Taiwan’s Amended Tax Guidelines for E-Commerce Enterprises

Taiwan’s Amended Tax Guidelines for E-Commerce Enterprises

The Ministry of Finance for Taiwan has issued draft amendments to the Value-Added and Non-Value-Added Business Tax Act that was first announced on December 28, 2016.

The revised VAT law made it mandatory for foreign e-commerce operators selling its services to individuals in Taiwan and having annual sales of more than NT$480,000 to register themselves with the local tax authorities. E-commerce companies that fail to comply with the new law will face a penalty of up to NT$30,000. The amended law came into effect on May 1, 2017.

Background

In the recent years, the e-commerce sector in Taiwan has witnessed an accelerated growth and profitability. Earlier it was not mandatory for foreign businesses to register for VAT unless they had a fixed place of business in Taiwan. Most foreign e-commerce operators dodged taxes by running their e-commerce business through digital platforms and did not require any Permanent Establishment (PE) in the country. This loophole caused huge losses in tax collection and forced the government to take corrective steps to increase revenues.

VAT Amendment

To close the tax loopholes, the Ministry of Finance came up with the Drafts Amendments bill. Under the VAT amendment, the Ministry of Finance incorporated the following changes:

  • Foreign businesses with annual e-commerce revenue of more than NTD 480,000 (US $16,000) must apply for taxpayer id and file for bi-monthly VAT returns
  • Penalties of up to five times the tax due to be imposed on businesses that fail to comply with the filing requirements. Non-compliance may even result in losing the license to operate in Taiwan.

Ministry of Finance of Taiwan has also simplified the online registration portal where foreign suppliers or their agents can complete VAT registration online.

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