Businesses Must Issue Invoices and Pay Taxes Despite Offsetting Penalties
The Taipei National Taxation Bureau has clarified that businesses contracting for projects must issue a Government Uniform Invoice(GUI) and report business tax based on the project’s full payment, even if they offset delayed penalties with the payment amount.
Under the Value Added Tax Act, the sales amount includes all charges received by the business for goods or services. Businesses must issue a GUI to the buyer and report taxes within the required timeframe. For project-based contracts, invoices must be issued for each installment based on the contract price, regardless of any delays or penalties deduction.
For example, if Company A is contracted to perform a water and electricity project for Company B and has an outstanding balance of NTD3.5 million after completion, but is fined NTD1 million for delay, therefore the net payment received will be NTD2.5 million (NT$3.5 million minus NTD1 million). Despite this, Company A is still required to issue a GUI for the full NTD3.5 million, not the offset amount of NTD2.5 million, as the penalty and invoice issuance are separate matters.
The Bureau urges businesses to review their invoicing and tax reporting. If invoices are missed or sales amounts are underreported, businesses can voluntarily correct their filings and pay any outstanding taxes before an investigation. This can help avoid penalties under Article 48-1 of the Tax Collection Acts.
