The Southern Area Branch of the National Taxation Bureau of the Ministry of Finance recently stated that domestic profit-seeking enterprises engaging in transactions with foreign e-commerce operators should first review and confirm whether the country or jurisdiction where the foreign e-commerce operator is located has entered into a comprehensive tax treaty with Taiwan. Where applicable, enterprises may apply for treaty benefits in a timely manner in order to lawfully reduce their overall tax burden. 

The Bureau noted that, with the growing prevalence of cross-border electronic transactions, many domestic enterprises purchase electronic services—such as cloud services, digital content, or online advertising—from foreign enterprises via the internet or other electronic means. When making payments for such services, if the income constitutes Taiwan-source income, withholding tax must be imposed and remitted by the withholding agent (i.e., the domestic enterprise), in accordance with Article 88, Paragraph 1, Subparagraph 2; Article 89, Paragraph 1, Subparagraph 2; and Article 124 of the Income Tax Act. However, if the foreign e-commerce operator is located in a country that has concluded a comprehensive tax treaty with Taiwan, the domestic enterprise may apply for tax relief pursuant to the applicable treaty. 

The National Taxation Bureau further explained that if, prior to applying for treaty benefits, the domestic enterprise has already completed the required withholding and remitted the tax in accordance with the law, it may apply to the tax authority for a refund of any over-withheld tax after obtaining approval for exemption of business profits. Enterprises are advised to properly apply the relevant rules to protect their interests.