Partial Draft Amendments to the Income Tax Act by the Executive Yuan of Taiwan

To optimize the tax-withholding system, the Executive Yuan of Taiwan adopted the Partial Draft Amendments (hereinafter referred to as the “Draft”) to the Income Tax Act (hereinafter referred to as the “Act”) on May 2, 2024, and submitted it to the Legislative Yuan for deliberation. The key points of the Draft are summarized as follows:

Revision of the Scope of Tax Withholder (Issuer for Tax-Withholding & Tax-Exemption Certificates)

1. Trustees who make payments subject to withholding are added as tax withholders (Article 88, Paragraph 1, Subparagraph 2, and Article 89, Paragraph 1, Subparagraph 2 of the Draft).

2. For the dividends or earnings distributed by a company to a profit-seeking business with its head office outside Taiwan, as well as the income paid by businesses, the tax withholder has been changed from the responsible persons of the business to the business itself (Article 89, Paragraph 1, Subparagraphs 1 and 2 of the Draft).

Revision of Regulations for Reporting, Certificate Issuance and Penalties

1. In the event of a business dissolution, closure, merger, transfer, deactivation or change, or when a bankruptcy case managed by the bankruptcy administrator is concluded by the court, tax-withholding or tax-exemption certificates must be promptly issued and submitted to the relevant tax collection authority within ten days thereafter (Article 89, Paragraph 3 and Article 92, Paragraph 1 of the Draft).

2. For profit-seeking businesses without a fixed place of business in Taiwan, the deadline for payment of taxes withheld, submission and issuance of certificates may be extended by five days in case of consecutive holidays lasting more than three days (Article 92, Paragraph 2 of the Draft).

3. Revision of penalty for failing to report or issue certificates as required

(1) For failing to submit or accurately report on time, or failing to issue tax-withholding exemption certificates on time, a fine ranging from NT$1,500 to NT$20,000 will be imposed, with a notice to submit or issue within a specified period. In case of failure to do so, an additional fine ranging from NT$3,000 to NT$90,000 will be imposed (Article 111, Paragraph 2 of the Draft).

(2) The tax withholder who has withheld taxes in accordance with the Act but fails to submit or accurately issue the tax-withholding certificates on time will be subject to a fine ranging from NT$1,500 to NT$20,000, along with a notice to submit or issue within a specified period. Failure to comply will result in an additional fine ranging from NT$3,000 to NT$45,000 (Article 114, Subparagraph 2 of the Draft).

(3) A profit-seeking business that distributes dividends or earnings and fails to submit or accurately issue the dividend statements on time will be subject to a fine ranging from NT$1,500 to NT$30,000, along with a notice to submit or issue within a specified period. Failure to comply will result in an additional fine ranging from NT$3,000 to NT$60,000 (Article 114-3 of the Draft).