Companies registered in Taiwan, as well as those that are not registered in this country, but sell goods on the Taiwanese market have to register for VAT purposes in this country. In the case of those opening a company in Taiwan that must be registered for VAT, there is no statutory threshold at which the registration is compulsory. The steps for VAT registration in Taiwan have to be completed during the incorporation formalities of the company.
In the case of foreign businesses selling goods on the internet to Taiwanese customers, the registration procedure is mandatory once the company’s sales have reached a yearly value of TWD 480,000. This regulation became applicable starting with 1st of May 2017 and our team of consultants in company formation in Taiwan can assist with more information on the requirements available on Taiwan VAT for foreign enterprises.
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When should a company register for VAT in Taiwan?
The obligation to register for the Taiwan sales tax is required in the case of specific types of operations. When referring to domestic companies, the registration is mandatory if they supply goods on the Taiwanese territory (this also includes the sale of real estate properties) or when they supply services on the local market. The regulation on Taiwan VAT is also imposed to businesses which deal with the import of goods into this country.
The steps for VAT registration in Taiwan have to be completed with the Ministry of Finance; there is a difference between the requirements available for local businesses and the ones that are registered elsewhere. In the case of locally incorporated companies, the procedure for applying for a VAT number is straightforward, but in the case of those that are registered elsewhere and develop commercial activities in Taiwan, the procedure for obtaining a VAT number is very restrictive.
The only exemption from this rule is available for foreign entities selling goods on the internet. As a foreign business charged with the VAT in Taiwan, it is also mandatory to appoint a fiscal representative. The requirement must also be met by foreign companies operating in the e-commerce sector in Taiwan.
What is the Taiwan sales tax?
The sales tax in Taiwan represents a business tax that was introduced in this country starting with 1931. The Taiwanese tax system distinguishes between the value added tax (VAT) and the gross business receipt tax, which represents a form of VAT applicable only to specific industries. Our team of consultants in company registration in Taiwan can present more details on the following:
- the standard VAT rate in Taiwan is imposed at 5% for most of the goods and services sold on the local market;
- there is a tax of 0% charged for the export of goods, international transportation, basic foodstuffs and the sale of land;
- the agricultural sector in Taiwan is charged with a gross business receipt tax (GBRT), applicable at a rate of 0.1%;
- a GBRT charged at a rate of 1% is available for small companies and reinsurance premiums;
- financial services in Taiwan are imposed with a GBRT applicable at a rate of 5%;
- entertainment services in Taiwan are charged with a GBRT of 15%.
What is the VAT registration procedure for foreign businesses in Taiwan?
Once a foreign company becomes liable for the payment of the VAT (when it reaches the above mentioned threshold), it must conduct the necessary steps for VAT registration in Taiwan. Foreign e-commerce operators should prepare a set of information regarding their company and business activities, such as: the company’s name, the name of the responsible person, the description of the business activity, the information regarding the tax agent and the company’s registration documents issued in the country of origin.
Those who are legally required to register for VAT in Taiwan must know that if they fail to meet the necessary steps or if they do not take the measures imposed by the local authorities, penalties will apply. The penalty can range from TWD 3,000 to TWD 30,000, as per the stipulations of the VAT Regulations, Article 45. Our team of specialists in company formation in Taiwan can present at length the main rules of law addressed to VAT registration in this country.
Once the company is registered for VAT, it must comply with the accounting requirements available here. For example, a liable company has to file VAT returns on a bi-monthly basis. It must also issue invoices to its clients in Taiwan following the national tax regulations.
For this purpose, an invoice should include the following elements: the company’s name and address, the company’s VAT number, the date at which the invoice was issued, the name and the address of the buyer, the buyer’s VAT number, the VAT that will be charged and the rate at which the Taiwan VAT is charged for the respective products or services, the currency in which the transaction is made and the total amount due.
The company can apply for a VAT number in Taiwan through the Ministry of Finance, by completing the Amendment of Registration Form and the Business Entry Registration. As we mentioned here, the VAT registration is mandatory and the company has to pay VAT if the annual threshold of the company is above NTD 480,000.
Provided that the company does meet this requirement, it will pay the tax accordingly, but in the situation in which its yearly sales will drop under this value, the businesses registered with the Ministry of Finance will be deregistered from the system in a period of six months. If the company in Taiwan is a VAT payer, it will be issued with a VAT number that has to be included in all its invoices. The standard VAT number in Taiwan is comprised of 8 digits.
What information should a Taiwanese invoice contain?
The Taiwanese invoice is one of the numerous accounting documents that have to be completed and maintained by businesses operating here. Based on this document, the company will know the amount of VAT that it needs to pay for each sale it registered. The invoice is a standard form and it has to contain a set of basic information.
Thus, an invoice should contain the name of the business and the business address, the company’s VAT number, the date at which the invoice is issued, the description of the goods that are sold, the VAT rate applicable to them and the total amount of VAT that results from the respective transaction. In this sense, it is necessary to know that the standard invoice follows the Government Uniform Invoice model.
Is there a VAT exemption in Taiwan?
Yes, companies in Taiwan can benefit from a VAT exemption in certain situations. This means that those who will open a company in Taiwan that develops specific activities will not be required to pay for VAT as long as they develop any of the activities below (still, if the company carries multiple activities and some of them require the payment of the VAT, the company will still have to register and pay VAT); the activities below are taxed at a 0% VAT rate:
- goods subjected to export are exempted from the VAT;
- the same applies for a certain category of goods that are sold in duty-free shops;
- services that are developed for export purposes are exempt from VAT;
- the same applies to international transportation, but with certain limitations;
- the maintenance services for vessels used for international transportation and deep-sea fishing are also exempt from VAT.
An exemption from VAT registration and VAT payment is applicable for the following types of activities: specific medical services (not all are exempt), specific social welfare services, certain educational services, certain educational publications, the goods and services sold by students to the local consumer market, the water supplied for irrigation purposes; for more information on other types of services and goods that can benefit from a full VAT exemption, you can address to our team of consultants in Taiwan company formation.
VAT refunds in Taiwan
Businessmen who will set up a company in Taiwan and who will become liable to the payment of the VAT must know that the applicable accounting law provides the right to obtain a VAT refund in specific situations. As a general rule, the VAT refund procedure can be completed in a period of 2 months.
Please mind that in the case in which the business is closed down, the company can be entitled to VAT returns, but in this case, the process can take much longer, as more complex procedures will have to be completed. VAT refunds for foreign companies are not applicable under the Taiwanese laws – this should be a matter of concern for foreign companies that are not registered here and that sell goods and services on the local market.
The VAT refund for a foreign company can apply only in few situations prescribed by the law, such as those related to temporary activities in Taiwan – participating in exhibitions, trainings, concluding a market inspection and other short-term basis operations. Still, even in this case, certain requirements have to be met and you can find out more on this subject from our team of specialists in company formation in Taiwan.
You can address to our specialists if you need advice on other taxes that are charged in this country, such as the stamp duty, the commodity tax, the tobacco tax, the special goods and services tax, and other indirect taxes that can apply to local and foreign businesses. Those interested in the registration procedure can contact our team of specialists in company registration in Taiwan for more details.