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ONE. General Rules

Date: 2017-08-07

Q1：What are the reasons why an offshore electronic services business entity shall apply for taxation registration in accordance with the Value-Added and Non-Value-Added Business Tax Act (hereinafter referred to as the VAT Act), which was amended and promulgated on Dec. 28, 2016?
A1：
1. Following the destination principle we adopted for business tax, it is the jurisdiction where the consumption occurs that has the right to tax. As a result, in the event that a foreign supplier having no fixed place of business within the territory of the R.O.C. sells services to domestic individual purchasers, the R.O.C. shall have the right to tax. Based on the difficulties in information exchange and the high cost of tax collection, Article 36 of the VAT Act before being amended stipulated that the burden to pay business tax was levied on the purchasers, except that the amount of each payment is not more than NT$3,000.
2. In recent years, e-commerce has increased in popularity and caused many business tax levy problems. The Ministry of Finance (MOF) referred to OECD suggestions as well as measures taken by the EU, Korea, Japan, etc. to amend the current VAT Act by stipulating that a foreign supplier selling cross-border electronic services to domestic individual purchasers shall register for business in our country and pay VAT by itself or appoint a tax-filing agent to handle those matters in order to follow the principle of taxation equity.

Q2：When did the VAT on cross-border electronic services come into force?
A2：It came into force on May 1st, 2017.

Q3：What are the applicable conditions of the amended VAT for an offshore electronic services business  entity  ?
A3：A foreign supplier having no fixed place of business within the territory of the R.O.C. sells electronic services to domestic individuals.

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