VAT-Free Reciprocal Treatment Between Germany and Taiwan. Tax Refundable for Expenditures Relating to Participation in Exhibitions and Business-Related Activities.

Starting from 1 July 2010, Taiwan businessmen who participate in exhibitions or engage in any other business activities in Germany would be entitled to 19% business tax credit in the case of accumulated tax levied on relevant expenditure amounting to more than EUR1,000 (about NT$42,000).

Taking into account that there are more than 4,000-5,000 Taiwan companies participating in exhibitions in Germany every year, and these companies have to bear no less than 19% business tax levied by German Government, Taiwan’s Ministry of Finance added Article 7-1 of Value-added and Non-value-added Business Tax Act (hereinafter “the Act”) after knowing that the reciprocal treatment for tax refund is made available by German Government.  The said Article provides that since 1 July 2010, foreign enterprises, institutions, organizations, or associations which meet the specific conditions may qualify for VAT refund in Taiwan, in the meantime, base on the reciprocal treatment, Taiwan businessmen can claim refund of their paid VAT for participation in exhibitions or business activities in foreign countries.

The German VAT Refund Act provides an extensive tax refund programs, events such as participation in exhibitions or visits to exhibitions, business tours, attendance at meetings, workshops, short-term training programs and other business-related activities, from which the expenses are derived may apply for VAT refunds.  The tax refunds available in Germany are identified under the negative list approach.  In addition to the fuel charges (e.g. gasoline and diesel), the other expenditures related to the participation in exhibitions or business activities are also applicable to VAT refunds.

Foreign Enterprises Participating in Exhibitions Held in Taiwan Entitled to VAT Refunds

Since 1 July 2010, foreign enterprises, institutions, organizations, or associations having no fixed place of business within the territory of Taiwan, which purchase goods or services on which value-added business tax (VAT) is levied to a total of more than NT$5,000 (or amount to NT$2,500 from 1 July 2010 to 31 December 2010) within Taiwan for the purpose of engaging in such business activities as exhibitions, business trips, market surveys, investment promotion activities and presentations within the period of one year, may qualify for VAT refund on the aforesaid goods or services from the tax collection authority of Taiwan, in accordance with Article 7-1 of the Act, and Enforcement Rules Governing Applications Made by Foreign Enterprises, Institutions, Organizations or Associations Engaged in Exhibitions or Temporary Business Activities within Territory of the ROC for VAT Refunds.

Remark:

1. Article 7-1 of the Act provides that foreign enterprises, institutions, organizations, or associations having no fixed place of business within the territory of Taiwan, which purchase goods or services on which VAT is levied to a total of certain amount of money or more within Taiwan for the purpose of engaging in exhibitions or temporary business activities within the period of one year, may qualify for VAT refund on the aforesaid goods or services, provided that reciprocal treatment, or exemption from similar taxes, is given to the same of Taiwan by the foreign country in which they are performing such activities as are described also above.

2. According to the Enforcement Rules Governing Applications Made by Foreign Enterprises, Institutions, Organizations or Associations Engaged in Exhibitions or Temporary Business Activities within Territory of the ROC for VAT Refunds, foreign enterprises, institutions, organizations, or associations having no fixed place of business within the territory of Taiwan, which purchase goods or services on which VAT is levied to a total of more than NT$5,000 within Taiwan for the purpose of engaging in such business activities as exhibitions, business trips, visits, market surveys, investment promotion activities and presentations during the period of 1 January till 31 December of the same year in which the goods or services are purchased, may qualify for VAT refund on the aforesaid goods or services, the total amount in relation to the goods or services purchased can be compiled during 1 January and 30 June of next year, unless the documents of the goods or services purchased are not obtained or kept, or the goods or services are purchased under the provisions of subparagraphs 2-5 of the first paragraph of Article 19 of the Act.  (2010.08)
/DC