A foreign diplomatic mission or its personnel stationed in Taiwan may enjoy "0%" Value Added Tax (VAT) rate.

The Kaohsiung National Tax Bureau has clarified how to handle VAT exemption when a business sells taxable goods or services to a diplomatic mission or its personnel stationed in Taiwan, in the case where the buyer presents a "Tax Exemption Card" issued by the Ministry of Foreign Affairs.

According to the explanation, the tax exemption certificate is based on the principle of reciprocity, which allows diplomatic personnel to receive tax-exempt status. When a business sells taxable goods or services to such personnel who present the exemption card, the sale should be made at the price excluding VAT. The business should issue a zero-rate Government Unified Invoice (GUI)　and handle the VAT reporting as follows:

1.    Issuing the Invoice:

o   The business should issue a GUI with a zero VAT rate.

o   The taxable price (excluding VAT) should be used to calculate the sales amount. For example, if the price of the taxable goods or services is NT$1,050, the VAT of NT$50 is excluded, and the sales amount would be NT$1,000.

o   In the "Buyer’s Name" field on the GUI, the name of the diplomatic mission or the personnel should be specified.

o   The "Remarks" section should include the exemption certificate number from the card.

o   The person benefiting from the tax exemption or responsible for the purchase must sign the GUI.

2.    VAT Reporting:

o   Since the sale is exempt from VAT under the zero-rate provision, the business must report the transaction accordingly in the VAT filing, ensuring it reflects the zero VAT rate.

This process ensures compliance with the applicable tax regulations when selling to diplomatic missions or their personnel in Taiwan. Additionally, it is important to note that invoices issued at the zero VAT rate are not eligible for the GUI lottery rewards under Article 11, Section 1, Item 6 of the Unified Invoice Reward Regulations.