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e-Tax alert 140 eng - New tax ruling on applicable business tax rate for banks on NCD transaction

e-Tax alert 140 eng - New tax ruling on applicable bus

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 %.

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lynn-chen

Partner

KPMG in Taiwan

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相關內容

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.

KPMG Observations

Based on KPMG’s further confirmation with MOF, the tax ruling would also apply to returns previously filed that are still open for assessment, where banks have reported the NCD transaction using the 5% tax rate. Hence, banks should investigate whether they have reported NCD revenue in any past business tax returns, that are not yet assessed, using the 5% business tax rate and file for refund of the excess business tax paid accordingly. 

Authors

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

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