Business operators who receive compensation for the sale of goods or services should issue uniform invoices as required and report and pay business tax, according to the Taipei National Taxation Bureau of the Ministry of Finance.
The Bureau explains that according to Article 1 and Article 16 of the Value-Added and Non-Value-Added Business Tax Act, business tax should be levied in the Republic of China on the sale of goods or services and the import of goods in accordance with the provisions of this law. The sales amount refers to the total consideration received by the business operator for the sale of goods or services, including any additional charges collected by the business operator beyond the price of the goods or services. Therefore, if a business operator receives compensation, and it is related to the sale of goods or services, they should issue uniform invoices as required and report and pay business tax.
The Bureau provides an example: Company A sells a customized machine to Company B for a price of NT$5 million, and they agree that if Company B breaches the contract and cancels the order, they should pay Company A compensation of NT$500,000. If Company B pays NT$500,000 in compensation to Company A due to a breach of contract, this amount falls under the consideration received by Company A for the sale of goods and should be reported and subject to business tax as required.
The Bureau urges business operators that if they receive compensation related to the sale of goods or services and fail to issue uniform invoices as required, they should promptly report and pay any omitted taxes to the local National Taxation Bureau branch, tax collection office, or service center before being investigated by tax authorities or designated personnel of the Ministry of Finance. They can benefit from the provisions of Article 48-1 of the Tax Collection Act, which allows for interest accrual but exemption from penalties.
Source: mof.gov.tw
