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The Amendment of the Taxation of E-commerce in Taiwan

【Charlotte Wu, Partner, Zhong Yin Law Firm】

The Taiwanese legislature has recently passed an amendment to the “Value-added and Non-value-added Business Tax Act” (the “Tax Act”) that will require foreign businesses that sell products and services to / in the Taiwanese market to register with the Government and pay tax on their sales, either directly or through a proxy. President Tsai signed the bill into law on December 28, 2016, but the effective date has yet to be decided upon by the legislature.

It is important to note that the newly amended Tax Act will now tax the “E-Commerce” industry more heavily. This means that service providers such as Airbnb and companies that sell applications and games via an online store will need to pay tax for each transaction they make. Previously, it was very difficult for the Government to track and enforce foreign companies doing “E-Commerce” business in Taiwan to pay tax on the services and products they were providing to their customers, especially if they did not have a physical operation in Taiwan. Companies before would many times not report any income earned in Taiwan through “E-Commerce” means, which meant that Taiwan lost a sizeable amount of tax revenue.

In keeping with the longstanding tradition of governments around the world taxing individuals and legal persons who do not have any representation, the Taiwanese legislature decided to amend the Tax Act to tax “E-Commerce” transactions in order to provide more revenue to the government in Taiwan. Companies with “E-Commerce” activities in Taiwan will need to self-report their income to the Government or face stiff penalties, such as needing to pay a fine of up to five times of the evaded tax amount or losing their business license. Although the legislature has not decided on the actual tax rate yet, the amended Tax Act states that the tax rate itself shall be between 5% and 10% of the transaction.

The now amended Tax Act has three main points:

1. Instead of the individual purchaser being the payor of tax for each “E-commerce” transaction, the foreign seller will now be the payor of tax.
2. There will be no more “tax-free” transactions when it comes to “E-Commerce”. Companies and sellers will need to register with the Government and taxing authorities and pay tax either directly or through proxies. The Government has created an online system of for tax registration (and payment) in order to help facilitate this process.
3. There will be punishments for evading or under-reporting the correct tax liabilities. These punishments range from a fine of up to five times of the amount of evaded tax, to the revocation of the company’s business license.

It is important to have the right legal team standing by to help plan or prepare for these upcoming changes. Please contact Zhong Yin Law Firm today for help with preparing your business operation to be compliant with the amended Tax Act. 



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pleasekindly contact
CharlotteWu, Esq.
TEL +886 2 2377 1858 EXT 8888