Taiwan Deferral of Provisional CIT and Introduction of Business Tax & VAT

2021-01-20 16:49
Deferral of Provisional Corporate Income Tax

Announced by Taiwan Ministry of Finance in end of July 2020, any Taiwan entity’s business is severely affected by COVID-19, the interim 2020 provisional corporate income tax can be deferred and paid later when doing the annual filing. Entities must meet one of following two conditions and file an application to local tax office:

•Industries have recognized and eligible as set out in the COVID-19 Relief Act; or
•Operating income decreased over a short period of time

To meet the second condition above, the average turnover of any two consecutive months in 2020 must be 15% lower than the average turnover of six months prior to December 2019 or the same period in 2019.

Business Tax(BT)
1. Introduction of BT
Business tax is imposed under two systems in Taiwan: the VAT system and the Non-VAT system.

2. Scope of Taxation
The sale of goods and the provision of services in Taiwan, as well as the import of goods into Taiwan, are subject to BT.
A sale of goods is defined as the transfer of goods to another entity for compensation in Taiwan.
A sale of services is the supply of services to others or the provision of goods for the use by others for consideration, with the exception of professional services offered by practitioners and services rendered by employees.

Value Added Tax(VAT)
1. Scope of Taxation
Except for entities subject to Non-VAT, all business entities fall within the scope of the VAT system. VAT is levied according to the value added to goods or services at each stage in the production and distribution chain.

2. Tax Rate
The VAT rate is 5%.

3. Applicable Zero-Rated Items
Business entities can apply for zero tax rate if they have any transactions which are qualified with the regulations, such as exporting goods. or services, selling products to a bonded free trade zone.

4. Non Value added Tax(Non VAT)
(1) Tax Payer and Tax Rate
The Non-VAT rate ranges from 0.1% to 25% as follows:
Non-VAT PayerNon-VAT Rate
Saloons and tea rooms, coffee shops and bars offering companionship services25%
Nightclubs or restaurants that provide entertainment shows15%
Financial institutions Qualified small businesses1~5%
Whole sellers and small entities for agricultural products1%
Saloons and tea rooms, coffee shops and bars offering companionship services0.1%
(2) Exemption Items
32 items are exempt from VAT; these include the sale of land and medical services, and pharmaceuticals provided by hospitals. When selling VAT-exempt goods or services, the seller does not collect VAT from the buyer and the seller will not be eligible for a credit on VAT paid on purchases relating to such goods or services. A seller can apply to the MOF to forfeit the VAT exemption if the exemption is unfavourable to the seller.

5. GUI(Government Uniform Invoice)
The GUI(Government Uniform Invoice) is a standard VAT invoice. In Taiwan, a VAT-system business entity selling goods or services must issue a GUI to a purchaser at the time of sale, delivery, or receipt of payment, as the case may be. The common types of GUI and their usage are as follows:
Type of GUIUsage
Triplicate GUIA VAT-system business entity supplies goods or services to another business entity(business-to-business)
Duplicate GUIA VAT-system business entity supplies goods or services to a non-business entity
Cash Register GUIA VAT-system business entity uses a cash register to record its sales of goods or services
Electronic GUIPertain to the uniform invoice issued, transmitted or obtained via the internet or by other electronic means when business entities selling goods or services to a purchaser; there shall be the retention media file, the receipt media file and the certification media file.

* Source: Ministry of Finance