e. sales of goods exceed NTD 80,000 or sales of labour services exceed NTD 40,000. Sellers should apply for taxation registration for their business, which is stricter than before.

According to the regulation (Order No. 10904512340) issued by The Taiwan Ministry of Finance on 31 January,2020, in considering with the fairness and online transaction practices, individuals who sell goods or labour through online for profit-making purpose, should apply for taxation registration with the Taiwan National Taxation Bureau when the business monthly total sales amount reaches the business tax threshold (NTD 80,000 for sales of goods and NTD40,000 for sales of labour), while no application is needed with sales amount below the threshold.

For example, A started selling clothes online from January 2020, and the monthly sales amount in January 2020 were NTD 60,000, which did not reach the threshold (the threshold: sales of goods were NTD 80,000). The sales from 1 February to 16 February 2020 are NTD 160,000, which has reached the threshold of business tax. Therefore, A should apply for taxation registration with the Taiwan National Taxation Bureau.

Situation that will not be fined: If A applies for taxation registration with the National Taxation Bureau before 31 March, 2020, or applies for taxation registration after the National Taxation Bureau finds out and notify before 31 March, 2020. Then A shall only be charged with the business tax from February 2020 until the date of taxation registration applied. No fine shall be imposed.

Situation that will be fined: If A does not apply for taxation registration after 31 March, 2020 and find out by the National Taxation Bureau on or after 1 April, 2020. Then A would be fined according to the sales amount from 1 February, 2020 until the date of taxation registration applied.

Fine / Penalty:

Those who fail to apply for taxation registration according to regulations: the maximum fine is NTD 30,000.
Business without applying for taxation registration according to regulations: on top of pursuing the tax payment, a fine of less than 5 times of the tax evasion and the business will be suspended.

In general, online transactions can be divided into three categories:

Sale of personal non-profit second-hand goods: individuals selling clothes and furniture used daily by the family are tax-free. Therefore, not all online transactions are taxable.
Selling goods online occasionally. If an individual sells goods online occasionally, e.g. selling self-made handicrafts online occasionally is considered as temporary trade income which shall be calculated at a net profit margin of 6% and included in the individual income tax.
Online transactions for profit-making purpose with purchase and sale: Individuals who run online businesses for profit-making purpose with purchase and sale shall declare and pay for tax. The are three levels of imposing tax (NTD 80,000 or NTD 200,000) according to the monthly sales.

The following table shows the impact on tax of online transactions:

	Threshold	Business Tax	Income Tax
Non Profit-making Purpose	Individuals selling clothes and furniture used daily by the family	No need for taxation registration	Tax-free
Non Profit-making Purpose	Selling goods online occasionally (e.g. selling self-made handicrafts online occasionally)	No need for taxation registration	Considered as temporary trade income which shall be calculated at a net profit margin of 6% and included in the individual income tax.
Profit-making Purpose	Monthly sales of goods below NTD 80,000 (Monthly sales of labour below NTD 40,000)	No need for taxation registration	Calculated with Individual Income Tax. With accounting record：Yearly total income deducting related cost is considered as income amount. Without accounting record: ：income calculated with Audit by Reviewing Declaration on Tax Returns Expanding to the Cases Qualified for the Standards Issued by the MOF on yearly total income.
	Monthly sales of goods between NTD 80,000 – NTD 200,000 (Monthly sales of labour between NTD 40,000 – NTD 200,000)	Registration：Taxation registration according to the individuals’ household Tax Rate： 1% Declaration：The National Taxation Bureau will issue tax bill for it.	Calculated with Individual Income Tax. With accounting record：Yearly total income deducting related cost is considered as income amount. Without accounting record: ：income calculated with Audit by Reviewing Declaration on Tax Returns Expanding to the Cases Qualified for the Standards Issued by the MOF on yearly total income.
	Monthly sales of goods or labour over NTD 200,000	Registration：Taxation registration according to the individuals’ household Tax Rate： 5%; issue unified receipt according to law Declaration：declare for business tax every 2 months	The declaration of income tax may varies from the business model. Company: Corporate Tax 20%. Sole/ Partnership: calculated with individual income tax of pre-tax profit and loss.