Remind domestic buyers of overseas e-commerce electronic services to obtain cloud invoices or pay business tax on their own

The Ministry of Finance stated that with the vigorous development of the digital economy, it is becoming increasingly common for domestic buyers to purchase electronic services from foreign enterprises, institutions, groups, and organizations (such as Google, Apple, etc., hereinafter referred to as overseas e-commerce companies) that do not have fixed business locations in Taiwan through the Internet or other digital means. In order to control tax sources and maintain tax fairness, Taiwan has implemented a value-added business tax system for cross-border electronic service transactions since May 1, 2017. When domestic natural persons purchase electronic services from overseas e-commerce companies, the overseas e-commerce companies are responsible for registering their tax status, issuing cloud invoices, and reporting and paying business tax in Taiwan. Therefore, domestic natural persons will obtain cloud invoices issued by overseas e-commerce companies; for domestic non-natural persons (including business persons) who purchase, they should calculate and pay business tax in accordance with regulations.

The Ministry of Finance explained that according to Article 28-1, Article 36-3 and Article 7-1-2 of the Value-Added and Non-Value-Added Business Tax Act (hereinafter referred to as the Business Tax Act), if the annual sales of electronic services sold by overseas e-commerce companies to domestic natural persons exceed a certain standard (currently NT$600,000), they should apply for tax registration in accordance with regulations, issue cloud invoices to deliver to the buyer, and declare and pay business tax. Therefore, when domestic natural persons purchase electronic services from overseas e-commerce companies, they should remember to keep the correct email address to request the cloud invoice issued by the overseas e-commerce company. In addition to increasing their chances of winning, they can also assist the government in supervising overseas e-commerce companies to pay taxes in accordance with the law. When overseas e-commerce companies sell electronic services to non-natural persons (including business persons) in the country, the service buyer should calculate the business tax amount based on the prescribed tax rate (5% for electronic services) within 15 days from the beginning of the next payment period in accordance with Article 36, Paragraph 1 of the Business Tax Act.

The Ministry of Finance added that if the domestic non-natural persons who purchase electronic services from overseas e-commerce companies are business operators who calculate taxes in accordance with Section 1 of Chapter 4 of the Business Tax Act (i.e., value-added business operators), and the electronic services they purchase from overseas e-commerce companies are used exclusively for the operation of taxable goods or services, they can be exempted from tax payment based on simplified procedures. However, when reporting, the amount paid to the overseas e-commerce company should be filled in Column 74 of the business operator's sales and tax declaration form (401); for those who exclusively or concurrently operate tax-free goods or services under Article 8, Paragraph 1 of the same law, they should still calculate their payable business tax in accordance with the regulations and report and pay it together with the current business tax amount. Therefore, if domestic value-added business operators purchase electronic services from overseas e-commerce companies, they should pay attention to following the above regulations.

The Ministry of Finance reminds that domestic natural persons who purchase electronic services from overseas e-commerce companies can submit reports to the National Tax Bureau with specific evidence if they find that the overseas e-commerce companies have failed to issue cloud invoices and deliver them to the buyers in accordance with regulations. The Ministry also calls on domestic non-natural persons (including business persons) who purchase electronic services from overseas e-commerce companies, except those who meet the aforementioned exemption conditions, if they find that they have failed to pay taxes in accordance with regulations, to report to the local National Tax Bureau as soon as possible and pay the unpaid taxes and interest before they are reported or investigated by the tax collection agency or investigators designated by the Ministry, so as to avoid penalties.

Contact person for press release: Liang Weijun Contact number: (02) 2322-8146