Corporate Tax 2010 - BMR Advisors

Chapter 46
Taiwan
Josephine Peng
Lee and Li, Attorneys-at-Law
Jill Niu
1 General: Treaties
1.1 How many income tax treaties are currently in force in
Taiwan
Taiwan has entered into tax treaty with 16 jurisdictions as of
October 7, 2009.
1.2 Do they generally follow the OECD or another model
These tax treaties generally follow the OECD model.
1.3 Do treaties have to be incorporated into domestic law
before they take effect
No. Article 124 of the Income Tax Act prescribes that, where there
are special provisions under a tax treaty between Taiwan and a
foreign country, such special provisions shall apply. Hence the
provisions under these tax treaties supersede and need not be
incorporated into Taiwan laws and regulations before they take
effect.
1.4 Do they generally incorporate anti-treaty shopping rules (or
“limitation of benefits” articles)
Except for a few exceptions such as that with the UK, most of the
tax treaties that Taiwan has entered into do not contain anti-treaty
shopping rules.
1.5 Are treaties overridden by any rules of domestic law
(whether existing when the treaty takes effect or
introduced subsequently)
No. Once a tax treaty takes effect, the provisions thereunder
supersede Taiwan laws and regulations.
2 Transaction Taxes
exchange of real properties or real property mortgage for
submission to the authorities for registration.
2.2 Do you have Value Added Tax (or a similar tax) If so, at
what rate or rates
There are two types of business tax: value-added tax (“VAT”); and
gross business receipts tax (“GBRT”).
Currently, businesses in financial industries are subject to GBRT at
2% of income generated from their exclusively authorised
businesses and 5% of income generated from their non-exclusively
authorised businesses.
Businesses in industries other than financial industries are subject to
VAT at 5% of the sales amount, and 0% or no VAT under certain
circumstances.
2.3 Is VAT (or any similar tax) charged on all transactions or
are there any relevant exclusions
The sale of goods and provision of services within Taiwan as well
as the importation of goods are subject to business tax, which is
payable by sellers and service providers, unless the law provides
otherwise. For example, the sale of land, securities that are subject
to securities transaction tax, and financial derivative products, is
exempt from business tax.
2.4 Is it always fully recoverable by all businesses If not,
what are the relevant restrictions
GBRT paid is deductible as cost against the GBRT operator’s
taxable income.
VAT in general is recoverable but not in full. The VAT paid by a
VAT operator under certain circumstances may not be offset against
its VAT payable, such as where the required documents could not be
provided; where the goods or services purchased are not for use in
business operation (unless they are for qualified donations); and
where the goods or services purchased are for entertainment
purposes, employee benefits, and so on.
2.1 Are there any documentary taxes in Taiwan
2.5 Are there any other transaction taxes
The execution of certain documents in Taiwan is subject to stamp
tax. These documents include: (i) receipts for monetary payments
in the form of cash; (ii) deeds for sale of movables; (iii) agreements
for the performance and completion of specific works or tasks; and
(iv) deeds and agreements for sale, gratuitous transfer, partition or
ICLG TO: CORPORATE TAX 2010
© Published and reproduced with kind permission by Global Legal Group Ltd, London
Securities transaction tax (“STT”) is imposed on the sale of
securities unless otherwise exempt. The term ‘’securities’’ includes
shares and debentures issued by companies and other securities
approved by the government for issuance to the public. The rate of
STT applicable to share transactions is 0.3% and that to debenture
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