The Ministry of Finance rendered the Tai-Cai-Shui-10704514390 Circular of May 23, 2018 (hereinafter, the “Circular”) to communicate that under Article 7 of the Value-added and Non-value-added Business Tax Law, if a business operator (including operators in taxed zones and bonded zones) sells bonded goods to overseas customers and obtain foreign exchange income during their storage in a bonded warehouse, a zero tax rate may apply to the business taxes.
The Ministry of Finance stated in its newsletter on May 23, 2018 that since the business taxes in Taiwan are levied under the destination principle, export goods and services are not subject to business taxes since their places of consumption are not in Taiwan. To reduce the product costs of export operators and enhance their competitiveness in global markets, Article 7 of the Value-added and Non-value-added Business Tax Law (hereinafter, the “Law”), in accordance with international practices, provides that a zero tax rate may apply to export goods, quasi-export goods (such as bonded goods) or services so that the input taxes paid by the business operators may be refunded in full as an exemption on their business tax burden.
The Ministry of Finance further indicated that under the circumstances set forth in the Circular, a zero tax rate may apply to a domestic business operator’s export of bonded goods. However, if an overseas customer subsequently sells the bonded goods stored in the bonded warehouse to another business operator in Taiwan and handles the import declaration procedure, the customs will collect a 5% business tax on such imported goods from their consignee or holder on behalf of tax agencies in order to meet the destination principle.