Taiwan Tax Benefit Application on Article 25 of the Income Tax Act kul2tw

Article 25 (ATC 25) of Taiwan’s Personal Income Tax Law states:

Any profit-seeking enterprise having its head office outside the territory of the Republic of China, and which is engaged in
1)international transport,
2)construction contracting,
3)providing technical services, or
4)machinery and equipment leasing, etc.,
in the territory of the Republic of China, and the cost and expenses of which are difficult to calculate may apply for approval from the Ministry of Finance, or the Ministry of Finance may make the decision to consider 10% of its total business revenue for an enterprise engaged in international transport business, or 15% of its total business revenue for one engaged in any other businesses as its income derived within the territory of the Republic of China regardless whether or not it has a branch office or business agent in the territory of the Republic of China. In such cases, however, the regulation in Article 39 regarding the deduction of losses cannot be applied.

Effective Tax Rate 

For Example:
With ATC 25 Approval
If a foreign company receives ATC 25 advance ruling approval on a technical service contract, deemed profits on a NTD 2 million contract will be NTD 300,000. Net tax payable on the contract revenue will be NTD 60,000 (NTD 300,000*20%).
Without ATC 25 approval
Applicable withholding tax on the same contract would amount to NTD 400,000 (NTD 2 million*20%).

Mechanism of Paying Tax

If the foreign company does not have a permanent establishment in Taiwan, the Taiwan customer should, in accordance with Article 88 of the Income Tax Act, deduct 3% withholding tax and remit the net amount to the foreign company.

If the foreign Company has a permanent establishment in Taiwan, the Taiwan permanent establishment should issue a VAT invoice to the Taiwan customer and book the contract revenue in its accounting record. Tax is paid at the time the corporate income tax return is submitted. The due date is five months after the end of the fiscal year.

Application and Approval Timeline

ATC 25 is an advance ruling application.
Generally, we will suggest  to send out the application before work kick-off , but only after the commencement date of the contract.
It takes approximately one month to obtain approval.

Experienced Professionals Serve You

We have very experienced professionals to serve clients for ATC 25 applications.
We help clients evaluate whether an advance ruling application is appropriate for their circumstances, and assist clients to formulate effective tax planning solutions.

Service Description :

We are quite familiar with this application and elapsed  to provide you the services related to the Article 25 Application of Income Tax Act. Regarding to the procedure, required documents, and our service charges are described as follows:

1. Procedure

1.1 Apply to the Taxation Bureau, Ministry of Finance for the Article 25 Application of Income Tax Act.
Any amendment or extension letter to the contract will be defined as another contract and a separate service charge will be raised.

1.2 Apply to the Revenue Service Office for the stamp tax investigation.

Stamp tax of the contract is calculated by 0.1% of contract value.

2. Required Documents

2.1 Power of Attorney (must be signed and printed on company letterhead)appointing the agent (Evershine) to handle the application.

2.2 The Certificate of Incorporation of  Your Company

2.3 The copy of the contract signed between  Your Company & Taiwan Client.The contract, written in Chinese. If the signed contract is in a language other than Chinese, then the contract must be translated into Chinese. There is no need to sign the Chinese translation. A brief description of the parties that signed the contract.

2.4 Any other supporting documents that tax officer may request upon reviewing the application.

3. Service Charges

3.1 Service fee will be per contract, not including Out–of–Pocket expenses as described in below 3.2.

3.2 Out–of–Pocket expenses:
these expenses may occur by handling the application including taxi, postage, translation fee and stamp tax, etc.

4. Payment Term

4.1 Before starting the application, you will need to pay us the total amount of service fee.

4.2 After received the approval letter and stamp tax investigation letter, you need to pay us the real incurred out–of–pocket expenses.