fees collected for providing Internet trade platform services to the Internet
platform providers for renting or membership transactions, the tax
determination must decide if the platform provider has a fixed place for
business or a business agent in Taiwan; if so, the proceeds from the
"
domestic" or "non-domestic" buyers is taxed as a local source income; if not,
only the proceeds from the "domestic" buyer is taxable.
3.
Attribute Determination of Internet Platform Provider
Does a foreign network platform provider rented a network server in Taiwan from an
Internet Service Provider (ISP) constitute a fixed place of business? What is the
income stipulation of fees for diversified services, as operating profit, royalties, or
labor and rental? So far, the Taiwan Revenue Department does not have a clear
definition and regulation of the stipulation of income, thus creating uncertainty in
provider’s significant risk in tax management operation.
6.7.2
Two: Current Tax Issues of the Taiwan Internet transactions
1.
Differences in recognizing income sources and income stipulation between
Taiwan and the Organization for Economic Cooperation and Development
(
OECD):
•
Standards in Taiwan: All foreign network platform provider who has a fixed place
of business in Taiwan, all the profits from the permanent establishment in Taiwan
will be tax liable; without a fixed place of business, the tax liability will be for the
income source from Taiwan.
•
OECD Standards: OECD has further explanation for the proceeds of the
permanent establishment of e-commerce and all kinds of transaction. For
example, the determination of the network platform provider constitutes a
"
permanent establishment" is on the server location and the device is totally under
the control of the enterprise to satisfy the core business operations. OECD also
specifies that network platform rental, website display fees, and advertising
revenue obtained are all operating profits. Downloading software with expiration
date, licensed software for commercial use, subscription-based interactive online
services are all stipulated as royalty.
2.
Impact of Taiwan’s different tax direction with the international community to
cross-border Internet transactions tax:
For a foreign platform provider who registers to obtain the domain to set up a
website in Taiwan, but does not have branches in Taiwan and the server is not in
Taiwan, the merchandise slotting fees or advertisement fees are considered
income in Taiwan. While the OECD income source determination would treat the
proceeds taxable at the State of residence of the foreign enterprises. This may
