Friday, 18 November 2016

Taiwan: VAT proposed on nonresident suppliers of digital services

Taiwan’s Minister of Finance (MOF) published a draft bill on 22 September 2016 that would require nonresident providers of e-services to private consumers in Taiwan to register with the Taiwan tax authorities, account for VAT and remit a 5% VAT to the authorities. If approved, the draft bill would amend the Value-Added and Non-Value Added Business Tax Act (VAT Act) and would apply as from 1 January 2017.

The rules are designed to ensure that VAT on cross-border transactions is paid in Taiwan when the individual e-service recipient is located in Taiwan, and are similar to the rules introduced in the EU and in Korea in 2015. The rules also take into account the recommendations in the OECD’s International VAT/GST Guidelines published in 2015.

As noted above, the proposed measures would apply only to business-to-consumer (B2C) supplies, and the existing threshold of NTD 3,000 below which VAT is not payable would be abolished (because the VAT compliance obligations would shift to the foreign seller). The reverse charge would continue to apply to business-to-business (B2B) supplies of e-services.

Although not included in the draft law, a registration threshold and a definition of e-services would be incorporated in rulings or in the Enforcement Rules of the VAT Act following enactment of the amended VAT act. A simplified electronic VAT registration process is expected to apply to foreign suppliers.

Because it may be difficult for a foreign service provider without a fixed place of business in Taiwan to open a bank account in Taiwan to pay the VAT due in Taiwan currency, a foreign service provider would be allowed to appoint a tax agent to assist in meeting the nonresident’s VAT compliance obligations.

Source & more info: Deloitte