The Ministry of Finance issued the Tai-Cai-Shui-10704603930 Circular of October 3, 2018 (hereinafter, the “Circular”) to interpret relevant requirements for filing and paying business taxes on the exchange commissions received from overseas merchants and forwarded by an overseas acquirer to a domestic credit card issuer or on the exchange commissions received from domestic merchants and forwarded by a domestic acquirer to an overseas credit card issuer.
Exchange commissions received from overseas merchants and forwarded by an overseas acquirer to a domestic credit card issuer may be governed by Article 7, Subparagraph 2 of the Value-added and Non-value-added Business Tax Law (hereinafter, the “Business Tax Law”) and Article 11, Subparagraph 2 of the Enforcement Rules of the same law, and foreign exchange supporting documents or reconciliation statements of a domestic settlement institution or an international credit card organization may be included in application for a zero tax rate.
According to the Circular, exchange commissions forwarded by a domestic acquirer from domestic merchants to an overseas credit card issuer are compensation for sales services to business operators in Taiwan. Therefore, if the agreement between a domestic acquirer and its merchants or relevant collection receipts indicate that the exchange commissions may be collected on behalf of others, the business taxes shall be filed and paid by domestic merchants in accordance with Article 36 of the Business Tax Law. If the above requirement is not met, a domestic acquirer shall file and pay business taxes on the fees collected from the merchants and the exchange fees paid to a foreign credit card issuer in accordance with Articles 35 and 36 of the same law.
This Circular further points out that this Circular shall apply to cases in which the business taxes were not yet assessed prior to the issuing date of this Circular or cases in which an application has been filed in accordance with this Circular. In case of any excess tax payment, a refund will be granted. For domestic merchants and acquirers which do not file and pay business taxes before January 15, 2019, the competent tax authority shall provide active facilitation, and they are exempt from the penalties under Article 51 of the Business Tax Law and Article 44 of the Tax Collection Law.