In terms of the global logistic business, a special ruling is updated by Taiwan MOF on April 17th, 2018. Per ruling no. 10600664060, offshore entities will be liable to pay income taxes for their merchandise that are stored in warehouse located in Taiwan, and be sold and delivered to customers via logistic vendors or other third parties as such a business activity is considered to derive certain sort of Taiwan sourced income.

        The sourced income could be calculated based on offshore entities' actual revenue and costs. While offshore entities find it difficult to prove to the Taiwan tax authority the profits they earned in Taiwan or reckon that not 100% income they earn from business activities in Taiwan could be deemed Taiwan sourced income, profit margin rate as well as contribution rate will come into effective. To determine the contribution rate that is applied, offshore entities' business activity could be categorized as the following:

1)      Import and store products produced offshore, and sell products while they are located in Taiwan then deliver sold products to inland or outland customers;

2)      Import products produced offshore being stored and processed in Taiwan; products then delivered to inland or outland customers when transaction is completed while products are located in Taiwan;

3)      Import and store products purchased offshore, and sell products while they are located in Taiwan then deliver sold products to inland or outland customers; sale activities are performed offshore;

4)      Import products purchased offshore being stored and processed in Taiwan; products then delivered to inland or outland customers when transaction is completed while products are located in Taiwan; sale activities are performed offshore;

        For situation 1) & 3), the contribution rate will be 3% while for situation 2) & 4), the contribution rate will be 3% plus percentage of processing value over the whole product value.

        Above issue aside, it is always two aspects in such a case that whether the offshore entities fall into the local tax regulation mentioned above, and whether the offshore entities meet the DTA. When local tax regulations are met, offshore entities will be liable for income tax obligation in Taiwan. While DTA comes effective, the offshore entities could apply for DTA to offset the tax duty imposed. However, cases that will be deemed to fit DTA are expected to be those warehouses purely used for storage, delivery, and functions that are with auxiliary nature. Providing that additional services are a must to complete the sale transaction, it could be somewhat difficult to claim to the Taiwan tax office that DTA criteria are fully met.