At Del Sol CPA & Associates, we understand the challenges foreign businesses face navigating Taiwan's tax system. Many clients come to us after experiencing issues with previous accounting firms, leading to overpayments due to inaccurate VAT filings. We can help!
Key Takeaways
Q: How can I get the overpaid VAT?
You can offset it against future business taxes or request a tax refund from the Ministry of Finance (MOF).
Q: The difference between Zero-Tax vs. Tax-Exempt?
Zero-rated tax allows deduction of input tax, leading to potential refunds. Tax-exempt sales don't allow tax deductions or refunds.
Saving Through Expertise
A long-term resident client in Taiwan owned a marketing consulting company serving foreign clients. Initially, he engaged with another CPA firm to manage his company tax and accountings in Taiwan. However, our collaboration began when he reached out to us via Line chat messenger seeking advice on personal financial planning, including property investment and other financial matters.
During the consultation, we conducted a thorough review of his financial documents, revealing a significant oversight by the previous accounting firm. It was discovered that the services sold by our client are subject to a zero-tax rate, potentially saving up to NTD 150,000 in value-added tax (VAT) if filed correctly. Subsequently, we initiated negotiations with the tax office and prepared the necessary documents to amend the VAT filing for that tax year.
Please note that obtaining approval for VAT amendments can vary depending on the tax office's discretion and the justification provided as each tax office agent has different style.
Our experienced CPA team understand these nuances and can effectively communicate your case. In our client's situation, we secured a positive outcome due to our familiarity with regulations and clear communication with a tax agent who understood foreign investor complexities.
Understanding Taiwan's VAT System
In Taiwan, most businesses are subject to a standard 5% VAT. However, specific goods and services are exempt, including:
Exported goods.
Services relating to export or services provided in the R.O.C. but used in a foreign country.
Goods sold to outbound or transit passengers by duty-free shops established under applicable law.
Goods or services sold to a bonded zone business entity for its operational use.
International transportation; however, foreign transport enterprises engaging in international transport within the territory of the R.O.C. shall qualify for the zero tax rate only if reciprocal treatment, or exemption from similar taxes, is given to international transport enterprises of the R.O.C. by the foreign country in which the foreign enterprise is incorporated.
Vessels and aircraft used in international transportation and deep sea fishing boats.
Sales of goods and maintenance services to vessels and aircraft used for international transportation and deep sea fishing boats.
Goods sold by a bonded zone business entity to a taxable zone business entity and exported directly without being transported to the taxable zone.
Goods sold by a bonded zone business entity to a taxable zone business entity for export and placed in a bonded warehouse or logistics center administered by an enterprise inside a free trade zone or by Customs.
Note:
If the sale (payment received from an overseas bank account) qualifies for Zero VAT tax rate liability, you must prepare the following three certification transaction documents:
1. Sales fapiao.
2. Respective invoice (the document indicating the amount charged to your client).
3. Inward remittance memo (also known as transaction memo or 匯款水單) issued by your bank.
Epilogue
Our client's case highlights the importance of meticulous tax planning and adherence to regulatory requirements. Through comprehensive discussions with our CPA, who provided expert insights into Taiwan's tax laws and regulations, our client decided to switch to us and entrusted us as his new CPA firm for handling his company tax and personal tax. The seamless transfer of company documents was facilitated within a couple of weeks, ensuring continuity and compliance.
Transferring your company's documents from a previous accounting firm may seem daunting, but our experienced CPA team is committed to guiding clients through every step of the process. We prefer clear communication, and we prioritize being responsive to our clients' concerns by addressing them as soon as possible.
LET US HELP YOU
At Del Sol CPA & Associates, our dedicated team led by Kevin prioritizes client satisfaction, offering personalized assistance to navigate the complexities of VAT filing and ensure compliance with tax regulations. Contact us today to discover how our CPA firm can help minimize your tax burden and maximize your business success.
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