Taiwan Tax Benefit Application on Article 25 tpe4ww.25
For enterprises that received approval for the tax benefit, the withholding tax rate on its income from Taiwan will be significantly reduced from 20% to 3% or 2%. Businesses whose headquarters are outside of Taiwan must apply for the tax benefit described in Article 25 of Income Tax Act with the Ministry of Finance and 15% of its business revenue within Taiwan would be the taxable income.
Contact us in working hours (Taipei and China Time Zone)
Manager Jerry Chu, USA Graduate School Alumni and a well-English speaker
Tel No.: +886-2-2717-0515 ext. 103
Article 25 (ATC 25) of Taiwan’s Personal Income Tax Law states:
Any profit-seeking enterprise having its head office outside the territory of the Republic of China, and which is engaged in
3)providing technical services, or
4)machinery and equipment leasing, etc.,
in the territory of the Republic of China, and the cost and expenses of which are difficult to calculate may apply for approval from the Ministry of Finance, or the Ministry of Finance may make the decision to consider 10% of its total business revenue for an enterprise engaged in international transport business, or 15% of its total business revenue for one engaged in any other businesses as its income derived within the territory of the Republic of China regardless whether or not it has a branch office or business agent in the territory of the Republic of China. In such cases, however, the regulation in Article 39 regarding the deduction of losses cannot be applied.
Effective Tax Rate
With ATC 25 advance ruling approval, deemed profit ratios can be summarized as follows:
|Deemed Profit Ratio||Tax Rate||Effective Tax Rate|
With ATC 25 Approval
If a foreign company receives ATC 25 advance ruling approval on a technical service contract, deemed profits on a NTD 2 million contract will be NTD 300,000. Net tax payable on the contract revenue will be NTD 60,000 (NTD 300,000*20%).
Without ATC 25 approval
Applicable withholding tax on the same contract would amount to NTD 400,000 (NTD 2 million*20%).
Mechanism of Paying Tax
If the foreign company does not have a permanent establishment in Taiwan, the Taiwan customer should, in accordance with Article 88 of the Income Tax Act, deduct 3% withholding tax and remit the net amount to the foreign company.
If the foreign Company has a permanent establishment in Taiwan, the Taiwan permanent establishment should issue a VAT invoice to the Taiwan customer and book the contract revenue in its accounting record. Tax is paid at the time the corporate income tax return is submitted. The due date is five months after the end of the fiscal year.
Application and Approval Timeline
ATC 25 is an advance ruling application.
Generally, we will suggest to send out the application before work kick-off , but only after the commencement date of the contract.
It takes approximately one month to obtain approval.
Experienced Professionals Serve You
We have very experienced professionals to serve clients for ATC 25 applications.
We help clients evaluate whether an advance ruling application is appropriate for their circumstances, and assist clients to formulate effective tax planning solutions.
Any amendment or extension letter to the contract will be defined as another contract and a separate service charge will be raised.
these expenses may occur by handling the application including taxi, postage, translation fee and stamp tax, etc.
Manager Jerry Chu, well-English speaker, USA Graduate School Alumni
+886-2-2717-0515 ext. 103 or +886-939-357735
+886-2-2717-0515 ext. 123 or +886-975-077867
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