The income derived from manpower dispatch business by foreign profit-seeking enterprises is not applicable to Article 25 of the Income Tax Act.
The National Taxation Bureau of Kaohsiung expressed that any foreign profit-seeking enterprise engaged in international transport, construction contracting, providing technical services, or machinery and equipment leasing, etc., in the territory of the Republic of China, and the cost and expenses of which were difficult to calculate, may apply to the Ministry of Finance for the applicability of Paragraph 1 of Article 25 of the Income Tax Act. That is, ten per cent (10%) of its total business revenue for an enterprise engaged in international transport business; or fifteen per cent (15%) of its total business revenue for an enterprise engaged in any other businesses as its income derived within the territory of the Republic of China is calculated as the profit-seeking income tax.
The Bureau expressed that, since cross-border trading has become more frequent following the rise of globalization, the number of applications for the applicability of Paragraph 1 of Article 25 of the Income Tax Act also increased year-by-year. In the Bureau’s jurisdiction, most of the applications are related to the provision of technical services. In one example, the Bureau also discovered that a foreign profit-seeking enterprise engaged in manpower dispatch business signed a manpower dispatch service contract with a domestic enterprise and asserted that its income was generated mainly from technical services. Nevertheless, according to the contents of contract, the income generated by the foreign profit-seeking enterprise accounts for employment agency fee or consideration of human resource management instead of technical services. Therefore, in accordance with Paragraph 2 of Point 8 of the “Principles for Reviewing Foreign Profit-Seeking Enterprises’ Application for Calculating Income Tax in Accordance with Paragraph 1 of Article 25 of the Income Tax Act”, manpower dispatch business is not within the scope of the applicability of Paragraph 1 of Article 25 of the Income Tax Act. Therefore, for foreign labor employment agencies that do not have a fixed place of business or business agent within the territory of the Republic of China, the host employer, namely the domestic enterprise to which the employee is dispatched, shall withhold the income tax in accordance with the total contract price and prescribed tax rate when making the payment.
The Bureau provided the following example: A foreign profit-seeking enterprise, Company Z, signed a technical service contract with Company A of our country regarding the dispatch of a foreign technician for engaging in the operations of special machinery. Nevertheless, when reviewing the application, the Bureau found that Company Z only introduced a technician in compliance with Party A’s qualifications; and that the technician would be commanded, supervised, and assessed by Party A upon the arrival thereof in Taiwan. This indicates that Company A is in fact the employer thereof, whereas Company Z only provides assistance in administrative works and dispatch services, instead of technical assistance, during the contract fulfillment process. The Bureau therefore determined that Company A provided labor dispatch services instead of technical services within the territory of the Republic of China and Paragraph 1 of Article 25 of the Income Tax Act was therefore not applicable to this case.
The Bureau would like to remind foreign profit-seeking enterprises desiring to apply for the applicability of Paragraph 1 of Article 25 of the Income Tax Act that, for calculating the income tax, the technical services thereof should be within the scope of planning, design, installation, testing, maintenance, trial run, counseling, advice, review/approval, supervision, certification, personnel training, and other service type services, except for manpower dispatch services. Before submitting the said application, foreign profit-seeking enterprises can refer to “Principles for Reviewing Foreign Profit-Seeking Enterprises’ Application for Calculating Income Tax in Accordance with Paragraph 1 of Article 25 of the Income Tax Act” and pay attention to relevant restrictions. If there are any questions, feel free to dial the free service hotline 0800-000-321 for more information or go to the Bureau’s website (https://www.ntbk.gov.tw) to make an inquiry online through the national tax smart customer service “National Tax Assistant”.
Provided by: Profit-seeking Enterprise Income Tax Division
Contact person: Ms. Wang telephone number: (07)7256600 ext.7140
Reference URL：https://www.mof.gov.tw/Eng/singlehtml/f48d641f159a4866b1d31c0916fbcc71?cntId=3a8ce5f319004a689051a66ee5fc73ab