Tax Withholders Who Actually Afford Withholding Tax Can Apply for Applicable NPR and DPCR of Cross-border Electronic Services Transactions
The National Taxation Bureau of the Southern Area, Ministry of Finance (hereinafter “the Bureau”) stated that, where a foreign profit-seeking enterprise without a fixed place of business or business agent within the R.O.C. sells cross-border electronic services, for income within the withholding tax scope under Article 88 of the Income Tax Act, the tax withholder shall withhold the tax from the payment based on the prescribed withholding ratio. The domestic purchaser, namely the tax withholder, having actually afforded the withholding tax of remuneration derived from the R.O.C., can apply for the applicable net profit ratio (hereinafter NPR) and domestic profit contribution ratio (hereinafter DPCR) with the tax authority-in-charge before the payment, and therefore, the taxable ncome and the withholding tax shall be calculated based on the approved NPR and DPCR.
For example, Company A within the R.O.C., purchases online advertising through the website set up by a foreign enterprise, Company B, which has no fixed place of business or agent in the R.O.C., and has paid NT$100,000 as remuneration. According to the regulations, Company A should withhold NT$20,000 at a withholding rate of 20%. However, if Company A and Company B agreed that the income tax ould be borne by Company A, Company A can apply for the applicable NPR (assumed 30%) and DPCR (assumed 50%) with the tax authority-in-charge to calculate thetaxable income before the payment. After approval, the withholding tax would then be NT$3,000 (NT$100,000 × 30% × 50% × 20%).
The Bureau explained that, when applying for the applicable NPR and DPCR with the tax authority-in-charge, in addition to filling out the “Application Form for Net Profit Ratio and Profit ribution Ratio Applicable to Cross-Border Electronic Services Provided by Foreign Profit-Seeking Enterprise (for use of tax withholder),” the said tax withholder is required to provide the contracts, tions of nature of business, onshore and offshore transaction flows, major business items, and relevant documents proving that the tax withholder afforded the withholding tax and other sufficient vidence for verification.
The Bureau would like to remind tax withholders to visit the website of eTax portal, Ministry of Finance (https://www.etax.nat.gov.tw) to check out the approved list of the applicable NPR and DPCR of cross-border electronic services providers before the application. If there is no information available on the announcement of electronic service providers related to the trainsation, tax olders can prepare the required documents and apply with the tax authority-in-charge to assess the applicable NPR and DPCR.
Press Release Contact: Ms. Wu
Profit-seeking Enterprise Income Tax Division
TEL: 06-2223111 ext.1103
Reference URL：https://www.mof.gov.tw/Eng/singlehtml/f48d641f159a4866b1d31c0916fbcc71?cntId=1bac044bd6e44ef4bf68b122e3c5c944