Viewpoints from Kaizen

Attention to the List Price for Taxable Goods or Services in Taiwan   Business models and styles have been more diversified nowadays. No matter the business is run online or in physical stores, the list price of taxable goods or services should include business tax in it. However, some online stores claim that they do not include business tax in the list price and require an additional 5% business tax charge to their clients, which lead to consumption disputes.   Taiwan National Taxation Bureau indicates that business tax is a kind of consumption tax. When a company is selling taxable goods or services, it should include the consumption tax in the selling price and collect it from the consumers. Therefore, according to the Value-added and Non-value-added Business Tax Act Article 32 Paragraph 2 and 3, the list price for taxable goods or services should include business tax. In other words, […]

The Impact of Taiwan Civil Code New Amendment on Taxation   According to Taiwan Civil Code, the age of majority has been lowered to 18 years old. The Taiwan Executive Yuen also amended the regulations of tax allowance in the Income Tax Act and the Estate and Gift Tax Act accordingly.   In terms of income tax, what is affected is the dependent support regulations. According to the previous version, the taxpayer’s children who are under 20 years old or over 20 years old but are still in school, physically or mentally disabled or unable to earn a living can be filed as dependent support by their family, which would increase the tax allowance for the declaring household. After the Civil Code is amended, the tax act no longer defines the age of the children being supported, instead it follows the Civil Code to examine if the target is an […]

Taiwan Increase on 2021 Withholding Amount Threshold   Starting from 1 January, 2021, Taiwan basic monthly salary has been adjusted to NT$24,000. When a tax withholder pays wages to individuals living outside Taiwan (referred to non-residents), the withholding rate for calculation is adjusted accordingly. In 2020, monthly salary below NT$35,700 is subject to a 6% withholding rate, while exceeding NT$35,700 is subject to 18%. In 2021, the cut-off point would be increased to NT$36,000.   Who is considered as non-resident? Taiwan Income Tax Act Article 7 stipulates the definition of resident: 1. Those who have a residence in Taiwan and often live in Taiwan. 2. Those who do not have a residence in Taiwan but stay in the country for a total of 183 days during a tax year. A person who does not meet the above definition of a resident is considered as a non-resident. Non-resident s are mostly […]

Taiwan Company should Declares Correct Income   Many companies thought that underreporting the income of the company will not have a penalty as they do not generate taxable income. Actually, according to the regulation of Income Tax Act, where a profit-seeking enterprise, due to tax exemption provided under the incentive statute or because of the business deficit, shall not have a taxable income even though the amount of income omitted or under-reported is added to it, a fine shall be imposed separately at prescribed times according to the preceding two paragraphs on the taxable omission and under-reporting of income calculated at the profit-seeking enterprise income tax rate applicable in the current year. The amount of the fine, however, shall not exceed TWD 90,000 or be less than TWD 4,500.   For example, Company A file a profit-seeking enterprise income tax return for the year 2018, the loss of the company […]

Provisions on Taiwan Branch Sharing Headquarter Expenses According to the “Regulations Governing Assessment of Profit-Seeking Enterprise Income Tax” Article 70, when a foreign company Taiwan branch is filling tax, it can apportion the management expenses of its headquarter. However, there are two constrains which have to be aware of: Firstly, the apportionment party is designated to the headquarter or regional headquarter, etc., and limited to non-operating departments only; Secondly, expenses listed as purchasing cost or fund interest, etc., should not be file as apportionment repeatedly.   If a Taiwan branch files an apportionment of management expenses, the target party must be its foreign headquarter, or the regional headquarter which is responsible for managing the branch. Another restriction is mainly focus on operating department. When a headquarter or regional headquarter intent to apportion the management expenses to its branch, it is assumed that its administrative department (non-operating department) does not involve […]

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 […]

Documents Required for Taiwan Companies Reporting Overseas Investment Loss   According to the Regulations Governing Assessment of Profit-Seeking Enterprise Income Tax Article 99 Subparagraph 2 “Investment loss should provide prove on capital reduction to cover losses, merger and acquisition, bankruptcy or liquidation. However, if the invested business located in a foreign country and did not participate in any actual operating activities, company should provide related documents on the business, which engaged in actual operating activities and caused losses to the invested enterprise due to business losses, that the enterprise shifted its investment to. The mentioned documents should be verified or certified by Taiwan Embassy, Commercial Representative Office or Foreign Trade Organization. For those in Mainland China, documents should be verified or certified by the organization managing issues on people’s relations between Taiwan and Mainland China, which was appointed by the Mainland Affairs Council ROC (Taiwan) of Executive Yuen.”   For […]

Common Mistakes of Foreign Company Applying Taiwan Income Tax Act Article 25 According to the profit margin stipulated in Taiwan Income Tax Act Article 25, simplifying the calculation of part of the contract costs is one of the services that many foreign companies often apply for when they run their business in Taiwan.   There are four types of applicable scope of business, including (1) operating international transportation, (2) contracting construction projects, (3) providing technical services, (4) leasing machinery and equipment, in Taiwan. If there are difficulties in dividing the cost of the above mentioned 4 types, with the approval from Taiwan Ministry of Finance, foreign company operating international transportation can calculate its income within Taiwan at 10%. For the other 3 types, income is calculated at 15%. So, the withheld income tax rate has been reduced from 20% to 3% (i.e. 20%*15% = 3%).   Taiwan National Taxation Bureau […]