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Foreign E-commerce Operators to File Tax Registration and Pay VAT in Taiwan Soon

Foreign E-commerce Operators to File Tax Registration and Pay VAT in Taiwan Soon
Under Taiwanese business tax laws, sellers are in general the payer of business tax (also known as value-added tax or VAT).  However, in a case where the seller is a foreign entity without a fixed place of business (FPB) within Taiwan and sells services in Taiwan, the Taiwanese service purchaser becomes the payer of the VAT payable on such services; if the service fee is less than NT$3,000 or the purchaser is a VAT operator, the 5%VAT is exempt. 
With the fast growing digital economy, while many foreign e-commerce operators (FEOs) provide electronic services to Taiwanese individuals, most, if not all, do not establish any FPB in Taiwan; instead, they either engage an affiliate or a third party to provide the so-called auxiliary or soliciting services.  Technically, the VAT on the service fees generated by these FEOs should be paid by the Taiwanese individuals; however, in practice, individuals rarely pay 5% VAT on the service fees that they pay to the FEOs.  Such non-payment of VAT not only means a loss to the national coffers but is also unfair to Taiwanese e-commerce operators as they are required to pay 5% VAT on their sales revenue while FEOs without FPB in Taiwan are not. 
In response, the Ministry of Finance (MOF) proposed amendments to the Business Tax Act, most of which are based on the recommendations made by the Organization for Economic C-operation and Development and the approaches adopted by EU members, Korea and Japan.  The Executive Yuan (Cabinet) approved the amendments on 14 September 2016 and forwarded them to the Legislative Yuan (Legislature) for review and approval.  
The Legislative Yuan passed the amendments to the Business Tax Act ("Amendments") on December 9, 2016, and authorized the Executive Yuan to set a date for implementation.  The Amendments are expected to take effect in mid 2017.
The Amendments include the addition of three provisions and revision to nine provisions.  The key points of the Amendments are as follows:
I.                 Those FEOs without FPB in Taiwan that are selling electronic services to Taiwanese individuals are deemed business operators and VAT taxpayers in Taiwan (Articles 2-1 and 6 of the Business Tax Act);
II.               The replacement of the term "Business Registration" with "Tax Registration" (Article 28 of the Business Tax Act).
III.             FEOs must file a tax registration with the Taiwan tax authorities [like Taiwanese business operators], file VAT returns and pay the VAT payable in due course, if their annual sales meet the threshold [to be set by the MOF], or engage a tax agent to do so on their behalf (Article 28-1 of the Business Tax Act);
IV.            The abolishment of the VAT exemption for service fees of under NT$3,000 ((Article 36 of the Business Tax Act); and
V.              A penalty will be imposed on a FEO's tax agent if the tax agent fails to, on behalf of the FEO, file a tax registration or VAT return or pay VAT (Article 49-1 of the Business Tax Act).
The Amendments do not cover certain issues; for example, what constitutes electronic services and whether FEOs are required to issue government uniform invoices for the service fees received from Taiwanese individuals.  We expect that the MOF will clarify these issues when it amends the Enforcement Rules of the Business Tax Act.