Value-added tax (VAT)
The full name of GST in Taiwan is “Value-added and Non-value-added Business Tax.” Usually we call it “Value-added Tax (VAT)” or “Business Tax.”
Taxable Transactions
VAT applies to two types of transactions:
- Sales within Taiwan
- Imports into Taiwan
Rate
The rate of VAT on taxable transactions is 5%.
Government Uniform Invoice (GUI)
Companies that sell goods or services in Taiwan are subject to VAT and required to issue a government uniform invoice (GUI) to buyers at the time of sale, delivery or receipt of payment. And the GUI will include the 5% VAT attched to the price of the goods or service.
Tax payable
Tax payable is the amount that the output VAT exceeds the input VAT:
Tax paybale = output VAT - input VAT
1. Output VAT
When a company sells goods or services in Taiwan, 5% VAT will be added to the price and shown on the issued GUI. And the VAT attached to the price and collected from the buyer is “output VAT.” In nature, it is consumption tax collected from consumers.
2. Input VAT
Similarly, a company would pay additional 5% VAT when purchasing from suppliers. And the VAT attached to the purchasing price is “inout VAT” or “input VAT credit.”
Outside of the taxable scope
For transactions which are outside of the taxable scope, the VAT system may either exclude it or include it with 0% rate. Usually the zero-rated treatment is more beneficial because it may get refund of input VAT credit. On the contrary, the input VAT credit would become invalid if the transaction is excluded from the VAT system.
Zero-rated Transactions
Specifically, the following items are zero-rated:
- Exports
- Export-related services
- Services provided in Taiwan but used in a foreign country.
Filing and payment
A company, whether or not it has sales, must file a bi-monthly VAT return before the 15th day of each odd month for the two preceding months. The tax payable must be paid before filing the return.