|Foreign enterprise selling electronic services across borders can apply to the tax collection authority for a refund of tax overpaid|
National Taxation Bureau of Taipei, Ministry of Finance (NTBT) expressed that due to the rapid development of internet and increasing the electronic commerce, if foreign enterprises with no fixed place of business or business agent within Taiwan, but deriving Taiwan source revenue from selling electronic services to domestic business buyers, the domestic business buyers within Taiwan shall withhold the taxes from each gross payment to foreign enterprises and pay the taxes to the tax authorities in accordance with Article 88 and 92 of Income Tax Act.
NTBT pointed out, starting from calendar year 2017, foreign enterprise derived Taiwan source revenue from selling electronic services to domestic business buyers, whose revenue has been withheld 20% withholding tax by gross revenue at the date of payment, the foreign enterprise also may, or engage agent to, apply approved to re-calculated income by applicable profit ratio and the onshore profit contribution ratio within five years from the withholding tax payment date to the tax collection authority where the tax withholder is located for a refund of tax overpaid. The foreign enterprise or the agent shall complete the tax refund application form and attach invoice(s), document(s) of income calculation, the withholding tax statement(s). If the application is made by an agent, the original letter of authority is needed.
NTBT gave an example, a foreign enterprise (which called company A) obtained the income of NT$100,000 from a domestic enterprise (which called company B) for its cross-border electronic service in 2017 and had been withheld NT$20,000 by 20% withholding rate. Here after, in February 2018, company A applied for and approved to re-calculated income by applicable profit ratio 30% and the onshore profit contribution ratio 100% starting from January 2017, so the withholding tax became NT$6,000 (100,000*30%*100%*20%). Therefore, Company A engaged an agent to apply for a refund of overpaid taxes of NT$14,000 (20,000-6,000). Within 3 years from Jan. 2017, the withholder of company B can calculate the withholding tax by applicable profit ratio 30% and withholding rate 20%.
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