{"id":89542,"date":"2023-07-12T17:42:40","date_gmt":"2023-07-12T09:42:40","guid":{"rendered":"https:\/\/premiatnc.com\/tw\/?p=89542"},"modified":"2024-03-11T11:14:11","modified_gmt":"2024-03-11T03:14:11","slug":"taiwan-income-tax-refund","status":"publish","type":"post","link":"https:\/\/premiatnc.com\/tw\/blogging\/taiwan-income-tax-refund\/","title":{"rendered":"5+ Ways for Applying Taiwan Income Tax Refund: Ultimate Guide for Foreign Companies\u00a0\u00a0"},"content":{"rendered":"\n
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Foreign companies without a fixed place of business or a business agent in Taiwan should be aware of the taxation implications<\/a> for the services provided both within and outside the territory of Taiwan. According to the Income Tax Act of Taiwan, the service income with its source in Taiwan shall be taxed at the applicable withholding tax rate of 20%. To understand how to apply for Taiwan income tax refund, please read on.  <\/p>\n\n\n\n

To reduce such high tax burden, foreign companies<\/a> can use applicable tax benefit to decrease the effective withholding tax rate. Furthermore, if a foreign company that makes a profit by selling services ends up paying more or less withholding tax than it should, based on its actual income, profit ratio, or domestic contribution ratio as determined by the tax authority, it has the right to request a refund for the extra tax paid. This refund application can be submitted directly by the company or through a representative within a ten-year timeframe, starting from the date the withholding tax was paid. <\/p>\n\n\n\n

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6 Ways to Apply for Taiwan Income Tax Refund <\/h2>\n\n\n\n

There are six income determination methods to reduce the effective withholding tax rate to income determination methods as below: <\/p>\n\n\n\n

1. Business Profits Tax Exemption under Tax Treaty <\/h3>\n\n\n\n

Income Tax Agreements are also known as Agreements for the Elimination of Double Taxation with Respect to Taxes on Income and the Prevention of Tax Evasion and Avoidance.   <\/p>\n\n\n\n

Foreign companies that have earned income may be eligible for tax exemption based on an Agreement for the Avoidance of Double Taxation<\/a>. To qualify for this exemption, the companies need to follow the regulations and provide the required documents, including a Resident Certificate and supporting documentation. <\/p>\n\n\n\n

In the case that a resident of the other Contracting State who has derived income not subject to withholding tax under Article 88 of the Income Tax Act, and has filed a tax return and made tax payment in accordance with the Income Tax Act, the income recipient could provide the relevant documents as required, along with the tax return and original copy of the tax payment statements, and apply to the tax collection authority which originally handled the tax filing case for a refund of tax overpaid.  <\/p>\n\n\n\n

2. Article 25 of Income Tax Act- Technical Services   <\/h3>\n\n\n\n

Foreign companies having its head office outside the territory of Taiwan that provide technical services in Taiwan may encounter difficulties in calculating their costs and expenses. In such cases, they have the option to apply for a deemed profit rate of 15%. This application helps to reduce the net withholding tax rate to 3%.  <\/p>\n\n\n\n

However, it’s important to note that the technical services provided by these foreign companies must align with the specific scope outlined in the regulations. Services such as information transmission without specialized skills and knowledge, general administration, and labor dispatching, etc. will be excluded from the scope of application of the aforementioned regulation.   <\/p>\n\n\n\n

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3. Domestic Profit Contribution Ratio  <\/h3>\n\n\n\n

If there are enough documents to show a clear separation between transactions that occur within Taiwan and those that take place offshore, along with the proportion of contribution related to services performed in Taiwan, the Domestic Profit Contribution Ratio will be determined based on these supporting documents.  <\/p>\n\n\n\n

The National Taxation Bureau <\/a>will assess the documents to determine the ratio. However, it can be challenging to determine the exact percentage of the contribution ratio, making it a bit difficult to practically apply for recognition.  <\/p>\n\n\n\n

4. Verification and Deduction of Costs and Expenses  <\/h3>\n\n\n\n

Foreign companies that earn income from providing services in Taiwan have the option to submit their accounting records<\/a>, documents, or audit reports to the National Taxation Bureau. They can use these records to recalculate their taxable income by deducting relevant costs and expenses from the verified revenue earned in Taiwan, either on a per-transaction or annual basis.  <\/p>\n\n\n\n

If these companies have paid too much withholding tax in previous years, they can apply for a tax refund<\/a> after receiving approval from the National Taxation Bureau. <\/p>\n\n\n\n

5. Pre-Approval for Net Profit Ratio  <\/h3>\n\n\n\n

Foreign companies without a fixed place of business or business agent within the territory of Taiwan generating the income for services can provide relevant documents to the National Taxation Bureau in order to apply for the adoption of net profit ratio and the contribution of the domestic transaction process to the total profit of all trading processes before receiving payments, in order to calculate the taxable income while filing their tax returns, or have their taxes withheld by the tax withholder in accordance with the required withholding ratio.  <\/p>\n\n\n\n

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6. Cross-Border Electronic Services  <\/h3>\n\n\n\n

Foreign companies selling cross-border electronic services as below shall first apply for the Net Profit Ratio and Domestic Profit Contribution Ratio. The competent National Taxation Bureau will assess the applicable Net Profit Ratio and Domestic Profit Contribution Ratio.  <\/p>\n\n\n\n