Business Entities Settling Overdue Fines with Project Payments Shall Still Issue Uniform Invoices and Report Business Tax Based on the Project Payments.
The National Taxation Bureau of Taipei, Ministry of Finance stated that business entities undertaking construction projects shall issue uniform invoices, file, and pay business tax based on the project payments. They cannot exempt themselves from issuing uniform invoices by using project payments to settle overdue fines.
The Bureau explained that, according to Paragraph 1, Article 16 of the Value-Added and Non-Value-Added Business Tax Act (hereinafter referred to as the Business Tax Act), the sales amount refers to the total consideration received by a business entity for the sale of goods or services, including any additional fees collected beyond the price of the goods or services. Furthermore, in accordance with Paragraph 1, Article 32 of the Business Tax Act, business entities must issue uniform invoices within the time limits specified in the "Time Limits for Issuing Sales Documents by Business Entities" and deliver them to the buyers. According to these regulations, contractors undertaking construction projects must issue uniform invoices based on the periodic payments stipulated in the construction contract. If a contractor is fined due to delayed project completion, the fine and the obligation to issue invoices as scheduled are separate matters. Contractors cannot use the final project payment to offset overdue fines to evade the obligation to issue uniform invoices, file, and pay business tax.
The Bureau provides the following example to illustrate the situation: Company A undertook an electrical and plumbing project for Company B. Upon project completion, Company A had yet to request payment for the remaining contract amount of NT$3.5 million (including tax). However, due to delayed completion, Company A was fined NT$1 million and chose to offset the fine against the outstanding payment, ultimately receiving NT$2.5 million (NT$3.5 million – NT$1 million). Since the fine and the obligation to issue invoices on time are separate matters, Company A must still issue a uniform invoice for the full NT$3.5 million to Company B in accordance with regulations and cannot simply issue an invoice for the reduced amount of NT$2.5 million.
The Bureau urges business entities to conduct self-reviews. If they have underreported sales amounts or failed to issue uniform invoices in full, they should voluntarily report and pay any outstanding taxes to the relevant tax authority before being reported, investigated by tax authorities, or examined by personnel designated by the Ministry of Finance. In accordance with Article 48-1 of the Tax Collection Act, doing so allows them to pay the overdue tax with interest and avoid penalties.
(Contact: Ms. Yen, Head of the Sales Tax Division; Tel: 886-2-2311-3711 ext.1810)
Reference URL：https://www.mof.gov.tw/Eng/singlehtml/f48d641f159a4866b1d31c0916fbcc71?cntId=ed667feb34f046d2868b2e286f06d3fa