Pursuant to the prior amendment of Article 11 and Article 36 of Business Tax Act in 2014, the business tax rate for sales revenue derived by banks and insurance companies from operating of banks and insurance sector’s core businesses has increased from 2% to 5 %.

After the aforementioned amendment, the sales revenue of banks and insurance companies can be divided into 3 categories:

• Non-core business revenue,
• Other financial sector’s core business revenue, and
• Banks and insurance sector’s core business revenue.

For revenue from Category (A), the 5% business tax rate will still apply. For Category (B), as they are the revenue derived from the core business that other financial sectors including securities, futures, bill finance and trust sectors can also engage in, thus the business tax rate for sales revenue under this category remain as 2%. For Category (C), the business tax rate is increased from 2% to 5% (the reinsurance premium is subject to 1% business tax).

On December 9, 2019, MOF released a tax ruling which specifies that the revenue derived by banks from the purchase of NCD issued by the Central Bank pursuant to Article 27 of The Taiwan Central Bank Act, is within the scope of the abovementioned category of “other financial sector’s core business revenue”, i.e. Category B above. Therefore, the applicable tax rate for the such sales is 2% effective from the announcement of this tax ruling.

Authors

Lynn Chen,  Partner
Chuck Chiu, Associate Director 
Shawn Lin, Legal Intern