Comprehensive Guide to Taiwan Deductible and Non-Deductible Input Taxes 

Understanding which input tax items are deductible and which are not is essential for businesses aiming to maximize their tax benefits while staying compliant with tax regulations. This guide explores the range of deductible and non-deductible input tax items, providing clarity and actionable insights for businesses. 

Deductible Input Tax Items

Input tax deductions are available for various business expenses directly related to operations, investments, and employee activities. Below is a detailed list of items that qualify for deductions. 

1. Purchases for Business Operations

Stationery and Office Supplies

Expenses incurred for purchasing pens, paper, folders, and other stationery items essential for daily business tasks are deductible. These items are vital for maintaining smooth administrative operations. 

Postal, Telephone, and Internet Fees

Communication expenses, such as postal services, phone bills, and internet subscriptions, are necessary for business activities and qualify for input tax deductions. Proper invoices must support these claims.

Utilities (Water, Electricity, Gas)

Payments for utilities like electricity, water, and gas used in office spaces are deductible. These expenses are integral to the functioning of any workplace. 

Advertising Expenses

Costs associated with promoting products or services, such as advertisements, digital marketing campaigns, or printed brochures, are deductible. Advertising is recognized as a business growth activity.

Miscellaneous Expenses

Purchases of cleaning supplies, sanitary items, and spare parts for office equipment are considered operational necessities and are deductible.

2. Office Equipment Purchases

Essential Appliances

Purchases of appliances like air conditioners, fans, telephones, computers, and mobile phones necessary for office operations are eligible for deductions. These items contribute to workplace efficiency and comfort. 

3. Training and Development Costs

Employee Training Fees

Expenses for employee training programs that enhance job performance are deductible, provided they are relevant to business operations. Documentation, such as invoices, course content, and attendance records, is required. 

4. Service Fees

Consulting and Translation Services

Professional fees for services like consultancy or translation are deductible if invoices contain the company registration number. Such services often support business decision-making and global operations. 

5. Rent and Leasing

Venue and Vehicle Rentals

Rental expenses for office spaces or vehicles used for business purposes are deductible. This includes leasing warehouses, meeting spaces, and transportation vehicles. 

6. Transportation and Fuel Costs

Courier and Freight Services

Expenses for courier services, express deliveries, and freight are deductible, as they facilitate the movement of goods and documents necessary for operations. 

Fuel Costs

Gasoline expenses for company-owned vehicles qualify for deductions. Proper documentation, including invoices with a company registration number, is mandatory.

7. Meeting and Maintenance Expenses

Meeting Meal Expenses

Meals provided during business review meetings are deductible. However, entertainment expenses, such as client dinners, cannot be claimed. 

Repairs and Maintenance

Costs for vehicle repairs, office equipment maintenance, and office renovations qualify for deductions, as they maintain the functionality of business assets.

8. Domestic Travel and Accommodation

Transportation Tickets

Airfare, high-speed rail, train, and coach tickets for business travel are deductible. These tickets often include business tax, making them eligible for claims. 

Accommodation Costs

Hotel stays during business trips are deductible if proper invoices and a travel report are provided. However, lodging expenses for employee recreational trips are considered welfare benefits and are not deductible. 

9. Fixed Assets

Long-Term Investments

Items with a useful life exceeding two years and a value above 80,000 currency units can be classified as fixed assets. Input tax paid on these purchases is refundable if no tax is payable for the period. 

Vehicle Purchases

  • Company Scooters: Must be registered under the company’s name with supporting documentation. 
  • Company Cars: Only dual-use vehicles or trucks qualify for deductions. Proper registration and invoices are necessary. 

10. Additional Deductible Items

Employee Essentials

Purchases of uniforms, work shoes, tissues, soap, disinfectant, and tea for employee use at the workplace are deductible. 

Sports and Recreational Activities

Expenses related to external team sports activities, such as registration fees and uniforms, qualify as deductible. 

Promotional Giveaways

Items purchased for promotional campaigns, such as freebies or raffle prizes, are deductible if they are classified as advertising expenses. 

Leased Passenger Vehicles

Leasing companies renting passenger vehicles under financial or non-financial agreements can claim input tax deductions.

Test Vehicles

Dealers purchasing vehicles for test-driving purposes under nine seats can deduct input tax.

Non-Deductible Input Tax Items

Certain expenses are excluded from input tax deductions due to their nature, purpose, or documentation issues. Understanding these exclusions helps businesses avoid errors during tax filings. 

1. Non-Business-Related Purchases

Consumer Purchases

Expenses on items like meals, general clothing, and handbags that are not directly related to business operations are non-deductible.

Client Hospitality

Travel, accommodation, and meals provided to clients are classified as entertainment and are not deductible.

Entertainment Gifts

Items like shareholder souvenirs or gifts for external parties are not eligible for input tax deductions.

2. Personal and Recreational Expenses

Personal-Use Vehicles

Expenses related to personal vehicles used by executives or employees are non-deductible.

Tourism and Recreational Costs

Travel expenses for recreational purposes, such as employee outings or tourism-related activities, are not deductible. 

3. Employee Welfare

Employee Benefits

Rewards, gifts, travel expenses, entertainment costs, and housing-related expenses for employees fall under welfare and are non-deductible. 

Meal Provisions

Expenses for food purchases, kitchen equipment, and meal preparation for employees do not qualify for deductions. 

4. Donations

Charitable Contributions

Goods purchased for donations to charities, public organizations, or foreign governments are non-deductible. 

5. Vehicle Leasing

Financial Leases

Leasing passenger vehicles under financial lease arrangements is treated as an installment purchase, making the tax non-deductible.

Luxury Vehicle Use

Vehicles leased or purchased for senior employees or client shuttle services in hotels or travel agencies do not qualify for input tax deductions. 

6. Documentation Issues

Inadequate Records

Receipts or informal documentation without tax identifiers are not accepted for input tax claims. 

Foreign Expenses

Expenses incurred overseas, such as international flight tickets or foreign transactions, are typically exempt from local business tax and are non-deductible. 

Conclusion

By understanding the distinction between deductible and non-deductible input tax items, businesses can make informed financial decisions and ensure compliance with tax regulations. Proper documentation, adherence to eligibility criteria, and consultation with tax professionals can help maximize deductions while avoiding costly errors. Businesses should periodically review their tax practices to adapt to evolving regulations and ensure optimal tax efficiency. 

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