This guide from Good Earth CPA, a Taipei firm of Taiwan certified public accountants, summarizes the Taiwan tax issues that commonly arise when payments, services, goods or costs cross borders.
Cross-border transactions can create Taiwan withholding tax, corporate income tax and VAT obligations that are not always obvious. Identifying them early makes it easier to consider the relief that may be available and to keep the documentation that the Taiwan tax authorities expect.
These issues mainly affect foreign companies that receive payments from customers in Taiwan, foreign-owned subsidiaries, branches and representative offices in Taiwan, Taiwan companies that pay foreign suppliers or related companies, and groups with transactions between Taiwan and other countries.
When a Taiwan company pays a foreign company that has no fixed place of business in Taiwan, the payer generally has to withhold Taiwan income tax. Under Taiwan’s Standards of Withholding Rates, payments such as royalties, rentals, service fees and most interest paid to non-residents are generally subject to 20% withholding, unless a tax treaty or an approved relief applies.
Taiwan has comprehensive income tax agreements with a number of countries. Where an agreement applies, withholding tax on dividends, interest and royalties may be reduced, and the business profits of a foreign company without a permanent establishment in Taiwan may be exempt. Treaty benefits generally have to be claimed with supporting documents, such as a certificate of tax residence from the other country.
A foreign company that provides international transport, construction contracting, technical services or machinery and equipment leasing in Taiwan, and whose costs are difficult to calculate, may apply to the Ministry of Finance to have 15% of its Taiwan revenue (10% for international transport) treated as its Taiwan taxable income. At the current 20% corporate income tax rate, this results in an effective tax of 3% of revenue (2% for international transport). Our Article 25 case study discusses a court ruling on how contracts were treated under this provision.
A Taiwan branch may be able to deduct a share of its foreign head office’s overhead expenses, but only with the documentation that the regulations require, such as certified financial statements of the head office and a clear allocation basis. Our offshore parent company expense allocation case study shows how a deduction was denied for lack of such documents.
Services provided in Taiwan qualify for the 0% VAT (business tax) rate only in specific circumstances, such as services related to exports or services used outside Taiwan. Being paid by a foreign customer is not enough on its own: in a 2010 ruling, Taiwan’s Supreme Administrative Court looked at where the services were actually used. Read our Taiwan 0% VAT case study.
Transactions between related parties, such as a Taiwan subsidiary and its foreign parent, must follow the arm’s-length principle under Taiwan’s transfer pricing regulations, and many enterprises must prepare transfer pricing reports. Our transfer pricing case study describes common errors in these reports.
Good Earth CPA provides accounting, withholding tax, corporate income tax and VAT compliance services and corporate tax advisory and income tax planning services for businesses in Taiwan, including foreign-owned subsidiaries, branches and representative offices.
When a matter also involves another country, we can work with our international affiliates and professional partners. Our founder, Joseph Ni, is a certified public accountant in both Taiwan and the United States. Meet our team.
International tax questions often arise alongside day-to-day compliance. See our accounting and tax services for foreign-owned companies, our Taiwan company formation guide, our Taiwan tax case studies and our Taiwan tax and business updates.
To discuss a cross-border tax question, contact Good Earth CPA in Taipei.
This page provides general information about Taiwan tax rules as of October 2026. It is not tax or legal advice; rules and their application change, so please contact us about your specific situation.