Business tax (BT) is imposed under two systems: the value-added tax (VAT) system and the non-value-added tax (Non-VAT) system.
Pursuant to the Value-added and Non-value-added Business Tax Act (Business Tax Act or BTA), 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. In addition, any of the following circumstances will be deemed a sale of goods for BT purposes:
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 individuals in employment.
Any of the following circumstances is an import of goods:
The following are BT taxpayers:
Introduction of uniform invoices
When a business entity which computes its business tax according to Section 1 of Chapter 4 of the Business Tax Act sells goods or services, it shall issue uniform invoices to the purchaser at the time stipulated in "The Table of the Time Limits for Issuing Documentary Evidence of Sales," and its list price for taxable goods or services shall be inclusive of the business tax. If the purchaser is a business entity, the business tax computed must be stated separately from the sales amount on the uniform invoice. If the purchaser is not a business entity, the business tax does not need to be itemized on the uniform invoice. The uniform invoice issued by a Non-VAT business entity has to state only the sales amount.
Types of uniform invoices
The types of uniform invoices and their usage are as follows:
| Type of uniform invoices | Usage |
|---|---|
| Triplicate uniform invoices | A VAT-system business entity supplies goods or services to another business entity (usually business-to-business) in accordance with Section 1, Chapter 4 of the Business Tax Act |
| Duplicate uniform invoices | A VAT-system business entity supplies goods or services to a non-business entity in accordance with Section 1, Chapter 4 of the Business Tax Act |
| Cash Register uniform invoices | A VAT-system business entity uses a cash register to record its sales of goods or services in accordance with Section 1, Chapter 4 of the Business Tax Act |
| Special uniform invoices | A special business tax system business entity supplies goods or services to buyers in accordance with Section 2, Chapter 4 of the Business Tax Act |
| Electronic uniform invoices | Pertain 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. |
Note: Financial institutions, special food and beverage services enterprises, small business entities, business entities operated and supplying services solely by persons with visual impairments engaging in massage in accordance with the laws, and other business entities which are exempted by the Ministry of Finance from filing sales amounts are subject to Non-VAT on the basis of their gross business receipts in accordance with Section 2, Chapter 4 of the Business Tax Act; other business entities are subject to VAT in accordance with Section 1, Chapter 4 of the Business Tax Act.
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 (see below for a sample calculation of VAT).
The current applicable VAT rate is 5%.
The following sales of goods and provision of services are zero-rated:
"Bonded zone" means a technology industrial park, a science park, an agricultural technology park, or a free-trade zone, approved by the government, or a bonded factory, bonded warehouse, or logistics center administered by Customs, or any other specially designated area approved for establishment by the competent authority in charge of the relevant industry and supervised by Customs.
"Bonded zone business entity" is an enterprise inside a technology industrial park, a science park, an agricultural technology park, or a free-trade zone that has been approved by the government, and also means a bonded factory, bonded warehouse, or logistics center administered by Customs, or an enterprise inside any other specially designated area approved for establishment by the competent authority in charge of the relevant industry and supervised by Customs. "Taxable zone business entity" is a business entity other than a bonded zone business entity.
Foreign enterprises, institutions, organizations, or associations that do not have a fixed place of business in Taiwan and that purchase goods or services for exhibitions or temporary business activities within a period of one year and on which the VAT is more than NTD 5,000 may qualify for a VAT refund on the goods or services. (However, in the case of the following conditions such goods or services shall not be applicable for tax refund: (i) where the documents of the goods or services purchased are not obtained or kept in the manner required, or (ii) where the input tax is not deductible in accordance with the Business Tax Act.)
The above institutions may qualify for VAT refund, provided reciprocal treatment or exemption from similar taxes is granted to the same institutions of Taiwan by the foreign country in which they are performing such activities.
The Ministry of Finance has issued regulations on issues such as calculation of the one-year period, the scope of exhibitions or temporary business activities, documentation requirements, the period in which to request a refund, etc.
The relevant information can be browsed and downloaded at the special zone “Exhibitors’ VAT Refund System” of the eTax Portal on the Ministry of Finance website (www.etax.nat.gov.tw).
The amount of overpaid VAT claimed by a business entity will be refunded after verification by the tax authorities when:
Overpaid VAT resulting from circumstances other than the above may be offset against future business tax payable. Business entities with special situations can request approval from the Ministry of Finance to receive tax refunds.
Example: ABC Company's operations in January and February 2024:
Analysis:
Of the NTD 17,000 overpaid VAT, NTD 10,000 (5% of fixed asset purchase) and NTD 5,000 (5% of export sales), totaling NTD 15,000 will be refunded. The remaining NTD 2,000 (NTD 17,000- NTD 15,000) can be used to offset the output VAT in the future.
Financial institutions, special food and beverage services enterprises, small business entities, business entities operated and supplying services solely by persons with visual impairments engaging in massage in accordance with the laws, and other business entities which are exempted by the Ministry of Finance from filing sales amounts are subject to Non-VAT on the basis of their gross business receipts. Since Non-VAT is not recoverable, it is an additional cost on purchases.
The Non-VAT rate ranges from 0.1% to 25% as follows:
| Non-VAT Payer | Non-VAT Rate | |
|---|---|---|
| Saloons and tea rooms, coffee shops and bars offering companionship services | 25% | |
| Nightclubs or restaurants that provide entertainment shows | 15% | |
| Enterprises engaged in banking, insurance, investment trust, securities, futures, commercial paper, and pawnshops | Non-core business(i.e., business not exclusive to the enterprises listed left) | 5% |
| Banking and insurance business | 5% | |
| Core business separate from banking and insurance business(i.e., business exclusive to the enterprises listed in the sub-column to the left and not related to the banking and insurance business) | 2% | |
| Purchase of services sold by foreign enterprises listed in the sub-column to the left which have no fixed place of business within the territory of the R.O.C. and such services are categorized as the non-core business of those enterprises | 5% | |
| Purchase of services sold by foreign banking and insurance enterprises which have no fixed place of business within the territory of the R.O.C. and such services are categorized as the banking and insurance business | 5% | |
| Purchase of services sold by foreign enterprises listed in the sub-column to the left which have no fixed place of business within the territory of the R.O.C. and such services are categorized as the core business separate from banking and insurance business exclusive to those enterprises | 2% | |
| Reinsurance premiums of insurance enterprises | 1% | |
| Small business entities, business entities operated and supplying services solely by persons with visual impairments engaging in massage in accordance with the laws, and other business entities which are exempted by the Ministry of Finance from filing sales amounts | 1% | |
| Consignees in agricultural wholesale markets and small business entities that sell agricultural products | 0.1% | |
Thirty-two 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 deduction on VAT paid on purchases relating to such goods or services.
A seller can apply to the Ministry of Finance to forfeit the VAT exemption if the exemption is unfavorable to the seller. Once the application is approved by the Ministry of Finance, no change will be allowed for three years.
VAT returns must be filed bimonthly before the 15th day of the following period and tax due must be paid at that time. The VAT filing date is the 15th day of every odd month; e.g. a VAT return for January and February must be filed and VAT paid before March 15.
Business entities that qualify for the 0% VAT rate may apply to the tax office to file the VAT return on a monthly basis. Once approved to file a monthly tax return, the business entity cannot request approval to change the filing period for one year.
Non-VAT returns must be filed bimonthly. The Non-VAT payable, if any, must be paid to the government treasury in advance (i.e., before the Non-VAT return is filed), and the taxpayer must attach the receipt for payment of the tax to the tax return. For small business entities and other business entities exempted by the Ministry of Finance, the taxpayer must pay the Non-VAT every three months according to the tax payment voucher issued by the tax authorities.
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