Non-financial business operators (profit-making enterprises) who pay interest on interbank loans need to apply for withholding and reporting vouchers, but do not need to obtain invoices

Company A called to ask whether it needs to withhold tax and file a tax voucher for the interest paid on loans from its peer Company B or affiliated companies? Or do I need to obtain the unified invoice issued by Company B? (Company A and Company B are not in the financial industry)

The Ministry of Finance's Kaohsiung National Taxation Bureau explained that when non-financial business operators (profit-making enterprises) enter into loan contracts and pay interest on interbank loans, in accordance with the Ministry of Finance's letter of interpretation No. 7557458 dated July 3, 1986, non-financial business operators should be exempt from issuing unified invoices and business tax on interest income collected from interbank transactions or financial arrangements; however, the business operators (profit-making enterprises) that pay such financing interest expenses should be the withholding agents, and in accordance with the relevant provisions of Articles 88, 89 and 92 of the Income Tax Act, taxes should be withheld and paid at the prescribed withholding rate, and withholding vouchers must be filed within the prescribed time limit.

Therefore, if Company A borrowed money from its peer Company B at the beginning of 2015 and paid monthly interest of NT$300,000, Company A should withhold NT$30,000 in tax at the prescribed withholding rate of 10% each time it made payment and pay it to the national treasury. It should also submit a withholding voucher before the end of January 2016 and does not need to produce the uniform invoice issued by Company B.

The bureau reminds that if business persons (profit-making enterprises) pay interest on loans from other banks, they should check whether they have complied with relevant laws and regulations. If you have any questions, you can call the toll-free service hotline 0800-000-321 or go to the bureau’s website (https://www.ntbk.gov.tw) and use the National Tax Service’s smart customer service “National Tax Service Assistant” to make online inquiries.

Provider: Xiaogang Taxation Office Contact: Section Chief Lai Yuling Contact number: (07) 8123746 ext. 6010
Written by: Huang Weijie Contact: (07) 8123746 ext. 6012