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Constructing a fair tax environment

I. Individual

1.In 2018, the standard deduction, the special deduction for wage income, and the special deduction for the disabled were significantly increased, with increases of from 33% to 56% to relieve the tax burden on middle- and low-income earners and wage earners and improve the distribution of income.

2.The amount of the special deduction for pre-school children of individual income tax was significantly raised per child per year to NT$120,000 from 2018 to relieve the tax burden on middle- and low-income earners and taxpayers who have children. 

3.From 2019 the means to calculate wage income is based on a lump‐sum deduction or an itemized expense deduction, including vocational clothing expenses, upgrading training expenses, and vocational tool expenses, with an upper limit of 3% of the wage income for each. The taxpayer can choose the best option.

4.In order to make effective use of government resources and relieve the tax burden on households with disabled individuals, from 2019, the taxpayer, his/her spouse, or any dependent who has a physical or mental disability and requires long-term care services as announced by the Ministry of Health and Welfare, is entitled to the special deduction of NT$120,000 for long-term care per person per year.

5.To prevent speculators from hoarding houses and to impose tax fairly, the tax burden of holding a house used for non-residential purposes is properly raised. Article 5 of the House Tax Act is revised as follows: for a house used for residential purposes by the owner or leased for public welfare purposes by a landlord registered with the local government as a charity, the tax rate shall be 1.2 %; for the house used for residential purposes, which is not occupied by the owner, the rate is raised to the interval between 1.5% and 3.6 % from the interval between 1.2% and 2%, and provisions are added so that the local government may stipulate different rates based on the number of houses a person owns; for operating a private hospital, a private clinic or a professional office, the rate is raised to the interval between 3% and 5% from the interval between 1.5% and 2.5%.

6.The amendments to Subparagraph 9, Paragraph 1, Article 7 of the Vehicle License Tax Act were promulgated on December 6, 2017. Each social welfare institution or organization is now allowed to have more than three vehicles exempted from the vehicle license tax for those vehicles with fixed assisting equipment to carry disabled persons and those who need long-term care, as well as a particular sign showing exclusive use by social welfare institutions or organizations which have an identification document issued by the social welfare authorities and authorized by the municipal or county (city) government.

7.In order to fulfil carbon reduction policies and maintain tax fairness, Article 12 of the Commodity Tax Act has been amended, stipulating that hybrid electric vehicles taxed at one-half (1/2) of the statutory tax rates, the hybrid electric vehicles shall be in conformity with the standard announced by the MOF.

8.The house and land transactions income tax system was implemented in 2016, and the taxation on real estate in the Specifically Selected Goods and Services Tax Act was suspended at the same time. The resultant income tax revenues are used for expenditures on housing policy and long-term social care services to preserve housing justice, narrow the wealth gap, and allocate social resources rationally.

9.In order to prevent high-income individuals from utilizing donations of non-cash property for their tax planning, to maintain taxation justice and to conform with the principle of taxation by law as provided by Article 19 of the Constitution, the MOF amended Article 17-4 of the Income Tax Act concerning itemized deductions for non-cash property donations, which came into force on August 1, 2016.

10.Article 23 of the Tax Collection Act has been amended, extending the enforcement period by 5 years for cases in which the unsettled tax arrears have been transferred before March 5, 2007, the amount of tax owed before March 4, 2017 is more than NT$10 million, or the taxpayer has been determined by the court to be arrested or managed and issued by the executive enforcement agency, in order to achieve taxation fairness and social expectations, and taking into account the rights of taxpayers and safeguarding national taxation obligations.

11.Article 15 of the Long-Term Care Service Act stipulates that the tax revenues from raising the estate and gift tax rates and tobacco and alcohol tax amounts as sources will be allocated to the long-term care service development fund. To help the sustained development of the long-term care system, Articles 7, 20, and 20-1 of the Tobacco and Alcohol Tax Act and amendments to the Estate and Gift Tax Act were promulgated on May 10, 2017, raising the Tobacco and Alcohol Tax amount of tobacco products from NT$590 to NT$1,590 per thousand sticks (per kilogram), and adjusting the estate tax and gift tax from a single flat tax rate of 10% to progressive tax rates of 10%, 15%, and 20%.

12.The Taxpayer Rights Protection Act was enacted on December 28, 2016, and implemented on December 28, 2017. In order to protect the rights of taxpayers, relevant sub-regulations, operation manuals, and declaration forms related to the Taxpayer Rights Protection Act have been established as a guideline for both tax collection authorities and taxpayers.

13.Article 3 and 11 of the Enforcement Rules of the Taxpayer Rights Protection Act have been amended. From January 1, 2018, taxpayer’s basic living expenses are reflected in the revised amounts for the exemption, standard deductions (or itemized deductions), special deduction for savings & investment, and special deduction for disability, special deduction for pre-school children. In the case that the taxpayer’s basic living expenses exceeds the total amount of the above-mentioned deductions (ie, the difference in basic living expenses), the difference may be deducted from the total amount of comprehensive income to protect the people’s right to life.


II. Profit-Seeking Enterprise

1.The announcement lifted the restrictions on the application of the export tax refund threshold effectively assists the industry to lower the threshold for receiving orders and enhance export competitiveness.

2.The tax rate of the profit-seeking enterprise income was raised from 17% to 20% from 2018. However, in consideration of low-profit profit-seeking enterprises, those with a taxable income of not more than NT$500,000 are subject to annual adjustments with a tax rate of 18% for the taxable year 2018, a tax rate of 19% for the taxable year 2019, and a 20% rate for the taxable year 2020 and after.

3.The MOF reduced the surtax rate on undistributed earnings of companies from 10% to 5% from 2018. By reducing the income tax burden of companies that must accumulate their own capital by retaining their surplus, companies having difficulty fund-raising or small and medium-sized startups can accumulate investment momentum into future transformation and upgrading.

4.From 2018, a profit-seeking enterprise organized as a sole proprietorship or a partnership shall be exempt from computing and making a profit-seeking enterprise income tax payment. The profit-seeking enterprise income shall be incorporated into its sole proprietor’s or partners’ “Business Income” and be levied as individual income tax.

5.The MOF abolished the partial imputation tax system on dividends and deleted the rule that profit-seeking enterprises shall set up an imputation credit account, calculate, and record the amount in the said accounts as well as related penalties starting on January 1, 2018, simplifying the tax system.

6.The VAT system for foreign companies selling cross-border electronic services entered into force on May 1, 2017. From that day, foreign companies selling cross-border electronic services to domestic individual consumers shall register and pay VAT in our country to ensure tax sources and maintain tax fairness. From 2017, the income derived from foreign suppliers selling cross-border electronic services to domestic purchasers via the internet or other electronic ways shall be subject to taxation  in accordance with the relevant regulations. The abovementioned measures complete the tax declaration and payment mechanism for foreign suppliers selling cross-border electronic services, control tax sources, and maintain the fairness of taxation.

7.In order to prevent legitimate domestic businesses suffering disadvantages of unfair market competition arising from importers’ abusing the Low Value Consignment Relief (LVCR) by splitting a declaration over a long period of time, the “Principles of Identifying Frequent Importations”, which stipulates that the frequently imported low-value consignments whose frequency of importation exceeds six times every half a year are prohibited from applying for the LVCR, was announced on May 26, 2016 and took effect on July 1, 2017.

8.To balance the duty and tax burden imposed on domestic and foreign businesses and to provide a fair environment of competition for domestic and foreign businesses, the threshold of the LVCR has been reduced from NT$3,000 to NT$2,000, which took effect on January 1, 2018.

 

III.Synergistically stabilizing prices

1.Reducing import tariff on commodities and oils flexibly and temporarily to stabilize prices.

2.Implement flexible exemption from business tax on imported wheat, barley, corn soybean and bulk commodities to reduce inflationary pressures and the burden on consumers.

3.Flexibly reduce the commodity tax on gasoline and diesel oil by the amount of NT$1.3 and NT$1.4 to temporarily relieve inflationary pressures caused by increased gasoline and diesel oil costs on taxpayers.

4.The tax on cooking rice wine is in accordance with the tax rate of the Tobacco and Alcohol Tax Act to relieve the burden on purchasing cooking rice wine, reduce the incentive of consuming bootleg rice wine, and protect the safety and health of consumers.

 

IV. Strengthen Tax Administration

1. In order to promote the digitization of individual income tax deduction documents, the MOF has been proactive in providing deduction information to individual taxpayers. The number of taxpayers who utilized this measure was 4.55 million in 2020. On average, each taxpayer saved the equivalent of 34 sheets of paper receipts.

2. In order to simplify the procedures for filing tax returns and to streamline the tax collection authority’s administration, a pre-calculation service was put into practice. The number of taxpayers who utilized this measure to complete their income tax returns was 2.32 million in 2020, with a ratio to total taxpayers of about 36%.

3. The MOF promoted the policy of paperless issuance of various withholding and non-withholding tax statements for income tax in 2014, so as to reduce the consumption of paper, simplify tax administration, reduce the compliance cost on tax withholder and enhance tax administrative efficiency. Furthermore, in order to expand the scope of the paperless issuance of various withholding and non-withholding tax statements for income tax, a trial service measure was implemented in 2015 allowing profit-seeking enterprises, organizations or institutions, and professional practitioners to inquire about their income data online using their digital certificate. From January 1, 2019, the MOF further promoted a policy to simplify tax administration and provide more convenience for taxpayers. When withholding agents file withholding statements of resident individuals having income subject to separate taxation, such income can be included in the scope of the policy of paperless issuance of various withholding and non-withholding tax statements for income tax.

4. From January 1, 2017, the MOF implemented the “Plan of Filing the Various Withholding Tax Statements for Non-residents via Internet.” In accordance with the Income Tax Act, the tax withholder who pays withholding income to non-residents and has paid the withholding tax within 10 days from the date of withholding may utilize the internet to file withholding tax statements, a measure which is both time-saving and convenient.

5. In order to enhance simplified and convenient services, and promote the quality of tax service for administrative efficiency, from July 1, 2019, the platform service for non-residents’ designated tax service agent or custodian institution to check and download withholding tax statement information online was put into practice.

6. From January 1, 2017, profit-seeking enterprises can file their account books to the collection authority-in-charge via the internet or other media. This enhances the electronic environment for profit-seeking enterprises, reduces audit compliance costs, and implements the paperless policy for a green environment. A total of 6,165 profit-seeking enterprises have used the service as of June 11, 2019.

7. In 2019, “The Regulations Governing the Account Books and Vouchers of Profit-Seeking Enterprises Managed by the Competent Tax Authorities” was amended. When the competent tax authority conducts investigations, profit-seeking enterprises can submit their electronic files of account books and vouchers processed electronically and stored in a storage medium instead of printing out the files on paper to achieve energy conservation and carbon reduction, to simplify tax administration, and to provide more convenience for taxpayers.

8. Since November 1st, 2017, the eTax Document Service of the Ministry of Finance has continually provided several online services, such as the issuance of payment certificates and tax bills of House Tax, Land Value Tax, Land Value Increment Tax, and Deed Tax; the issuance of payment certificate for Vehicle License Tax; the re-issuance of various Gift Tax certificates within 5 years, individual income, personal property, and Individual Income Tax registration; and the re-issuance of Profit-seeking Enterprises Income Tax. The multiple channels of online service aim to make the application process for tax documents more efficient so that taxpayers may obtain eTax documents anytime, anywhere.

9. In order to expand the online individual income tax filing system, the online tax filing system for Microsoft Windows users was launched in 2019, following the successful rollout for Mac users in 2018. Taxpayers can easily and conveniently file tax returns without downloading software. A total of 1.9 million cases were declared through online tax filing system in 2020.

10. Customs has been continuously promoting and refining the Authorized Economic Operator (AEO) certification and management system, so as to encourage the voluntary compliance of traders, facilitate the customs clearance of low-risk shipments, safeguard cargo security, and enhance the competitiveness of traders.  As of the end of August 2020, there were 781 AEOs in Taiwan, including 403 general AEOs and 378 security and safety AEOs. These AEOs’ trade volumes accounted for approximately 48% of our total trade volumes.

11. Customs adopted Radio Frequency Identification (RFID) e-seal system to control and monitor containers entering and exiting at container terminals in various port areas. There are approximate 40,000 transshipment containers which do not need to be escorted by customs officers. We saved about NT$24 million in operational cost of carriers and 65,000 hours of operational time annually.

12. Customs established the “Customs-Port-Trade Single Window” for cross-border trade by integrating three existing IT systems, which were e-Customs, e-Trade, and e-Port, to form a one-stop service environment for traders. It also reduces the operation cost for traders by about NT$860 million per year.

13. The “Advance Cargo Information System” aims to integrate the sea and air cargo clearance systems and to harmonize the data from Customs and licensing agencies by using WCO Data Model so that it lays a foundation for cross-border data exchange.

14. The foreign travelers tax refund e-service, authorized downtown refund service and in-store small-amount VAT refund service have been provided to improve refund services for foreign travelers, strength our international competition, create value for the tourism industry, and increase job opportunities in related industries.

15. The implementation of the "Paperless System on the Import/Export Declaration Document Review" will enable the declarants to transmit the relevant electronic files of the documents to be cleared to the Customs after receiving the approval notice. It is an environmentally-friendly and efficient initiative and can save  time in customs clearance.

16. Promote the combination of electronic payment and cloud-invoices, using cloud-invoice mobile barcode, electronic certificates and credit card as cloud-invoice carriers.

(1)There are 25 credit card issuing banks engaged in credit card cloud-invoice carriers, and 21 banks with the combination of mobile payment tools and cloud-invoicing.

(2)Currently multiple mobile payment operators (such as O'Pay, JKOS, etc.) have provided mobile barcode display function on e-payment apps, which will effectively expand the use of cloud-invoices.

17. Improve Filing Measures of Estate and Gift Tax

(1)On July 1, 2017, the MOF implemented a service whereby taxpayers may use their National Health Insurance IC card or Financial CA to file their estate and gift tax returns via the internet; further, on July 1, 2018, the MOF implemented a service whereby taxpayers may file their estate and gift tax return via the internet with attached documents.

(2)The MOF continues to implement services whereby taxpayers may apply for electronic tax documents of the re-issuance of estate and gift tax certificates within the past five years (payment certificates, tax exemption certificates, estate tax exclusion certificates, gift tax exclusion certificates) via the internet where these certificates have been issued by the taxation authorities.

(3)From January 1, 2018, the MOF implemented a service whereby taxpayers may use their Citizen Digital Certificate, National Health Insurance IC card, or Financial CA to apply to the taxation authority for an access code to download “estate property reference materials.”

(4)In order to simplify procedures and offer public service for filing gift tax and estate tax, has promoted a cross-office/regional service for gift tax and estate tax filing from May 1, 2019 and December 1, 2019. For property gifts or estate that qualify for certain conditions, taxpayers can choose any branch office of the tax authorities to file their gift tax or estate tax; therefore, taxpayers won’t need to file their gift tax or estate tax in the tax office of their household registration.

(5)The MOF has provided one-stop service for cross-district inquiry of the financial heritage information of the decedent since July 1, 2020. Taxpayers can inquire the financial heritage information of the decedent at any branch office of the tax authorities. After receiving the application, the branch office will transfer the document to the financial institutions, and the taxpayer will receive the response from the financial institutions directly.

18. Promoting mobile tax payment services and adding TW FidO Taiwan mobile identity services

(1)Through the promotion of mobile tax payment services, taxpayers can pay taxes using mobile devices. Since 2012, mobile technologies have been integrated and tax payment services have expanded to a number of mobile devices, such as mobile web pages, QR code, mobile payment and Taiwan Pay. Tax services have been greatly simplified, reducing time spent on tax payment procedures.

(2)With the addition of TW FidO Taiwan mobile identity, individuals can apply to bind their mobile devices with citizen digital certificates, and use their mobile device to identify and log in to land value tax online inquiring system to pay tax during the land value tax paying statutory period in November 2019. Furthermore, taxpayers can also use TW FidO to log in to the related e-filing system to declare and pay tax during the individual income tax period from May 2020 to June 2020.

19. To promote the interface of the automatic payment system of amusement tax by motion picture screening operators with the computerized box-office database of the Ministry of Culture, starting on August 1, 2018, operators can automatically import related application materials and complete the application for declaration and tax reduction or exemption by inputting their screening license number. This system will save time, reduce costs, simplify operations, and offer greater convenience.

20. To promote diversified services of uniform invoice redemption, since January 1, 2019, the MOF created a redemption APP, adding physical redemption sites such as First Bank, Chang Hwa Commercial Bank, Agricultural Bank of Taiwan, credit departments of farmers’ and fishermen’s associations, credit cooperatives, four convenience stores, PX mart, and Simple Mart to disburse the prizes instead of using the Post Office.

21. In order to implement the authorization system for the customs declaration of express consignments, the measure of prohibiting the unauthorized import express consignments from customs declaration has been implemented since May 16, 2020, whereby Customs will not accept the simplified customs declaration filed by the consignees unless they have completed the registration of the Real-Name Authorization APP or they have submitted the paper-based letter of authorization has been submitted to the customs brokers. As of the end of August 2020, the number of registered real-name authorization was 1,687,892, and the number of customs declarations completed with real-name certification accounted for 36.94% of the number of simple declarations.

Release date:2019-09-27 Last updated:2020-09-29 Click times:676