Foreign Enterprises Granted a Business Profits Tax Exemption Should Continually Review Their Eligibility

Tax Update

Summary:

Under current Double Taxation Agreements (the “Tax Treaties” or “Treaties”) and the Regulations Governing Application of Agreements for the Avoidance of Double Taxation with Respect to Taxes on Income (the “DTA Regulations”), foreign enterprises providing services in Taiwan may apply for a business profits tax exemption if certain conditions are met. However, if the aggregate number of days spent providing services in Taiwan exceeds the threshold prescribed under the applicable tax treaty, the foreign enterprise may be deemed to have a permanent establishment in Taiwan, thereby losing its entitlement to the exemption and becoming subject to additional tax liabilities.

Analysis:

Under current Double Taxation Agreements (the “Tax Treaties” or “Treaties”), if a foreign enterprise does not have a permanent establishment in Taiwan, its business profits derived within Taiwan are subject to taxation exclusively by the enterprise’s residence state. Conversely, if the enterprise carries on business in Taiwan through a permanent establishment, Taiwan’s taxing rights are restricted to the profits attributable to that permanent establishment. Consequently, the allocation of taxing rights over business profits depends on whether a permanent establishment exists in Taiwan.

Regarding the determination of a permanent establishment, in addition to a building site, a construction, assembly or installation project or supervisory projects exceeding a specific period under the Tax Treaties, Article 9 of the DTA Regulations further provides that where a foreign enterprise furnishes services in Taiwan through its personnel for a period exceeding the prescribed threshold, it may constitute, or be deemed to constitute, a permanent establishment. Furthermore, formally distinct services belonging in substance to the same or a related project shall have their service days aggregated.

For example: In 2025, Japanese Company A concluded multiple maintenance contracts (“Contract X”) with Taiwan Company B, dispatching technicians to Taiwan from March through December 2025 for an aggregate stay of 160 days and generating NT$10 million in service revenue. Meeting the criteria under the Taiwan-Japan tax treaty, Company A obtained a tax exemption approval letter. Subsequently, Company B entered into a new contract (“Contract Y”) with Company A for NT$3 million, and Company A’s personnel provided services in Taiwan from January to February 2026 for an accumulated stay of 35 days.

Since the nature of the work under Contract X and Contract Y is identical and the two contracts are commercially related, the service days attributable to Contract X and Contract Y should be aggregated for purposes of determining whether a permanent establishment exists. Under this premise, Company A’s total service duration in Taiwan reached 195 days (160 + 35 days) within a consecutive 12-month period (from March 2025 to February 2026), which exceeds the 183-day threshold prescribed under the Taiwan-Japan tax treaty. Accordingly, Company A is deemed to have a permanent establishment within Taiwan. In this case, the NT$3 million service fee under Contract Y would be subject to withholding tax at 20%. More importantly, the NT$10 million service revenue derived from Contract X would likewise cease to qualify for the business profits tax exemption and would become subject to withholding tax at a rate of 20%, resulting in additional tax of NT$2 million.

Special reminder to all foreign enterprises: even if a tax exemption approval letter for business profits has already been obtained, enterprises should continue to monitor newly executed contracts, contractual amendments, and the actual duration of personnel providing services in Taiwan and periodically reassess whether the conditions for treaty-based business profits tax exemption continue to be satisfied. If related projects are found, upon aggregation, to have exceeded the applicable permanent establishment threshold during the relevant period, the enterprise should proactively report the matter to the tax authorities and arrange for any required additional tax filings and tax payments in order to mitigate potential tax exposure.

稅務法令新訊

要旨：

依所得稅協定及《適用所得稅協定查核準則》規定，外國營利事業在我國境內提供服務，符合特定條件者，得申請適用營業利潤免納所得稅。惟外國營利事業取得免稅核准函後，如於我國境內服務天數合併計算後超過協定所定門檻，將構成我國境內常設機構，因而不符原核定免稅之要件，並應依法補繳稅款。

解析：

依照現行所得稅協定規定，如外國營利事業在我國未設有常設機構，或雖設有常設機構，但營業利潤非歸屬於該常設機構時，其於我國境內創造之營業利潤，課稅權原則上歸屬於該外國營利事業之居住地國。倘其於我國境內係經由常設機構從事營業行為，則我國僅就歸屬於該常設機構之營業利潤為限，享課稅權。由此可見，對於營業利潤是否具備課稅權之判定，與「常設機構存在與否」息息相關。

針對常設機構之認定，除依照所得稅協定所述之建築工地、營建、裝配或安裝工程，或相關監督活動持續超過特定期間者即視為在我國有常設機構外，另按我國《適用所得稅協定查核準則》第 9 條規定，外國營利事業如經由員工或其他受僱人員在我國境內提供服務，而該服務存續期間超過一定期間，亦視為在我國境內存在常設機構；且即便形式上係不同之服務，如實質上係屬於相同或相關之計畫案，則服務天數應予合併計算。

舉例說明：日商 A 公司於 114 年度與我國甲公司簽訂多份設備檢測維護合約（統稱「 X 合約」），並於 114 年 3 月至 12 月間陸續派遣技術人員至我國境內提供服務，實際居留天數合計達 160 天並取得服務收入共新台幣（下同）1,000 萬元；因滿足要件得適用台日所得稅協定，且經申請並取得營業利潤免稅核准函後，該服務收入 1,000 萬元免予扣繳。

惟嗣後甲公司因營運需要，再度與 A 公司簽訂新的設備檢測維護合約（簡稱「 Ｙ 合約」），約定服務報酬 300 萬元，A 公司續於 115 年 1 月至 2 月間派員來台提供服務，並實際居留天數合計為 35 天。此時因 X 合約與 Y 合約之工作性質相同，兩合約具備商業關聯性，故 A 公司就 X 合約及 Y 合約兩次派員來台提供服務之天數應予合併計算。據此，A 公司於連續 12 個月內（114 年 3 月至 115 年 2 月間） ，在台提供服務天數合計為 195（160 + 35）天，已逾台日所得稅協定所定門檻 183 天，而應認 A 公司於我國境內構成常設機構。此時應特別注意，除 Y 合約之服務報酬 300 萬元需繳納 20% 扣繳稅款以外，X 合約之服務報酬 1,000 萬元亦不得適用營業利潤免稅優惠，而應按 20%扣繳稅率補繳稅款 200 萬元。

特別提醒有台灣來源所得之外國營利事業，縱已取得營業利潤免稅核准函，仍應持續留意後續之合約簽訂、變更，或是派員來台提供服務之實際情形，並持續檢視是否仍符合所得稅協定免稅構成要件。如發現具備關聯性之計畫案合併計算後，於存續期間內已達常設機構認定門檻，應主動告知國稅局並辦理補報及補繳扣繳稅款，以降低後續稅務風險。