The National Tax Bureau (NTB) of the Ministry of Finance has clarified that foreign profit-seeking enterprises (foreign e-commerce businesses) engaging in cross-border electronic services may apply for tax exemptions on business profits under applicable tax treaties to reduce their tax burden, provided their country of residence has signed a comprehensive tax treaty with Taiwan. 

I. Withholding Obligations and Tax Treaty Application

According to Articles 88 and 89 of the Income Tax Act, when a Taiwan enterprise pays for electronic services provided by a foreign e-commerce business, and such remuneration constitutes Taiwan-sourced income, the payer (the Taiwan withholding agent) is generally required to withhold income tax at the time of payment. However, under Article 124 of the same Act, if the foreign business resides in a country with a tax treaty with Taiwan and has no permanent establishment (PE) in Taiwan, it may apply for an income tax exemption on its business profits in accordance with the treaty. 

II. Application Procedures and Required Documents

To apply for the Business Profits Exemption under a tax treaty, the foreign e-commerce business must submit the following documents to the NTB where the payer is located: 

1. Certificate of Residence (COR): Issued by the tax authority of the foreign country. 
2. Contracts and Authorization: Copies of the agreement and the Power of Attorney (POA). 
3. Income Documentation: Documents detailing the transaction flow and relevant income. 
4. Application Form: A completed “Application for Business Profits Exemption under Tax Treaties for Cross-Border Electronic Services by Foreign Profit-Seeking Enterprises.” 

III. Refund Mechanism for Overpaid Tax 

If the Taiwan enterprise has already withheld and paid the tax at the time of payment in accordance with regulations, the foreign e-commerce business may still apply to the NTB for a refund of the overpaid tax after obtaining the official “Tax Exemption Approval Letter.” This mechanism ensures adherence to tax treaties and eliminates double taxation.