17 April, 2018
On January 2, 2018, the MOF issued a letter ruling on income tax imposed on cross-border sales of electronic services conducted by foreign profit-seeking enterprises.
The important points include:
(1) the meaning of domestic source income: other than the income derived from the merchandise produced and manufactured overseas, which is in principle not considered domestic source income, the income or remuneration received from the electronic services via the internet or other electronic means that carry instantaneity, interactivity, conveniency and continuity, the electronic services used for sales at a domestic physical location and the online platforms that are used for cross-border transactions are domestic source income if either transaction party is a national of this country or or a domestic service with physical location in this country;
(2) deduction of expense: the expense may be calculated according to the actual data or by referring to the ratio of expense to the net profit from the main business item of the entities in the same industry, or deemed to be 30% of the income if the above-mentioned calculation methods are not applicable, provided, however, that if the auditing authority should determine from examination of actual data that the ratio is higher, then the high ratio of expense calculated from the actual data shall be used;
(3) ratio of contribution to profit from domestic source income versus foreign source income: except that the contribution to profit by domestic source income shall be 100% where the entire transaction process takes place in this country or the service is both rendered and used in this country, the contribution ratio shall be determined according to the actual data or deemed to be 50% each, provided, however, that if the auditing authority should determine thereafter from examination of the actual data that the contribution rate of domestic source income is higher than 50%, then the higher ratio calculated from the actual datat shall be used.
For further information, please contact:
Elvin Peng,Tsar & Tsai Law Firm
law@tsartsai.com.tw
