TAX & PAYMENTS

Yes. The key factor in deciding whether the Taiwan government taxes you is where the underlying business activities take place, not whether you have established a company in Taiwan. If order taking, negotiation, contract signing and delivery are all completed in Taiwan, the income is Taiwan-source income. Once the Taiwan government establishes that it has the right to tax your company, the next question is who must file the tax return and pay the tax on your behalf in Taiwan. Under the Taiwan Income Tax Act there are two possible situations. In the first, you have a fixed place of business in Taiwan, meaning premises of your own. That place of business files the annual return and pays Taiwan profit-seeking enterprise income tax. In the second, you have a business agent in Taiwan, meaning someone who signs contracts, delivers goods or accepts orders for you. That is the situation described in your question, and the business agent is then responsible for filing and paying the tax on your behalf. Either situation can leave you liable for tax in Taiwan. The two situations are not mutually exclusive and may apply simultaneously. What decides whether your Taiwan partner has to pay the tax for you is whether they can sign contracts or deliver goods on your behalf. If they only pass order information to you, cannot sign in your name and do not ship from their own warehouse, they are usually not a business agent. If, on the other hand, they can decide on their own whether a deal goes through, meaning they hold the final say, they are your business agent in Taiwan.

Many foreign companies assume that the Taiwan government cannot tax the income if the contract is signed offshore and payment is made into an offshore account. In fact the source of income is determined neither by where the contract was signed nor by where payment was made, but by where the economic activity that produced the revenue took place. If commercial negotiation, quotation, service provision or technical support happens inside Taiwan, the income is Taiwan-source income. The first of the two situations above arises more easily than most foreign companies expect. Posting staff to Taiwan on a long-term basis and renting an office to do business, or setting up a warehouse in Taiwan to hold stock and ship from it, can each constitute a fixed place of business. Calling the premises a liaison office or renting space in a shared office does not prevent such a finding. Companies selling digital services have one more tax to watch. If you sell software and other electronic services directly to individuals in Taiwan through a cross-border subscription, you owe tax to the Taiwan government even when neither of the two situations above holds. Such a business must complete tax registration in Taiwan and file business tax returns at the 5% rate, and the rule applies once annual sales exceed NT$600,000. NT$600,000 is the current figure after the increase of 7 April 2025, raised from NT$480,000.

The next thing to confirm is whether your Taiwan partner will be treated as your business agent. Once they are, make sure they do file and pay the tax for you. If they do not, and the tax office finds out, it will go back and assess your company for Taiwan-source income tax, typically over five to seven years, with interest added and possibly a fine. Two things decide whether they will be treated as your business agent. 1. Start with how far your partner can go. If they can decide prices, discounts and payment terms on their own, or ship directly to customers from their own warehouse, they are already a business agent. Writing “forwarded on behalf of” into the contract does not change that finding. 2. Then review three indicators. Each indicator has two possible patterns, and you need to work out which one applies to you. The tax office will consider all three together rather than draw a conclusion from any single one. (1) How the fee is calculated. A fixed service fee means you have outsourced a task to them. A percentage of sales means they carry the outcome of whether the goods sell alongside you, and the tax office will see them as selling on your behalf. (2) Whose account the customer’s money reaches first. If the customer pays straight into your offshore account, the funds are not received in Taiwan. If the money goes to your partner first and they then remit it to you, the tax office will treat their account as your collection point in Taiwan. (3) Whose warehouse the goods reach first. If the goods go from overseas straight to the customer, they are not stored in Taiwan before delivery. If they go to your partner’s warehouse first and are distributed from there, that is what the Income Tax Act calls regularly storing and delivering products. If all three indicators match the latter pattern, you will find it almost impossible to argue that your partner merely forwards orders. Not being a business agent does not mean you owe no tax at all in Taiwan. If any one of your negotiation, quotation or service provision takes place inside Taiwan, the income is still Taiwan-source income. Case: A foreign company established a logistics center in Taiwan and appointed a Taiwan company as its business agent. It reported and paid profit-seeking enterprise income tax only on income from sales to customers in Taiwan. The tax office found that in the same year the foreign company had also sold a batch of goods to overseas customers, with payment received offshore. Those goods were imported from abroad, tested and processed in Taiwan, then held in the logistics center before shipment. The court held that the testing and processing were what created the value and made an economic contribution to the overall transaction process, so the revenue from the overseas customers also counted as Taiwan-source income.

A structure will not be treated as deliberate tax avoidance merely because it has several layers. Taiwan's tax office does not look at your group chart. It looks at whether each company in the chain actually operates. If the Cayman and Hong Kong companies each have their own employees and office, and major decisions are genuinely made locally, the structure is unlikely to be regarded as tax avoidance.

Many startups build a Cayman or Hong Kong structure so that international venture capital can invest smoothly and equity terms can be arranged flexibly. Reducing tax was never the point of it. That said, the structure does make a difference to tax. Jurisdictions such as the Cayman Islands impose very little tax, so profits left at that layer are barely taxed at all. Taiwan law does not stop you from setting up companies there. The tax office asks one central question: whether the offshore company exists for a genuine business purpose or solely to reduce tax liabilities. The two situations below are what lead it to suspect the latter. 1. That offshore company has none of the three: no employees, no office, and its major decisions are in fact taken somewhere else. The tax office will take the income booked in its name and attribute it back to the company that does the work. If the company doing the work is your Taiwan subsidiary, the income is attributed to it and it is the one required to pay the additional tax. 2. Your ownership structure includes a holding company in a jurisdiction that has a tax treaty with Taiwan. When your Taiwan subsidiary pays profits out as dividends to an offshore shareholder, it must first withhold income tax for the Taiwan government, and a treaty can bring that withholding down. But if that company has minimal capital, no office of its own and no employees on its payroll, the tax office will still read it as a company through which funds merely pass. Such a company cannot qualify for the reduced treaty rate. Tax avoidance means using an arrangement with no commercial reason behind it to bring the tax down. If Taiwan's tax office finds that you have avoided tax, you pay back what was underpaid. On top of that comes a surcharge equal to 15 percent of the tax now due, with interest added daily. Paying back tax is not the same as evading it, though. Taiwan law states that the tax authority may not impose a penalty for tax evasion on top of an avoidance assessment. What does count as evasion is a separate matter: concealing material facts, making false statements, or supplying incorrect information when you file or when you are under audit.

To confirm that your structure holds up, there are two things to do. 1. Apply the tax office's three questions to every offshore entity in the structure. (1) Where are the people? Does the company have employees of its own? (2) Where is its physical presence? Does it have an office that it actually rents or owns, given that a virtual office or a shared address does not count? (3) Where are decisions made? Are major investments, acquisitions and financing decisions approved at board meetings held locally? 2. Keep the evidence behind your answers, so you can show that the offshore parent is not a shell. (1) For the people, keep local social insurance records and payroll withholding records. (2) For the place, keep the lease and the utility and telephone bills. (3) For the decisions, keep the local board minutes, along with the company's own bank account, books and financial statements. Its funds also have to stay separate from the Taiwan subsidiary's, rather than all flowing back to Taiwan. Case: A company established a holding company in Hong Kong that reported several hundred million New Taiwan dollars of turnover on its books. A Taiwan court went through the facts one by one and found that this Hong Kong company had no capacity for substantive operations. Its capital was too small to support turnover of that size. Its registered address measured 20 ping (approximately 712 square feet), and in practice it was only somewhere an employee of a customs and logistics firm collected mail. Every purchase contract was reviewed and signed personally by the head of the group. The tax office took the revenue booked in the Hong Kong company's name and attributed all of it to the company that did the work, assessing income tax on it.

Yes. The Taiwan Company Act lets a company distribute surplus profits once at the end of each quarter or each half of a fiscal year, without waiting for the year-end closing. If the subsidiary is a company limited by shares and the parent company is its sole shareholder, a cash dividend may be approved by the board alone, without holding a shareholders' meeting. This mechanism is called interim distribution under the Company Act, and it has to be written into the articles of incorporation before you can use it. The good news is that this is a one-time step. Once that clause is in the articles, it applies to every distribution from then on. In practice, the most common reason foreign subsidiaries in Taiwan do not use this mechanism is not that they are ineligible. Their articles either lack the necessary clause, or the company is unaware that the option exists. As for how much you may distribute, the Taiwan Company Act sets no ceiling. The required deductions and allocations must be made first. Before making a distribution, the company must estimate and reserve the taxes payable for the period, offset losses carried forward from previous years, and allocate 10 percent to the legal reserve. The legal reserve is the tenth of profits that the Company Act requires a company to keep and not distribute, and once the accumulated reserve matches the paid-in capital you stop setting it aside. If your company has lost money in the past, this step alone decides how much you can distribute this period. The figure that remains is the money you can remit to the parent company.

The Taiwan Company Act treats "profits on the books" and "profits available to distribute" as two different things, and it writes the sequence into the statute. Get the sequence wrong and the court penalises the responsible person personally, not the company. There is only one way to stay clear of that. Work out the distributable amount before every distribution, and keep the figure conservative. Profits that sit on a Taiwan subsidiary's books are out of the parent company's reach. Once the articles provide for interim distribution, a subsidiary with steady profits can send money home once a quarter or once every six months, instead of leaving a full year of cash in Taiwan.

To give the parent company more room to move the subsidiary's profits, for example to remit them before the middle of the year, there are three things to do. 1. Review the subsidiary's articles of incorporation and check whether they provide for distributing surplus profits at the end of each quarter or each half of a fiscal year. If the clause is not there, amend the articles and file the change first. You do it once and never again. 2. Work out the distributable amount for the period. The taxes are an estimate, and underestimating means paying the difference later, so it is worth having an accountant calculate the amount and keeping it conservative. Do this step properly and the sequence above will not go wrong, which keeps you clear of a breach. 3. Take particular care when the parent company needs cash quickly. Do not move money out first under the label of a temporary advance or any other name. The label is not determinative. As long as the money in substance goes to shareholders in proportion to their holdings, the court reads it as a distribution of surplus profits, and the same sequence still has to be completed. If the need is genuinely urgent, run the interim distribution procedure through to the end. That is why the Taiwan Company Act created it. One more thing. Compliance with the Company Act alone does not mean that the funds may be remitted immediately. Before a dividend reaches an offshore parent company, the subsidiary has to withhold and pay the income tax on that dividend on the parent's behalf. The applicable tax rate and filing deadline are governed by tax law and are separate from the Company Act requirements. Case: The offshore parent of a Taiwan subsidiary needed cash at short notice and asked the subsidiary to remit money to it. The year-end closing was not finished and no distribution resolution had been passed. The subsidiary paid the money out to shareholders in proportion to their holdings under the label of a temporary advance, and the parent company received its share. That year the subsidiary had not yet made up its accumulated losses, and the required allocation to its legal reserve had not been completed. The court held that the temporary advance was in substance a distribution of dividends and bonuses, and that the procedure did breach the Company Act. In this case, however, the court imposed no criminal penalty. That was because the company held about NT$200 million in retained earnings against only about NT$50 million in liabilities, so creditors' interests were not harmed.

A newly established subsidiary will generally encounter four main types of tax obligation. The taxes are limited in number and follow a fixed filing schedule. 1. Profit-seeking enterprise income tax. The rate is 20%, and the return for the preceding year is filed each May. 2. Business tax. The rate is 5%, and the return is filed once every two months, by the 15th of an odd-numbered month for the two months before it. 3. Withholding on various categories of income. When you pay salary, rent, royalties or dividends to someone, you first withhold an amount and pay it to the tax office. 4. Surtax on undistributed earnings. If profits earned during the year remain undistributed, the undistributed amount is subject to an additional 5% tax in the following year. For the third one, the applicable rate depends on two factors. (1) The nature of the payment. (2) Whether the recipient is a Taiwan tax resident, which comes down to how many days they have lived in Taiwan. The withholding here is not tax on your company. It is income tax you pay to Taiwan's tax office in advance on behalf of the recipient. Where the recipient is a company, it is that company's profit-seeking enterprise income tax. Where the recipient is an individual, it is that person's individual income tax. To give examples, payment of a dividend to an offshore parent is subject to 21% withholding. Payment of royalties, rent or commission to an offshore company or individual is subject to 20%. Engaging an individual offshore for design, consulting or similar professional services is also 20%. Salary paid to a foreign employee who is not yet a Taiwan tax resident is subject to 18%. If that person's total monthly salary is at or below 1.5 times the basic wage, the rate drops to 6% (labor law now uses the term “minimum wage,” while the withholding-rate standards still use “basic wage”). In 2026 the basic wage for this purpose is NT$29,500 a month, so 1.5 times is NT$44,250, and the figure is adjusted every year. If you operate through a branch rather than a subsidiary in Taiwan, two of these rules apply differently. When a branch sends money back to its head office, that is not a distribution of dividends for tax purposes. So a branch has no surtax on undistributed earnings, and no income tax is withheld when the money goes back.

In Taiwan, company registration and tax registration are two separate things, handled by two separate agencies. After the Ministry of Economic Affairs approves your company registration, you still have to complete tax registration with the tax office and obtain a uniform invoice number range before you can issue invoices and take payment. The Business Tax Act requires a company to have this in place before it starts trading. 1. Foreign companies in Taiwan very often take payment before completing tax registration and complete the registration retroactively. For revenue from that period, the company must issue the missing invoices, file the required business tax returns, pay the outstanding tax and bear the applicable late-payment surcharge. 2. The other thing foreign companies commonly miss is withholding. Withholding and filing are the obligation of the party making the payment, not the party receiving it. If you fail to withhold, the tax office will pursue your company, and you may be unable to recover the amount from the recipient afterwards.

Before and after you start taking payment, these three things will keep you out of trouble. 1. Complete three registrations before you start trading. (1) Tax registration with the tax office, which is how your company completes its registration for tax purposes in Taiwan. (2) An application for a uniform invoice number range, without which your company cannot formally issue invoices. (3) Registering as a withholding unit, also with the tax office for the place where your company is located, which must be done before you can issue withholding statements. All three are one-off. You will not have to renew them periodically. 2. Put the fixed annual dates in your calendar. (1) Business tax, once every two months, filed by the 15th of an odd-numbered month. (2) Withholding on employee salary, filed by the 10th of the following month. (3) Payments to an offshore company with no fixed place of business in Taiwan, filed within 10 days of the payment date. (4) Withholding statements, filed by the end of January the following year. (5) Profit-seeking enterprise income tax, filed the following May. (6) The provisional payment in September. This is an advance instalment of profit-seeking enterprise income tax, set at half of the tax assessed on the previous year's return. You pay it yourself in September and settle up the following May. A company in its first year has no previous year to work from, so it does not make the payment. From the second year it does. 3. When you sign a contract, take a moment to check whether it needs stamp tax. Stamp tax is a small tax Taiwan charges on particular documents, paid either by affixing stamp tax stamps to the document or by applying to the local tax bureau for a payment slip. It is administered by the local tax bureau, not by the tax office. Stamp tax on a contract for work is 0.1% of the contract amount. A deed for the sale of movable property is subject to NT$12 per document, while a lease is not subject to stamp tax. The amounts are small, but falling short brings a fine. Case: A Japanese games company set up a subsidiary in Taiwan, with its accounting also handled by the finance team of its Japanese parent company. They assumed that completing the company registration meant they could start operating, and only completed tax registration in the third month, by which time they had already taken payment from customers. Once the registration was done, revenue from those three months had to be invoiced late, filed late and paid late, with a late-payment surcharge added. The surcharge runs at 1% of the outstanding amount for every three days of delay, up to a ceiling of 10%. The more awkward part was that their corporate customers in Taiwan could not obtain valid invoices at the time, so they could not claim input tax credits.

No. In Taiwan a uniform invoice is not a receipt. It is a document required under the tax law. Your customer needs it to claim an input tax credit against the business tax it owes. An invoice issued in English does not have the same effect for Taiwan tax purposes. Taiwan's business tax is a value-added tax with a standard rate of 5%. When you sell goods or provide services, you issue an invoice and collect 5% from your customer. The 5% you pay out on your own purchases can be credited, and the difference between the two is what you remit. Your customer can claim an input tax credit for the 5% paid to you only if you issue a uniform invoice. If all you give them is an invoice in English, that 5% becomes their cost. You cannot simply create your own uniform invoices. You must first obtain a uniform invoice number range from Taiwan's tax office. Electronic invoicing is now widely used in Taiwan, and most large companies require their suppliers to issue electronic invoices.

Business tax and profit-seeking enterprise income tax are two entirely different taxes. Business tax applies to each taxable sale, regardless of whether the transaction generates a profit. Once you sell, you must issue an invoice and pay the tax. Profit-seeking enterprise income tax is settled once a year and is calculated on that year's profit. The two terms foreign companies most often confuse are zero rating and exemption. When you issue a uniform invoice, every line item has to be assigned a tax category. The three categories generally relevant to foreign subsidiaries are taxable, zero-rated and exempt. Special-rate and mixed-rate categories also exist, mainly for financial businesses and certain food-and-beverage businesses, and generally do not apply to foreign subsidiaries. Most transactions are taxable, which means charging the customer an additional 5% on top of the price. Zero-rated and exempt sales both mean you do not charge that 5%, but the tax you yourself bear differs greatly between the two. Zero rating means you do not charge the customer 5%. The input tax paid on your own purchases remains creditable. Any excess input tax credit can be claimed as a refund from the tax office, so the effective tax really is zero. Selling goods abroad, and services you supply in Taiwan whose output is used abroad, are both zero-rated. Exemption also means you do not charge the customer 5%. But the invoices you receive on your own purchases are still taxable ones, and the 5% on them can neither be credited nor refunded, so that money becomes your cost. Foreign subsidiaries' ordinary business activities rarely fall within these exempt categories, which cover the sale of land, medical services and education.

Before you start taking payment, confirm the following two matters. 1. Confirm that you can actually issue uniform invoices. Apply to Taiwan's tax office for a number range, then confirm that your finance system can produce electronic invoices in Taiwan's format. If you take payment before both are done, that revenue will have to be invoiced late and the business tax paid late, with a late-payment surcharge added. 2. Do not decide for yourself that a cross-border service is zero-rated. What determines zero rating is where your people do the work and where the output is used. Work done in Taiwan whose output goes abroad can be zero-rated. Work done in Taiwan whose output is also used in Taiwan cannot, even if the money comes in from overseas, and you must charge the customer 5% and issue a taxable uniform invoice showing the amount of business tax. Once your business model is settled, confirm the position with the tax office before you start taking payment. Case: The Taiwan subsidiary of a US SaaS company had its engineering team in Taiwan and its users in Taiwan, but the party actually paying was overseas. Its finance team treated the service as an exported service subject to a zero rate, so the company neither charged the customer 5% nor issued a taxable uniform invoice. On audit, the tax office found that although the paying party was overseas, the engineers supplied the service in Taiwan and the service was used in Taiwan. This made it a service supplied within Taiwan and subject to 5% business tax. The company ended up paying two years of back business tax, plus a late-payment surcharge.