Advance Ruling

Advance Ruling - Application Under Article 25 of Income Tax Regulation

Withholding tax at the rate of 20% may apply to billing raised by a foreign company with no permanent establishment in Taiwan. The withholding tax rate may be reduced to effectively 3.75% via advance ruling application to Ministry of Finance under Article 25 of Income Tax Regulation.

Article 25 states "Company with head office situated outside of Taiwan that provides technical services or equipment rental within the territory of ROC, if having difficulty in calculating and apportioning costs may lodge an application to our Ministry of Finance to apply to treat 15% of the income so received from ROC to be its deemed taxable income."

The implication is that if advance ruling is obtained, 15% of the fees paid to foreign entity from Taiwan for services rendered will be deemed to be profits. Taiwan Tax Authority will require the payer to withhold 25% of the 15% fee as withholding tax. This in effect reduces tax burden from normal withholding tax rate of 20% to 3.75% (15%*25%).

Grant Thornton Tax Specialists have years of experience in assisting clients to apply for advance ruling s with Ministry of Finance. We can assist you to present your case and guide you from possible pitfalls.