5% import VAT for foreign goods sold online to Taiwan consumers
Taiwan has reconfirmed the 5% import Value Added Tax charge on goods bought online and imported to consumers. There is a de minimus limit of TWD 2,000, below which there is now VAT due.
There is also no customs duties due below the same threshold.
The VAT base is calculated as cost + insurance + freight costs.
Non-resident businesses generally do not have to VAT register in Taiwan unless they have a physical business location or warehouse in Taiwan and the total value of the imported goods exceeds TWD 80,000 annually. However, this exemption does not apply to tobacco, alcohol, agricultural products subject to tariff quotas, and frequently-imported goods.
Increasing global reductions in VAT import thresholds
Other countries to have reformed their Low Value Consignment Stock Relief (LVCR) include and withdrawn them mostly:
- Singapore in January 2018
- From July 2024 Thailand
- Malaysia in January 2024
- July 2018 in Australia
- UK from 1st January 2021
Regional Variations in de minimus VAT import levels
- European Union (EU)
- As of July 1, 2021, the EU abolished the VAT exemption for small consignments valued at €22 or less. All goods imported into the EU are now subject to VAT.
- The Import One-Stop Shop (IOSS) was introduced to simplify VAT collection for consignments not exceeding €150, allowing sellers to collect, declare, and pay VAT at the point of sale.
- United Kingdom (UK)
- Following Brexit, the UK introduced its own VAT regulations.
- Goods valued at £135 or less are subject to VAT at the point of sale rather than at import, with sellers required to register and collect UK VAT.
- Consignments over £135 are subject to import VAT and duties at the border.
- United States
- The US does not have a federal VAT system but imposes state-level sales taxes.
- Import consignments are generally subject to customs duties rather than VAT, but online sellers may need to navigate complex state tax obligations, especially after the South Dakota v. Wayfair, Inc. Supreme Court decision, which allowed states to require remote sellers to collect sales tax.
- Asia-Pacific
- China: Applies VAT on imports, with a standard rate of 13% and a reduced rate of 9% for certain goods.
- Australia: Since July 1, 2018, Australia imposes a 10% GST on low-value imported goods valued at AUD 1,000 or less, collected by the seller at the point of sale.
- Japan: Increased its consumption tax to 10% in 2019, applicable to imported goods, with a reduced rate of 8% for food and beverages (excluding alcohol).
- Canada
- Canada imposes Goods and Services Tax (GST) or Harmonized Sales Tax (HST) on imports, typically around 5-15% depending on the province.
- As of July 1, 2021, Canada requires non-resident vendors and digital platforms to collect GST/HST on sales of goods valued at CAD 20 or more.
Implications for Businesses
Businesses engaged in cross-border trade must navigate varying VAT regimes, requiring robust compliance mechanisms to manage tax obligations accurately. Key considerations include:
- VAT Registration: Businesses may need to register for VAT in multiple jurisdictions.
- Pricing Strategies: Adjusting pricing to account for VAT in different markets.
- IT Systems: Ensuring systems can handle VAT calculations and reporting.
- Customer Communication: Clearly informing customers about VAT charges and their implications.
Challenges and Future Trends
- Administrative Burden: Complying with diverse VAT regimes can be complex and costly.
- Technology Solutions: Increasing reliance on technology to manage VAT compliance, including automated tax calculation and reporting systems.
- International Cooperation: Efforts towards greater harmonization and simplification of VAT rules to facilitate global trade.
