A new revision of the Value-added and Non-value - added  Business  Tax  Act,  passed  by  the Legislative Yuan on January 10, lowers the business tax on services for branches of foreign companies with no fixed place of business in Taiwan from 5% to 3%.

Under  the  original  rules,  foreign  enterprises, government agencies, organizations, or associations that have no fixed place of business in Taiwan and that  sell  financial  services  to  domestic  buyers  are subject to a business tax of 5%, with the exception of foreign insurance firms whose income from reinsurance services is taxed at a rate of 1%.

The Ministry of Finance (MOF) notes that the new rate of 3% provides an appropriate balance of tax burden between domestic and overseas financial businesses, and will thus stimulate the development of international financial trading.

The  revision  also  demarcates  the  scope  of “bonded area,” “bonded area business,” and “tax area business,” and stipulates that bonded goods entering  a  bonded  area  from  overseas  are  not included within the scope of “imported goods.” In addition, bonded area businesses that sell goods to tax area businesses for direct export, or for storage in a designated bonded area for later export, without being shipped into a tax area, will be subject to a
business tax rate of zero.

The MOF also points out that in the future, the frequent  practice  of  commercial  outlets  offering goods or services at the untaxed price to customers who want to save the 5% value-added tax and are willing to waive an official invoice will be significantly corrected. Under the revised law, businesses that fail to include the 5% VAT into the retail price of products or services, and that fail to correct their behavior upon notification, will be fined.