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0% BUSINESS TAX RATE REMAINS APPLICABLE AFTER CHANGE IN INTENDED USE OF GOODS
Christina Chen/Josephine Peng
According to a directive issued by the Ministry of Finance (MOF)in March 2008 ("March 2008 Directive"), in a case where a company ("Seller") sells the goods prescribed under Article 7(4) of the Business Tax Act, i.e., machineries, equipment, raw materials, materials, fuel and intermediate products (collectively, the "Goods") to an export enterprise within a tax-free export processing zone or a science-based industrial park, or a bonded factory or a bonded warehouse supervised by Customs ("Buyer") , 0% business tax rate applies; provided that the Buyer states on the back of the government uniform invoice ("GUI") issued by the Seller for such sale that, "The Goods stated on this GUI is for the Buyer's production, processing or export, and that the Buyer is, whichever is applicable, an export enterprise within a tax-free export processing zone or a science-based industrial park or a bonded factory or a bonded warehouse", and stamps the Buyer's GUI stamp thereon.
The MOF issued another directive in November 2010, which provides that, if the Buyer changes the intended use of the Goods following the sale, and such change causes the Seller to become ineligible for the 0% business tax rate prescribed under the March 2008 Directive, the Seller shall not be subject to any business tax or penalty; unless the Buyer falsely declared the intended use of the Goods purchased and made false statement on the GUI, thereby resulting in the Seller's evasion of business tax. In that case, the Seller shall be subject to business tax and penalty.
