Teresa Huang and Jhen-Yi Chen
I. Regulatory objectives and legal basis
1. In view of the prosperous development of online trading, it is increasingly common and frequent for domestic buyers (i.e., consumers) of Taiwan to use the Internet to purchase electronic services from overseas enterprises, institutions, groups and organizations which have no fixed business location in Taiwan. Under Article 36 of the original Value-added and Non-value-added Business Tax Act (hereinafter, the “Business Tax Act”), which was later amended in 2016, domestic buyers using the Internet to purchase electronic services from the above-mentioned foreign enterprises, institutions, groups or organizations shall assume tax payment obligations. However, the taxation cost is relatively high if the buyer is a natural person, not to mention that the consumption status of a buyer is difficult to ascertain due to the secrecy of online trading information. As a result, the tax sources are difficult to identify. Therefore, Article 2-1 of the Business Tax Act was amended in 2016, in reference to the Base Erosion and Profit Shifting (“BEPS”) initiative of the Organization of Economic Development and Cooperation (“OECD”) and to the practices in the European Union and countries like Korea and Japan, to specifically stipulate that foreign operators that engage in cross-border sale of electronic services to individual consumers of Taiwan via the Internet shall apply for tax registration in Taiwan and pay relevant taxes in order to balance fiscal fairness with the simplicity of tax administration and to grasp tax sources. In addition, pursuant to Article 7-1 of the Regulations Governing the Use of Uniform Invoices and circulars from the Ministry of Finance, offshore e-commerce operators are required to issue cloud invoices beginning with January 1, 2019, and no penalty will be imposed during a one-year grace period. Beginning with January 1, 2020, if cloud invoices are not issued pursuant to law, the competent authority will impose a penalty directly.
2. Scope of application of the above legal provisions as highlighted below:
(1) An “offshore e-commerce operator” is defined as a foreign enterprise, institution, group or organization that operates cross-border e-commerce, provides e-commerce services (i.e., the sale of electronic services) and directly collects service charges from natural person consumers in Taiwan without a fixed business location within the territories of Taiwan (Articles 2-1 and 6 of the Business Tax Act, Article 7-1 of the Regulations Governing the Use of Uniform Invoices and Article 1 of the Regulations Governing the Levy of Business Taxes on Cross-border Electronic Service Transactions).
(2) The “electronic services” are defined as the services which use digital technologies to provide storage and transformation for use, including:
(i) Services that provide download and save to computer equipment or mobile devices (such as smartphones or tablet PCs) for use via the Internet or other electronic transmissions;
(ii) Services which are used in digital formats without requiring download and save in any devices and may be used on the Internet or via other electronic transmissions, including online gaming, advertisements, video browsing, audio broadcasting, information contents (such as movies, TV dramas, music, etc.), interactive communications, etc.;
(iii) Other services provided for use via the Internet or other electronic means, such as services provided for use in physical locations via the network platforms of offshore e-commerce operators (the amendment reasons for Article 2-1 of the Business Tax Act and Article 2 of the Regulations Governing the Levy of Business Taxes on Cross-border Electronic Service Transactions).
(3) The “onshore natural persons” are defined as follows:
(i) If the services so purchased do not have any physical usage location, they refer to individuals having a domicile or residence within Taiwan or those subject to the following circumstances: (a) they use computer equipment or mobile devices to purchase services by accessing the Internet through electronic, wireless or fiber optic technologies or by other electronic means with the equipment or devices installed within the territories of Taiwan; (b) they use mobile devices to purchase services with the country code of the mobile phone numbers of the buyers being the code of the Republic of China (Taiwan) (886); or (c) transaction-related information lends itself to the determination that the buyer is a natural person within the territories of Taiwan, e.g., the buyer’s billing address., the payment bank account information, the network address (IP address) of the equipment or devices used by the buyer, and the user identification code of the device (SIM card).
(ii) They refer to the buying individuals if the services so purchased have physical usage locations within the territories of Taiwan. The location for the use of the services is determined as follows: (a) the provision of the services is linked to real estate (e.g., services relating to housing accommodations or maintenance of buildings), and the real estate is located within the territories of Taiwan; (b) the transportation services as provided are used within the territories of Taiwan; (c) all kinds of services for events such as performances or exhibitions as provided are used within the territories of Taiwan; or (d) other services are used within the territories of Taiwan (Article 2 of the Regulations Governing the Levy of Business Taxes on Cross-border Electronic Service Transactions).
(4) A “tax registration” obligor means that if the annual sales revenue generated by an offshore e-commerce operator from the sale of electronic services to onshore natural persons exceeds NT$480,000, it shall handle the tax registration on its own or retain a tax agent to do so pursuant to law (Article 3 of the Regulations Governing the Levy of Business Taxes on Cross-border Electronic Service Transactions, Article 28-1 of the Business Tax Act and Chapter 3 of the Rules for Tax Registration).
(5) “Cloud invoices” are defined as electronic invoices which are issued, transmitted or received pursuant to applicable requirements without printing filing copies for electronic invoices for an operator’s sale of goods or services to buyers who use carriers approved by the Ministry of Finance or who designate their donation to agencies or organizations (Article 7-1, Paragraph 1 of the Regulations Governing the Use of Uniform Invoices).
(6) Offshore e-commerce operators that meet the above requirements shall issue cloud invoices and deliver the cloud invoices to the buyers (Article 7-1, Paragraph 2 of the Regulations Governing the Use of Uniform Invoices).
II. Current situations concerning the issuance of cloud invoices in practice
1. Issuance of invoices by offshore e-commerce operators:
According to statistics as of March 19, 2020, currently 138 offshore e-commerce operators have completed tax registration (113 are shown to be in operation), and only 76 offshore e-commerce operators have completed the issuance of cloud invoices.
2. The process for issuing cloud invoices by offshore e-commerce operators:
For details, please visit the website of the Ministry of Finance at:
III. Attitude of the competent authority in terms of control and enforcement as well as liabilities for legal violations
1. A search of past adjudications, decisions on administrative appeal and decisions does not indicate that there is any offshore e-commerce operator penalized for failure to issue cloud invoices. However, since the grace period is over, the competent authority will impose a penalty directly in case of failure to issue cloud invoices pursuant to law, beginning with January 1, 2020. According to the explanation of an official from the National Taxation Bureau of Taipei as quoted in a recent media report, the National Taxation Bureau will send a disposition to 37 offshore e-commerce operators which fail to issue the cloud invoices. A fine of NT$3,000 to NT$30,000 will be imposed the first time. If the violation is not rectified, the penalty will be imposed successively for each violation.
2. The following table summarizes the common types of legal violations and legal liabilities that may be involved when offshore e-commerce operators fail to issue cloud invoices pursuant to relevant requirements:
|Types of Violation||Penalty Amount and Other||Legal Basis|
|(1) Failure of a uniform invoice to specify the required information or inaccuracy of such information||
||Article 48 of the Value-added and Non-value-added Business Tax Act|
|(2) Failure to file a statement on uniform invoices and to pay the business tax based on the payable tax amount 30 days beyond the required deadline||
||Article 51 of the Value-added and Non-value-added Business Tax Act|
|(3) Failure to issue a uniform invoice or insufficient sale amount in a uniform invoice||
||Article 52 of the Value-added and Non-value-added Business Tax Act|
|(4) Failure to provide, obtain or maintain a voucher||
||Article 44 of the Tax Collection Act|
|(5) Failure to transmit uniform invoice information for record to the integrated service platform of the Ministry of Finance for electronic invoices||
||Article 15-1 of Uniform Invoice Award Regulations|
IV. Conclusions and suggestions
To accommodate the tax challenges from digital economy in recent years, it has been an international tax trend that governments of various countries have been striving to jointly prevent enterprises from reducing their tax obligations via all kinds of tax planning, or to eliminate existing double taxation through intergovernmental cooperation mechanisms, and to ensure that the countries where the consumers are located can collect value added taxes (VAT) and goods and services taxes (GST). In addition, the compulsory requirement that cloud invoices shall be issued is an important legislative measure for government agencies to effectively grasp the sources of tax base. Beginning with January 1, 2020, offshore e-commerce operators are required by law to issue cloud invoices for their service charges collected from natural persons in Taiwan for the provision of electronic services. However, according to the above-mentioned actual situations concerning the issuance of the invoices, there are still some offshore e-commerce operators who have not followed relevant procedures and thus run the risk of being penalized. Therefore, it is recommended that such offshore e-commerce operators who are required to follow the procedure for issuing cloud invoices should introduce corresponding processes as soon as possible so to ensure their compliance with relevant legal requirements.
 The authors are lawyers at Lee, Tsai & Partners. However, the contents of this article merely reflect personal opinions and does not represent the position of this law firm.
 MOF’s integrated electronic invoice platform: list of offshore e-commerce operators that have issued cloud invoices https://www.einvoice.nat.gov.tw/ein_upload/html/ESQ/ESQ902W.html (Last browsed on March 19, 2020)
 “National Taxation Bureau will impose penalties on 37 offshore e-commerce operators which fail to issue the cloud invoices”, Commercial Times, March 18, 2020 https://m.ctee.com.tw/livenews/aj/a07659002020031819014667 (Last browsed on March 19, 2020)