“VAT on cross-border electronic services”Foreign suppliers selling cross-border electronic services to domestic individual purchasers shall register for business and pay VAT
The Mininstry of Finance (MOF) has taken note of the rapid development of e-commerce in recent years, and the resulting increase in frequency of consumer purchases from froeign online sellers. These private online transactions create audit difficluties for tax authorities. Since purchasers don’t need to pay VAT on smaller purchases, and the cost of enforcing VAT payment on larger purchases is too high. This situation has caused unfair competition between domestic and foreign sellers resulting in tax revenue losses.
In order to solve the current tax levy problem on business tax arising from the cross-border tax-free threshold and reverse charge mechanism, the MOF referred to the OECD suggestion as well as measures taken by the EU, Korea and Japan, etc. to amend the current Value-Added and Non-Value-Added Business Tax Act (hereinafter referred to as the VAT Act) by stipulating that foreign suppliers selling cross-border electronic services to domestic individual purchasers shall register for business in our country or assign a tax-filing agent to handle the matter in order for the government to control tax sources.
The MOF drafted the proposal of the VAT Act and submitted it to the Executive Yuan. The amended draft was passed on the 3515th session on September 22, 2016. The related contents of the draft proposal are as follows：
1.To add the definition of taxpayer and business entity selleing cross-border electronic services.
2.To add the requirement for a business entity selleing cross-border electronic services to apply for taxation registration with the competent tax authority or appoint a tax-filing agent to handle it.
3.To add the requirement for a business entity selleing cross-border electronic services to file a bimonthly VAT return or appoint a tax-filing agent to handle it.
4.To add the penalty on the tax-filing agent for failing to file a VAT return and pay VAT on behalf of the taxpayer.
The MOF expressed that the drafted proposal of the VAT Act was passed by the Executive Yuan and will be submitted to the Legislative Yuan for review soon. The MOF will assert every effort to communicate with various parties in the Legislative Yuan to complete the amended procedure and plan for subsequent enaction or amendment of related regulations.
Contact：Section Chief Ms. Yeh