For the furnishing of services by a non-resident with no fixed place of business in Taiwan, the consideration paid for the services is subject to VAT. The base for VAT on the supply of services is the sales amount including consideration made and expense reimbursements.
As with provision of goods, it is the buyer who is responsible for reporting the purchase and calculating the VAT on their VAT return. And, if a non-resident has a fixed place of business, the fixed place of business is required to register for VAT, handle reporting, and provide government uniform invoices for the purchaser of services. This must be done regardless of whether the services are supplied by the non-resident directly or through their fixed place of business.
The supply of services is tax exempt if they are purchased by a buyer which engages exclusively in VAT taxable activities, and they are used solely for business in VAT taxable goods and services.
In addition, services supplied by non-residents with no fixed place of business to educational or research intuitions for education or research purposes are exempt from VAT.
The standard VAT rate on services is 5%.
Cross Border Electronic Services
Effective 1 May 2017, foreign suppliers with no fixed place of business in Taiwan that provide electronic services to domestic individuals need to register and account for VAT. The provision of electronic services is defined to include where:
- The services used are downloaded via the Internet or other electronic tools and saved to computers or mobile devices (such as smartphones, tablet computers, etc.) for use.
- The services are used online or via other electronic tools without being saved into any devices, including services used in digital form, like online games, advertisements, audio-visual browsing, voice frequency broadcasting, information contents (such as movies, soap operas, music, etc.) and interactive communications.
- Other services used are supplied through the Internet or other electronic tools; for example, the services are supplied through the online platforms set up by an offshore electronic business entity and used at a physical location.
Foreign supplies will also need to issue uniform invoices, although an exemption is provided from 1 May 2017 to 31 December 2018. The government has clarified that when a foreign enterprise, institution, group, or organization having no fixed place of business in Taiwan provides electronic services to domestic business entities, they would not be the taxpayers and domestic business entities should still pay the VAT without receiving the uniform invoices. Further, if this domestic business entity computes tax in accordance with the provisions of the law and the purchased services are used solely in conducting business in taxable goods or services, such services are exempted from the VAT.
The registration threshold for electronic services is TWD 480,000 in annual sales to domestic individuals on the basis of the calendar year. If the annual sales amount of the current or previous year is over the threshold, the supplier has to apply for taxation registration itself or appoint a tax-filing agent, which may be an individual residing within the territory of Taiwan, or an enterprise, institution, group, or organization that has a fixed place of business within the territory of Taiwan. Suppliers can register for VAT via the Ministry of Finance eTax Portal.