Taiwan VAT Rate, Business Compliance, and Refunds

Value-Added Tax, or VAT, is a form of consumption tax applied to the sale of goods and services within Taiwan. It functions by adding a tax at each step of the supply chain, from production to the final sale to the consumer. For businesses, the system allows them to deduct the VAT they pay on their own purchases of goods and services (input VAT) from the VAT they collect on their sales (output VAT). This structure ensures that the tax is ultimately borne by the final consumer, making it an indirect tax that is integrated into the retail price of most items.

Applicable VAT Rates in Taiwan

The business tax system in Taiwan includes both Value-Added Tax (VAT) and Gross Business Receipts Tax (GBRT), with VAT being the more common type for general industries. The standard VAT rate is 5% and applies to most goods and services sold within the country. This single rate is levied on transactions at each stage of the production and distribution process.

Certain transactions are designated as zero-rated, meaning they are technically taxable but at a 0% rate. This allows businesses to reclaim any input VAT they incurred in the production of these goods or services. Examples of zero-rated items include the export of goods from Taiwan and services that are rendered within Taiwan but consumed exclusively in a foreign country. This policy enhances the competitiveness of Taiwanese exports.

In contrast, some goods and services are classified as exempt from VAT. Unlike zero-rated items, businesses supplying exempt goods cannot recover the input VAT paid on their related expenses, making this unrecovered tax a business cost. Examples of exempt transactions include the sale of land, specific healthcare services, and certain financial products from banking and insurance institutions.

VAT Compliance for Businesses

Businesses operating in Taiwan are required to register for VAT if their sales activities meet certain thresholds. For most domestic enterprises, VAT registration is a standard part of the business setup process. Foreign e-commerce companies providing digital services to Taiwanese individuals must register for VAT if their annual sales exceed TWD 600,000.

The standard procedure for VAT compliance involves filing returns on a bimonthly basis. These returns must be submitted to the tax authority by the 15th day of the month following the end of each two-month reporting period. At the time of filing, the net amount of VAT owed must be remitted. Businesses must maintain all VAT-related records and invoices for a minimum of seven years.

A feature of Taiwan’s system is the Government Uniform Invoice (GUI). This is a mandatory, government-printed or approved invoice that businesses must issue for all transactions. The GUI system, which includes electronic versions, serves as the primary tool for the tax administration to track sales and ensure proper VAT collection. Each invoice has a unique serial number, which helps prevent tax evasion.

Tourist VAT Refund Program

Taiwan offers a VAT refund program for foreign visitors. To be eligible, a traveler must hold a non-R.O.C. passport, stay in Taiwan for no more than 183 days, and purchase at least NT$2,000 of goods from the same authorized store on the same day. The program allows these visitors to claim a refund on the 5% VAT paid on qualifying goods.

The process begins at the point of sale, where the tourist must present their passport to request an “Application Form for VAT Refund.” The refund must be claimed within 90 days of purchase, and the goods must be taken out of the country by the traveler. Services, hotel stays, and goods consumed before departure do not qualify.

Before departing Taiwan, travelers must present documents at a designated VAT refund counter or electronic kiosk at an airport or port. The required items include:

• The completed application form
• Original invoices (GUI)
• The traveler’s passport
• Purchased goods, which may be subject to inspection

For purchases under NT$48,000, some authorized stores offer on-site refunds, less a 20% administration fee.