Taiwan

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 […]

Attention to the Prescription on the Outstanding Accounts Payable for Taiwan Companies It is inevitable that accounts payable happens in businesses. The Taiwan National Taxation Bureau reminds that when companies declare for corporate income tax, it is important to pay attention to the prescription on various kinds of outstanding accounts payable, which can vary from 2 – 15 years. Furthermore, if a payment is unsettled upon prescription, it must be changed to other income in accounting in that current year.   When Taiwan companies file tax returns, many expenses will be listed as expenses in the year in which rights and responsibilities are incurred. But in fact, the payment has not yet been paid. Since the Civil Code Article 125 to 127 stipulates prescription for various payments, it continues to be delayed until the time limit of the creditor’s claim expires, in theory, the Taiwan company does not have to […]

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 foreigners, […]

Taiwan Business Tax and Profit-Seeking Enterprise Income Tax for the Cross-Border E-commerce   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 […]

Tax Saving Option for the Estate Tax in Taiwan   In this modern age, people live longer, a grandfather would like to distribute the property, his children are aged, and grandchildren are grown-up. When considerate of the tax saving of the property, between the “Generation-skipping Transfer Before Death” or “Children Abandon of Inheritance”, which way will be better?   All property of a decedent who was the Taiwan Citizen and resided in the Taiwan continuously shall be subject to estate tax of Estate and Gift Tax Act, no matter the estate is located within or outside the Taiwan. Property left by a decedent who was the Taiwan citizen but resided outside the Taiwan continuously or who was the non-Taiwan citizen shall be subject to estate tax for the estate that located within the Taiwan.   The taxpayers of the estate tax shall be: The executor appoint in the will, will […]

Guide to Taiwan Other Taxes Commodity Tax   (1)    Scope of Taxation   Commodities list in the “Commodity Tax Act”, whether manufactured domestically or imported from abroad shall be subject to commodity tax in accordance with this act except as otherwise provided by any other laws. The commodity tax levies depend on the type of goods, and the applicable tax rate or tax amount is also different (non-progressive tax rate).   (2)    Taxpayers   The Commodity Tax is levied when the taxable goods upon departure from a manufacturer’s premises or when the imported taxable goods completed the customs duties payment. The following table shows the scope of taxation and responsible taxpayers under the commodity tax:   Scope of Taxation and Taxpayers under Commodity Tax Scope of taxation Taxpayer Exception Commodities manufactured domestically Manufacturer   Commodities manufactured under consignment contract Consignee (i.e. manufacturer) If the consignor is a manufacturer of taxable […]

Guide to Taiwan Anti-Tax Avoidance Measures   Introduction   In view of many anti-tax avoidance measures have already been placed in the United States, EU countries and many other countries, Taiwan has set anti-tax avoidance measures such as transfer pricing and anti-thin-capitalization in accordance with international regulations. At the same time, the Income Tax Act regarding the addition of “controlled foreign companies” and “actual management offices” has also been passed, and the implementation date is yet to be announced.   Transfer Pricing   Taiwan referred to the transfer pricing guidelines and related measures of the OECD and the United States and European countries. Formulated and issued “Regulations Governing Assessment of Profit-Seeking Enterprise Income Tax on Non-Arm’s-Length Transfer Pricing” (hereinafter referred to as the “TPAS”) as the tax authority to investigate the result of transactions between the parties, whether there is an irregular basis.   (1)    Legal Basis   According to […]

Tax Differences Between Setting Up a Branch and a Subsidiary in Taiwan   For a foreign entity that is seeking to do business in Taiwan, a branch and a subsidiary are two commonly utilized methods. From an accounting perspective, a branch is equivalent to an extension of the parent organization and maintains its accounts jointly with the parent. The parent company is fully liable for the branch’s liabilities and legal claims. In comparison, a subsidiary is a separate corporate entity set up by the holding company. It maintains a separate set of books and its liabilities and legal claims cannot be passed on to the parent. When a foreign corporation expands its business in Taiwan, it usually involves in trading of common products, warehouse registration, manufacturing for domestic sale or export sale, or further invest in other business entities in exchange for shares.   Which is the most tax-efficient business […]