Taipei GMT
EY
9/F, 333 Keelung Road, Sec. 1 Taipei 11012
Taiwan
Indirect tax contacts
Vivian Wu
+886 (2) 2757-8888, Ext. 88833 vivian.wu@tw.ey.com
Olivia Li +886 (2) 2757-8888, Ext. 67105 olivia.yh.li@tw.ey.com
Julia Chien +886 (2) 2757-8888, Ext. 67176 julia.chien@tw.ey.com
A. At a glance
Name of the tax
Value-added tax (VAT) and gross business receipts tax (GBRT)
Local name Value-added and non-value-added business tax
Date introduced 13 June 1931 (revised June 2017)
Trading bloc membership Asia-Pacific Economic Cooperation (APEC)
Administered by Taiwan Ministry of Finance (MOF) (https://www.etax.nat.gov.tw/)
Rates
VAT 5%, zero-rated (0%) and exempt GBRT 0.1% to 25%
VAT number format 10001111 (eight digits)
VAT return periods Bimonthly Thresholds
Registration None
Recovery of VAT by non-established businesses Yes (only for VAT registered e-commerce businesses)
B. Scope of the taxes
Taiwan imposes business tax, which consists of VAT and GBRT.
Business tax applies to the following:
• Sale of goods in Taiwan. A transaction involving goods is a transfer of ownership of goods to others for consideration. This is not limited to goods exchanged for money. The exchange of goods for other goods is also included.
• Sale of services in Taiwan. A transaction involving services is the rendering of services to oth ers or supplying goods for the use of others for consideration.
• Import of goods into Taiwan by individuals or businesses.
Taxable persons may be subject to both VAT and GBRT. For example, a bank may be subject to VAT on its rental sales and GBRT on its interest income.
In general, both VAT and GBRT liabilities are based on the sales amount, which includes all of the consideration received from sales of goods and services and expense reimbursements.
C. Who is liable
The following persons are considered taxable persons for business tax purposes:
• Taxable persons that supply goods or services
• Consignees or holders of imported goods
• Purchasers of services supplied by non-established businesses that have no fixed place of business in Taiwan. However, if a taxable person purchasing services is solely engaged in the operation of goods or services that are subject to VAT in Taiwan (i.e., a fully taxable business and is entitled to fully recover input tax), the taxable person is not subject to business tax on its purchases of services supplied by a non-established business.
• Foreign taxable persons with no fixed place of business in Taiwan, that meet the threshold of annual sales of digital services to individual buyers in Taiwan (business-to-consumer (B2C) supply of digital services)
Exemption from registration. Taxable persons engaged solely in the business of the sale of exempt goods or services (as outlined below) and government entities of all levels may be exempted from applying for taxation registration.
The following goods or services may be exempted from applying for taxation registration:
• The water supplied to farmland for irrigation
• The medical services, medicine, ward lodging and meals provided by hospitals, clinics and sanitariums
• The social welfare services provided by social welfare organizations or institutions or labor organizations, duly established with permission of the competent authority and social welfare services consigned by the government
• The education services offered by schools, kindergartens and other educational and cultural institutions, including cultural services offered under government’s consignment
• The goods or services sold by student-run shops of vocational schools that do not serve outsid ers
• The proceeds from goods sold in tenders, charity sales and charity shows held by charity and relief institutions organized according to the law, provided that the total proceeds are solely used by said institutions after deducting the necessary expenditures for the tenders, charity sales and charity shows
• The goods or services sold by employee welfare organizations of government bodies, state enterprises and social organizations that are organized and operated under relevant laws and are not open to the public
• The goods or services sold by prison workshops and their finished goods stores
• Services rendered by post and telecommunication offices in accordance with the law; and busi ness consigned under government mandate
• The service of consigned sale of stamp tax tickets and postage stamps
• The goods or services sold by peddlers or hawkers
• Feed and unprocessed raw agricultural, forestry, fishing and livestock products and by-prod ucts; the agricultural, forestry, fishing and livestock products, and by-products of farmers’ and fishermen’s harvests sold by farmers and fishermen
• The fish caught and sold by fishermen
• The research services supplied by scientific or technological institutions that are established under the approval of the government
• The government at all levels
Voluntary registration and small businesses. The VAT law in Taiwan does not contain any provision for voluntary registration, nor special VAT registration rules for small businesses.
Group registration. Group VAT registration is not allowed in Taiwan.
Non-established businesses. A “non-established business” is a business that does not have a fixed place of business in Taiwan. A non-established business must register for VAT only if it sells cross-border electronic services to Taiwan domestic individuals and its annual sales exceeds NTD480,000. This kind of non-established business is called a “foreign e-commerce operator.” Foreign e-commerce operators can only register for VAT via the eTax portal, which is an elec tronic platform established by the Ministry of Finance, and either by itself or by an appointed tax agent (see the subsections Digital economy and Registration procedures below for further details)
Business tax also applies to the following taxable supplies made by nonresidents:
• Taxable sales of goods in which non-established businesses consign goods to Taiwanese entities, that sell the consigned goods on behalf of the foreign non-established businesses. A con signment agreement shall be in place in order to carry out the consignment of goods
• Taxable sales of services by foreign entities that have no fixed place of business in Taiwan to Taiwanese entities described in the third bullet in Taxable persons
• Taxable sales of digital services by foreign entities with no fixed place of business in Taiwan to Taiwanese individual buyers
The business tax rate is 2% for the purchase of core business-related services from foreign finan cial institutions that do not have a fixed place of business in Taiwan. For purchases of other services, the business tax rate is the standard rate of 5%.
However, public and private schools at any level or educational or research institutions that pur chased services provided by foreign enterprises, institutions, groups or organizations that have no fixed place of business within the territory of Taiwan, for educational, research or experimen tal purposes are not required to pay business tax.
Tax representatives. Tax representatives are not required in Taiwan. However, filing agents or tax agents are allowed. A filing agent can file the tax returns on behalf of the appointor. Whereas a tax agent can file the tax return and pay the tax on behalf of the appointor; in practice, only filing agents are allowed.
Reverse charge. A non-established business is not required to register for VAT in Taiwan, except for the non-established businesses that import goods into Taiwan. In this regard, for the importa tion of goods, the VAT will be borne by the importer, generally the domestic purchaser (i.e., via the reverse-charge mechanism).
For the purchase of services supplied by non-established businesses that have no fixed place of business in Taiwan, they will be subject to reverse-charge mechanism. However, if a taxable person purchasing services is solely engaged in the operation of goods or services that are subject to VAT in Taiwan (i.e., a fully taxable business and is entitled to fully recover input tax), the business entity is not subject to business tax on its purchases of services supplied by a foreign entity.
In addition, for non-established businesses making e-commerce supplies who have no fixed place of business in Taiwan and sell e-commerce services to Taiwanese individuals, they may need to register for the VAT purpose in Taiwan (refer to the Digital economy subsection below).
Domestic reverse charge. There are no domestic reverse charges in Taiwan.
Digital economy. Non-established businesses providing e-commerce services to Taiwanese indi vidual purchasers (B2C) and that have annual sales that exceed TWD480,000 must register for business (meaning business purpose, as non-established businesses are required to register for
this) and pay VAT directly or indirectly through appointment of a tax-filing agent. For further detail, see the subsection Non-established businesses above.
Where a non-established business sells physical goods to a Taiwanese customer via a digital platform or the internet, the non-established business is not required to register for business, and the VAT on digital supplies of goods would be imposed on the importer of record upon importation via the reverse-charge mechanism. For further detail, see the subsection Reverse charge above).
Online marketplaces and platforms. If a non-established business e-commerce operator renders digital platform services to local individuals, the non-established business e-commerce operator may need to register for VAT in Taiwan (see the Digital economy subsection above).
Registration procedures. Applications for business tax registration must be filed to the tax authority in paper or online after the completion of company registration but before commencement of operation in Taiwan. The following documentation must be submitted together with the applica tion:
• A photocopy of the national ID card, a photocopy of household registry or any other valid evidentiary documentation for the responsible person
• When the entity is a company, the company’s articles of incorporation
• When the entity is a partnership, a copy of the partnership agreement; if any of the partners is a minor, a document evidencing the approval of the minor’s legal agent shall also be submitted, but it is not required for a married minor
• When the entity is a limited partnership, a limited partnership agreement and the written consent of general partners for the elected representative; if any of the partners is a minor, a docu ment evidencing the approval of the minor’s legal agent shall also be submitted, but it is not required for a married minor
• In the case of other incorporations, a photocopy of the license for the incorporation’s establishment issued by the competent authority and the articles of incorporation
• When the responsible person at a branch unit is different from that of the head office, the letter of authorization shall also be submitted
• In the case of the selling of goods or services via automatic vending machines, the detailed information of the serial numbers of the automatic vending machines, the place of location and the total number of machines shall also be submitted
In principle, the business tax registration process is done automatically by a local tax administra tion office of the national tax authority as soon as it receives the approved and filed basic infor mation related to the company’s registration, from the competent authority in charge of company registration. However, the company may need to submit additional documents if formally requested by a local tax administration office of the national tax authority.
Foreign enterprises, institutions, groups or organizations, without a fixed place of establishment, providing e-commerce services to Taiwanese individuals are now required to register with Taiwan’s tax authority. Foreign e-commerce operators will be assigned a taxable person ID num ber that should be used when filing bimonthly VAT returns. The registration and VAT return filing obligations are required if the annual e-commerce sales revenue exceeds TWD480,000 (approx. USD16,000). If the sales revenues are in currencies other than TWD, the amount should be converted to TWD at a buying exchange rate announced by the Bank of Taiwan on the last date of the bimonthly VAT filing.
The foreign e-commerce operator should apply for tax registration via the eTax portal (https:// www.etax.nat.gov.tw/etwmain/front/ETW118W/VIEW/1063?site=en) by itself or by an appointed agent.
A foreign e-commerce operator that applies for tax registration must submit the following docu mentation:
• Qualification documents evidencing that the foreign enterprise, institution, group or organiza tion has been approved for registration or establishment by the competent authority for the relevant industry of its home jurisdiction
• Notarization documents for the qualification documents in point 1 authenticating its taxation/ trade registration or establishment provided by a local government agency/court in its home country, or by the Taiwan embassy or representative office in its home jurisdiction
• When appointing a tax agent for VAT registration, the power of attorney should be provided
• All documents written in any kind of language other than Chinese shall be accompanied by the Chinese translation
Deregistration. If there is cessation of a business entity, an application for cancellation of registra tion must be filed with the competent tax authority within 15 days after the occurrence of such an event. An application by a taxable person, for cancellation of registration, may only take effect upon the payment in full of taxes or upon the provision of security.
Changes to VAT registration details. If there is any change to the details of a taxable person, such as name of company, address, type of business, legal representative, etc., an application for amendment to registration must be filed with the competent tax authority within 15 days after the occurrence of such an event. An application by a taxable person for amendment to registra tion may only take effect upon the payment in full of taxes or upon the provision of security provided. However, this requirement shall not apply in the case of application for amendment due to merger, consolidation, increase of capital or a change in business address or scope of business.
D. Rates
The term “taxable supplies” refers to supplies of goods and services that are liable to a rate of VAT, including the zero-rate.
The VAT rates are:
• Standard rate: 5%
• Zero-rate: 0%
The standard rate of VAT applies to all supplies of goods or services unless a specific measure provides for the zero-rate or an exemption. Exempt supplies apply to both VAT and GBRT. Zerorated supplies apply only to VAT.
The following are the GBRT rates:
• 0.1% for traders in the agricultural wholesale market and small businesses supplying agricul tural products
• 1% for small businesses and other taxable persons that are excluded by the MOF from reporting their transactions
• 1% for reinsurance premiums of insurance enterprises (5% for operations other than authorized core businesses)
• 2% or 5% on the sale of services by local financial institutions (for banking and insurance companies: generally, 5%, except for certain transaction types; for the other financial institutions: 2% on their core business revenue and 5% on their noncore business revenue)
• 2% or 5% on the purchase of services from foreign financial institutions
• 15% for nightclubs or restaurants providing entertainment
• 25% for saloons or tearooms, coffee shops and bars offering companionship (in nightclubs, customers can ask wait staff to sit aside, serve drinks, chat and sing karaoke)
Examples of goods and services taxable at 0%
• Export of goods
• Services related to exports
• Services rendered in Taiwan but used outside Taiwan
• Sales of goods or services to taxable persons in bonded areas for the buyers’ operations
The term “exempt supplies” refers to supplies of goods and services that are not liable to VAT and that do not qualify for input tax deduction.
Examples of exempt supplies of goods and services
• Certain essential and unprocessed foods
• Sale of lands
• Certain bonds and securities
• Sales of fixed assets that are not regularly traded by certain taxable persons subject to GBRT
Option to tax for exempt supplies. Taxable persons may opt to treat the above examples of exempt supplies of goods and services as taxable. A taxable person can apply to the Ministry of Finance to opt to treat an exempt supply as taxable. An application should be filled out with the Sales Analysis Table attached.
E. Time of supply
The following are the rules for the timing of VAT liabilities:
• Goods: at the earlier of the delivery of goods or payment of the proceeds
• Services: in general, on payment of the remuneration or when service is delivered
• Continuous supplies of services: in general, on payment of the remuneration
• For imported goods: on customs declaration
In general, liability for GBRT arises on receipt of payments.
Deposits and prepayments. There are no special time of supply rules in Taiwan for deposits and prepayments. As such, the general time of supply rules apply (as outlined above).
Continuous supplies of services. There are no special time of supply rules in Taiwan for supplies of continuous supplies of services. As such, the general time of supply rules apply (as outlined above).
Goods sent on approval for sale or return. For supplies of goods sent on approval for sale or return, the tax is due when the goods are sold. If the goods are returned to the seller, the seller should obtain the qualified documents (e.g., certificate of sales/purchases returns or allowances on merchandise sold) to reverse the entry and adjust the amount of tax payable.
Reverse-charge services. Except for digital services for B2C transactions, the reverse-charge mechanism applies to services rendered by a non-established business that does not have a fixed place of business in Taiwan. However, if a taxable person purchasing services is solely engaged in the operation of goods or services that are subject to VAT in Taiwan (i.e., a fully taxable busi ness and is entitled to fully recover input tax), the taxable person is not subject to business tax on its purchases of services supplied by a non-established business.
The purchaser of such services shall, prior to the 15th day of the period following the period in which the payment is made, compute and pay the tax due on the supply.
In addition, VAT on such goods shall be levied by Customs at the time of importation.
Leased assets. There are no special time of supply rules in Taiwan for supplies of leased assets. As such, the general time of supply rules apply (as outlined above).
Imported goods. For the supply of imported goods, the time of supply is the holder of imported goods is liable to pay the 5% VAT at customs, i.e., at the time of importation.
F. Recovery of VAT by taxable persons
Input tax is deductible only with respect to VAT and not recoverable for GBRT.
Input tax is deductible in the current and next filing periods. If a taxable person reports the input tax after the next filing period, the taxable person must provide the reasons in an attachment to the tax return.
The time limit for a taxable person to reclaim input tax in Taiwan is 10 years.
Nondeductible input tax. Input tax is not deductible if supporting documents with respect to pur chased goods or services are not obtained or maintained.
Examples of items for which input tax is nondeductible
• Goods or services that are not used in the principal or ancillary business operations of the purchaser. However, input tax on purchases made for national defense construction, troop morale and contributions to the government is deductible
• Goods or services for social relations purposes
• Goods or services provided to individual employees
• Passenger cars for personal use
Examples of items for which input tax is deductible (if related to a taxable business use)
• Any input tax derived from the goods or services that are used in the principal or ancillary business operations of the purchaser shall be deductible, except for the abovementioned non deductible input tax
Partial exemption. If a taxable person incurring VAT engages on a concurrent basis in the business of tax exempt goods or services or in the business applying GBRT, the taxable person is prohibited from deducting a certain part of the input tax from the output tax. The taxable person must classify its purchases and importation of goods and services into for use specifically in its taxable business and for use in its tax-exempt business or for common overhead use. Depending on whether or not the taxable person could clearly identify the purchase and importation of goods and services for use, the taxable person may choose to employ the proportional deduction method or the direct deduction method to calculate its VAT recovery percentage. Once the tax able person has decided to adopt the direct deduction method, this cannot be changed within three years following the date of adoption. The nondeductible ratio is subject to be computed according to the prescribed formula as below.
The nondeductible ratio is the following: The net sales amount of exempt sales + the net sales amount subject to business as financial industries (e.g., banking enterprise), small business (e.g., vendor), and special food and beverage services enterprises (e.g., night clubs) /the total net sales amount for each period.
The net sales amount must be the balance of the total sales amount deducting sales returns and discounts.
Approval from the tax authorities is not required to use the partial exemption standard method in Taiwan. The only methods allowed in Taiwan are the proportional deduction method or the direct deduction method.
Capital goods. In Taiwan, there are no special input tax recovery rules for capital goods. The normal rules outlined above apply. The business tax overpaid on fixed assets obtained could be refunded after verification by the competent tax authority.
Refunds. In general, overpaid tax may be offset against future business tax payable, and the excess input tax not credited against the output tax in the current VAT return shall be carried
over to the next period. The competent tax authority shall assess the VAT return and the applica tion for VAT overpaid refund within six months, starting the next day of the filing deadline.
Overpaid VAT (i.e., the input tax remaining after deducting it against the output tax) is refundable after verification by the relevant tax office if any of the following conditions are satisfied:
• The overpaid amount of VAT resulting from zero-rated sales
• The overpaid amount of VAT resulting from the acquisition of fixed assets
• The overpaid amount of VAT resulting from the cancellation of registration through a merger or consolidation, transfer of ownership, dissolution or cessation of business
• Other special circumstances approved by the MOF exist
Pre-registration costs. Input tax incurred on pre-registration costs in Taiwan is recoverable.
Bad debts. Output tax accounted for on supplies that do not get paid by the recipient (i.e., bad debts) cannot be recovered in Taiwan.
Noneconomic activities. Input tax incurred on purchases that are used for noneconomic activities is not recoverable in Taiwan.
G. Recovery of VAT by non-established businesses
A non-established business may qualify for a refund of VAT incurred on the purchases of goods and services with respect to its participation in an exhibition or its engagement in “temporary commercial events” in Taiwan if the following conditions are met:
• The input tax reaches a minimum of TWD5,000 in a year
• Reciprocal treatment is given by the other foreign jurisdiction under the same circumstances
For purposes of the above rule, “temporary commercial events” refer to activities including traveling, training, inspection, market research, procurement, organizing or attending international conferences, tender invitations, information exchanges, marketing seminars and other business activities approved by the MOF that are relevant to the core or ancillary business operations of the companies.
H. Invoicing
VAT invoices. Taxable persons selling goods or services must issue Government Uniform Invoices (GUIs) to purchasers.
GUIs are generally printed and sold by the government. However, qualified taxable persons can apply to print their own invoices. The MOF prescribes the forms, items to be recorded and the uses for the invoices.
The tax authority has regulated a new format of GUIs in the cloud (“eGUIs”), which are defined as electronic GUIs and issued by taxable persons to purchasers via the vehicles (i.e., email address) approved by the tax authority.
Credit notes. In Taiwan, in the case where the sales amount for the GUIs has been declared to reduce the output tax incurred from the sales return or allowances, a certificate of sales returns/ allowances issued by the purchaser is required; such a case, however, shall be limited to instanc es where the original GUI contains the name and uniform serial number of the purchaser.
Electronic invoicing. Electronic invoicing is allowed in Taiwan, but not mandatory. However, the Taiwanese government has been promoting the use of electronic invoicing since 2010. Taxable persons that wish to use e-invoices are required to register for an account (to access the official e-invoice platform) using the electronic certification or signature obtained via the e-invoice ser vice platform or a value-added service center.
Simplified VAT invoices. Simplified VAT invoicing is not allowed in Taiwan. As such, full VAT invoices are required.
Self-billing. Self-billing is allowed in Taiwan. It is only allowed for goods that are produced, imported or purchased by a taxable person, and are used by the taxable person itself or supplied for no consideration. These scenarios are only where the taxable person can issue GUIS to them selves in their own name.
Proof of exports. The following are examples of documentation that may be used to substantiate exports:
• Goods exported: a copy of the international parcel receipt issued by the postal service, except for goods exported through customs that are exempt from such documentation requirement
• For services rendered with respect to exports or services rendered in Taiwan but used outside of Taiwan: a copy of the foreign currency receipt
• For goods sold to entities located in bonded areas: document issued by customs proving that such sale is an export or a copy of the GUI certified by the bonded purchaser
A taxable person applying for a zero-business tax rate on goods or services, for services relating to export or services provided in Taiwan but used overseas must submit the following evidence:
• If the foreign exchange obtained has been settled for sale to or deposited into a bank desig nated by the Taiwan government, the documentary evidence of the foreign exchange sale or deposit issued by the designated foreign exchange bank
• If the foreign exchange obtained has not been sold and settled or deposited into a bank desig nated by the Taiwan government, a photocopy of the original receipt of the foreign exchange with the amount specified therein
Foreign currency invoices. GUIs must be issued in the domestic currency, New Taiwan dollar (TWD), with the exception of non-established e-commerce businesses. The foreign currency can be noted as a remark on the GUIs and there is no need to convert the sales amount in foreign currency to TWD on the GUIs.
Supplies to nontaxable persons. A VAT invoice is generally required for all sales of goods and/or services. However, there are special invoicing rules for non-established businesses providing e-commerce services to Taiwanese individuals (B2C).
The foreign e-commerce operators (“FECOs”) are required to issue eGUIs aforesaid. The tax authority announced that there will be no penalties (up to TWD1 million) imposed for FECOs not issuing cloud GUIs from 1 January 2019 to 31 December 2019. When issuing eGUIs, foreign e-commerce operators can use the business’ native language. The transaction date on the eGUI should be recorded in AD (i.e., Anno Domini, e.g., 1 January 2018). This is different for Taiwanese taxable persons, as they list the transaction date in local description method (i.e., 1 January 2018 would be listed as 1 January 107, which is the description method for the Taiwanese year) on the GUI. The unit price, the price and the total amount can be listed using the currency native to the business, but the business should indicate the currency used.
Records. VAT documentation that must be kept for record keeping purposes are as follows:
• Any original transaction receipt, such as GUIs and commercial invoices, issued to the customers or itself and received from the suppliers
• Debit and credit notes
• General ledger
• General journal
• When the business is in merchandising sector, an inventory account book is required
• When the business is in manufacturing sector, a raw material account book, a work-in-process account book, a finished good account book and daily production report are required
Correcting errors in previous returns. The correction of previous returns must be made by submit ting necessary documentation to the supervisory tax authority in paper. If there is VAT payable in excess of the previous calculated VAT payable after correction, the VAT payable in excess of the previous amount must be paid along with interests before submitting the correction to the supervisory tax authority.
The documentation below must be provided to the supervisory tax authority for correcting previ ous returns if the taxable person found errors in previous returns:
• The previous returns before correction
• The previous returns after correction
• The explanation for difference between the previous and the correct return, as well as the cal culation form
• Transaction document evidencing the correction made (e.g., commercial invoice, payment receipt, etc.)
• The VAT payment receipt for the VAT amount in excess of the previous amount (if any)
Digital tax administration. There are no transactional reporting requirements in Taiwan.
J. Penalties
Penalties for late registration. Taxable persons registering late for VAT are subject to the greater of the following penalties:
• Penalty of no less than TWD3,000 and no more than TWD30,000, which may be imposed repeatedly if the registration is not filed within the period prescribed by the tax authority
• Penalty of up to five times the amount of tax evaded
For deregistration, taxable persons failing to notify the supervisory tax authority about the cessation of their business would be subject to a penalty for no less than TWD1,500 and no more than TWD15,000. Failure to comply with the rules within the time limit may result in continuous punishment for each violation until compliance is met.
Penalties for late payment and filings. A taxable person that fails to file the sales amount or the detailed list of GUIs used within the prescribed time limit, may be liable to the following penal ties:
• If the filing is past due for less than 30 days, a surcharge for late filing equal to 1% of the tax payable may be imposed for every two days overdue. The surcharge may not be less than TWD1,200 and not more than TWD12,000.
• If the filing is past due in excess of 30 days, a surcharge for non-filing equal to 30% of the assessed tax payable may be imposed. The amount of this surcharge may not be less than TWD3,000 and not more than TWD30,000.
• If there is no tax payable, the surcharge for late filing or non-filing shall be TWD1,200 and TWD3,000, respectively
Penalties for errors. Under the Taiwan tax regime, there is a gray area between errors and fraud. Generally, whether or not a taxable person is intentional or unintentional to avoid its tax obligation is subject to the tax authorities’ discretion.
Whether the issue is deemed as an error or fraud is up to the tax authority’s discretion. Most penalties are categorized as fraud and not errors.
Whereas a taxable person voluntarily files a supplementary tax return and pays to cover the tax amount failed to pay in the original tax return before any informant’s reports or the tax authori ties’ assessments, the punishments imposed on such tax evasion could be exempted.
If a taxable person were found to have failed to issue GUIs or understated sales amount on GUIs before the statutory period for filing a tax return, in addition to paying the tax calculated on the
basis of the understated or omitted sales amount at the prescribed tax rate, the taxable person shall be fined no more than five times the amount of the tax evaded. But the fines shall not exceed TWD1 million.
Moreover, if a profit-seeking entity fails to provide or obtain GUIs to or from others or to keep GUIs as required by the law, upon the verification of the tax authority, a fine equivalent to 5% of the total amount of the relevant GUIs shall be imposed on such entity. But the fines shall not exceed TWD1 million.
Where an event simultaneously violates the penalty for behavior sanction and the penalty for VAT shortfall, the heavier penalty between the two shall be imposed.
Taxable persons failing to notify the supervisory tax authority about the modification of their registered information would be subject to a penalty of no less than TWD1,500 and no more than TWD15,000. Failure in compliance with the rules within the time limit may result in continuous punishment for each violation until compliance is met.
Penalties for fraud. A taxable person may be subject to a fine for tax evasion ranging up to five times of the amount of tax evaded and the closure of the business if any of the following circumstances exist:
• A business is conducted without an application for business registration being filed
• The sales amount or detailed list of GUIs used is not submitted and the amount of business tax due is not paid within 30 days after the prescribed deadline
• The sales amount is not reported or is underreported
• The business is conducted after applying for deregistration or after suspension of business by the relevant collection authority
• The amount of input tax is falsely reported
• Business tax is not paid for the purchase of services provided by foreign entities within 30 days after the prescribed deadline
• Tax is evaded in another manner
Generally, a taxable person who evades tax payments by fraud or other unrighteous means shall be sentenced to imprisonment for no more than five years, detention or in lieu thereof or in addi tion thereto, be imposed with a fine of no more than TWD60,000. Additionally, a person who assists or instigates another person to evade tax payments shall be sentenced to imprisonment for no more than three years, detention or in lieu thereof, be imposed with a fine of no more than TWD60,000. Whereas a tax official, an attorney, a certified public accountant or any other autho rized agent commits an offense by assisting or instigating the taxable person to evade tax pay ments by fraud or other unrighteous means, the penalty to be imposed on the above enumerated persons shall be increased by up to one-half.
Personal liability for company officers. Where a legal representative of a taxable person evades VAT with illegal strategies or by fraud, this representative could be sentenced to imprisonment for no more than five years, detention or in lieu thereof or in addition thereto, be imposed with a fine of no more than TWD60,000.
Statute of limitations. Generally, the statute of limitations in Taiwan is five years, but this can be extended to seven years in cases of fraud, failing to file the returns within the prescribed time frame or tax evasion.