Freight tax applicable to Taiwan, Province of China

Withholding tax: 20%* of taxable income. As per Article 25 of the Income Tax Act (see below) taxable income is considered to be 10% of the gross outward freight earnings derived from international transport activities of non-residential shipowners and/or operators, provided that the freight is payable in Taiwan, Province of China. Hence withholding tax = 20% of 10% = 2%.

(*effective 01/01/2010. Previous rate: 25%)

Exemption Agreements

Residents of the following countries may benefit from double taxation agreements which reduce or waive the tax on international transportation. 
Comprehensive Double Taxation Agreements:
Country Reduction Date of entry
into force
Effective Date
Australia 6 100% 11/10/1996 01/12/1996
Austria 6 100% 20/12/2014 01/01/2015
Belgium 1, 5 100% 14/12/2005 01/01/2006
 Canada 6  100%  15/01/2016  19/12/2016
Denmark 6 100% 23/12/2005 01/01/2006
France 1, 3, 6 100% 31/12/2010 01/01/2011
Gambia 6 100% 04/11/1998 01/01/1999
Germany 100% 07/11/2012 01/01/2013
Hungary 6 100% 29/12/2010 01/01/2011
India 7 100% 12/08/2011 01/01/2012
Indonesia 7 100% 12/01/1996 01/03/1996
Israel 6 100% 24/12/2009 01/01/2010
Italy 1, 5, 6 100% 31/12/2015 01/01/2016
Japan 100% 13/06/2016 01/01/2017
Kiribati 6 100% 23/06/2014 01/01/2015
Luxembourg 6 100% 25/07/2014 01/01/2015
Macedonia 6 100% 09/06/1999 01/08/1999
Malaysia 6 100% 26/02/1999 01/01/2000
The Netherlands 1, 6  100% 16/05/2001 01/07/2001
New Zealand 6 100% 15/12/1997 01/01/1998
Paraguay 6 100% 03/06/2010 01/07/2010 Withholding
01/01/2011 Other
 Poland 6  100%  21/10/2016  30/12/2016
Senegal 4 100% 10/09/2004 01/11/2004
Singapore 4 See note 8 14/05/1982 01/01/1982
Slovakia 6 100% 24/09/2011 01/01/2012
South Africa 2, 4 100% 12/09/1996 01/11/1996
Swaziland 6 100% 09/02/1999 01/04/1999
Sweden 6 100% 24/11/2004 01/01/2005
Switzerland 6 100% 13/12/2011 01/01/2011 Withholding
01/01/2012 Other
Thailand 6, 9 50% 19/12/2012 01/01/2013
United Kingdom 6 100% 23/12/2002 01/01/2003
Vietnam 7 100% 06/05/1998 01/06/1998
Comprehensive Double Taxation Agreements currently in progress:
 Country  Date signed    
 China 10  25/08/2015     
 Philippines  29/05/2002    
Limited Treaties (Air and/or Sea):
 Country  Effective Date    
 China 11  26/02/1999 Air transport only    
 EU 12  01/08/1990 Sea transport only    
 Japan  04/09/1990 Sea & Air transport    
 Korea, Republic of 13  10/12/1991 Sea & Air transport    
 Netherlands

 01/01/1988 Sea transport

01/04/1983 Air transport

   
 Norway 14  07/06/1991 Sea transport only    
 Sweden   05/09/1990 Sea transport only    
 United States  31/05/1988 Sea & Air transport    

Notes

  1. Profits from the operation of ships in international traffic shall be taxable only in the territory in which the place of effective management of the enterprise is situated.
  2. Profits from the operation of ships in international traffic shall be taxable only in the Contracting State in which the place of effective management of the enterprise is situated.
  3. If the place of effective management of a shipping enterprise is aboard a ship, then it shall be deemed to be situated in the territory of which the operator of the ship is a resident.
  4. If the place of effective management of a shipping enterprise is aboard a ship, then it shall be deemed to be situated in the Contracting State of which the operator of the ship is a resident.
  5. If the place of effective management of a shipping enterprise is aboard a ship, then it shall be deemed to be situated in the territory in which the home harbour of the ship is situated, or, if there is no such home harbour, in the territory of which the operator of the ship is a resident.
  6. Profits from the operation in international traffic of ships includes the profits from the rental on a full (time or voyage) basis or a bareboat basis of ships.
  7. Profits from the operation in international traffic of ships includes the profits from the rental on a full (time or voyage) basis.
  8. Treat states that the tax charged shall not exceed 2 percent. 
  9. Income or profits derived by an enterprise of a territory from the operation of ships in international traffic may be taxed in the other territory, but the tax imposed in that other territory shall be reduced by an amount equal to 50 per cent thereof.
  10. This treaty does not apply to residents of Hong Kong, SAR or Macao, SAR.
  11. Applicable to Macau, SAR only.
  12. The protocol on income tax exemption on shipping enterprises applies to the basic freight, charter hire or slot hire.

    The European Union consists of the following 28 member states: Austria, Belgium, Bulgaria, Croatia, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, The Netherlands, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden and United Kingdom
  13. A resident or corporation of the Republic of Korea is exempt, on a basis of reciprocity, from income tax and business tax chargeable on the revenue or income derived by such resident or corporation from the operation in international traffic of ships registered in the Republic of Korea.
  14. The protocol exempts, on a reciprocal basis, Norwegian shipping enterprises from income tax on income derived from the operation of ships in international traffic.

 

Remarks

Income Tax Law

"Article 25
Any profit-seeking enterprise having its head office outside the territory of the Republic of China, and which is engaged in international transport, construction contracting, providing technical services, or machinery and equipment leasing, etc., in the territory of the Republic of China, and the cost and expenses of which are difficult to calculate may apply for approval from the Ministry of Finance, or the Ministry of Finance may make the decision to consider ten per cent of its total business revenue for an enterprise engaged in international transport business, or fifteen per cent of its total business revenue for one engaged in any other businesses as its income derived within the territory of the Republic of China regardless whether or not it has a branch office or business agent in the territory of the Republic of China. In such cases, however, the regulation in Article 39 regarding the deduction of losses cannot be applied.

Business revenue derived by an international transport enterprise within the Republic of China as provided in the preceding paragraph shall be as follows:

1) Marine transport enterprises: Referring to all ticket fares or transportation charges for outbound passengers and cargo accepted for carriage inside the territory of the Republic of China;"

In order to benefit from the exemption agreements, ship agents must register owners with the tax office. When exemption has been granted, the freight tax is waived. The agent is responsible for withholding the freight tax from the vessel owners/operators. The freight tax is payable on or before the 10th day following the month of settlement of the freight with the vessel owner/operator. 

Extract from Guidelines for the Application of Double Taxation Agreements issued by the Ministry of Finance on 22 February 2001.

"Application of Tax Exemption
... Where a resident of the other Contracting State does not have a permanent establishment or a fixed base within the territory of the ROC is entitled to exemption in accordance with the DTAs, the income recipient shall submit the Resident Certificate issued by the tax authority of the other Contracting State, along with relevant documents (such as transaction contracts), and shall state the applicable DTA provisions, to the tax collection authority-in-charge where the withholding agent or the payer of such income is located for approval. If the income so derived had been subject to the withholding tax under Article 88 of the Income Tax Law, the tax collection authority-in-charge shall, when issuing the approval, notify the withholding agent of the exemption from the withholding tax..."

Business tax (VAT) is rated at zero for all outward freights of collect or prepaid, except for the vessels of countries where business tax or other similar tax is levied on ships registered with the islands of Kinmen, Matsu, Penghu and/or Taiwan, for which the rate is 5%, chargeable to shippers.   

 

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