Cloud-based e-invoicing in Taiwan: What you need to know

General Background

Starting in 2018, Taiwan’s Ministry of Finance has gradually implemented the mandatory use of electronic invoices, with the goal of future applicability to all taxpayers. The initiation of the undertaking is to provide a more efficient and affordable Cloud processing service. This prevents logistical problems and erroneous oversights in a multitude of industries.

Taiwan has a special VAT system grounded on a Government Uniform Invoice. This format is regulated by legislation, which prescribes content and the submission time period within which the invoice is to be submitted to the Ministry of Finance. The Government Uniform Invoices are assigned batch sequence invoice numbers, which are provided to the VAT-payers every two months.

Mandating e-invoicing suits a hyper-modern economy, such as Taiwan’s. The implementation of a Cloud based e-invoicing system, lets Taiwan form part of the current movement of the globalisation of electronic invoices.

What is the current mandate in place?

The Taiwanese government has required the use of electronic Government Uniform Invoices (eGUIs), since 1 January 2020, and has since January 2021 mandated that any company, foreign or national, must invoice electronically. Thus, doing away with paper-based invoicing altogether.

The use of the E-Invoicing Platform of the Ministry of Finance has been mandated for cross border transactions, specifically Foreign Providers of Digital Services to Taiwanese end customers. The use of e-invoices has yet to be mandated for domestic taxpayers, however, they may elect to make use of the platform voluntarily due to the efficiency and reduction in costs. It is nevertheless part of the prerogative to mandate the use of e-invoices and the use of the E-Invoice Platform to all taxpayers.

The format prescribed by the Ministry of Finance is referred to as eGUIs XML MIG 4.0. This format’s use has been mandated from 1 January 2024, having had previous versions. The Message Implementation Guidelines (MIG) prescribes the model format and structure in which the e-invoice is to be submitted to the E-Invoice Platform, thus since January 2024.

It is important to note that there is no SAF-T obligation prescribed by the Taiwanese tax authority, in addition to no prescribed format in which business entities are to exchange invoices directly with the recipient.

Subsequently, the Ministry of Finance is of the intention to implement updates to the eGUI electronic invoice regime and impose new penalties for non-compliance. The envisioned updates and penalties have since been approved by the Taiwanese President on 7 August 2024. The date of implementation is yet to be confirmed.

What are the administrative pre-requisites for businesses to e-invoice?

In order for business entities to comply with the mandate there are specific requirements to meet, as listed below:

·        Business entities must possess an industrial and commercial certificate, issued by the Ministry of Economy. This is obtained via an application being made through the Ministry of Economic Affairs’ website.

·        Acquire the services of a value-added centre and an electronic invoice provider that interfaces with the E-Invoicing Platform in line with legislation; and

·        Business entities are required to identify their invoices by way of a pre-assigned serial number, provided by the government.

·        The issued e-invoices have to be electronically signed and sent to the E-Invoicing Platform, seven (7) days (for B2B transactions) after the delivery of goods and/or services to the recipient; and two (2) days (for B2C transactions) after the delivery of goods and/or services to the recipient.

Note: Failure to meet the prescribed deadlines can result in a fine unto TW$ 15,000.00, in addition to further late-tax penalties.

Legal authority on e-invoicing in Taiwan

Paragraph 2, Article 31 of the Value-Added and Non-Value-Added Business Tax Act, read with Article 7-1 of Regulations Governing the Use of Uniform Invoices, states that when off-shore e-services suppliers sell e-services to domestic individuals, they are required to issue cloud-based invoices which includes VAT to customers.

Further, Article 3 of the Regulations Governing the Use of Uniform Invoices (hereinafter referred to as ‘RGUUI’), stipulates that the tax authority will be responsible to impose the use of uniform invoices on all business entities, unless, in respect of Article 4, such business entity has been specifically exempted. Article 8 advises on the ‘unique uniform invoice seal’ wherein business entities are required to issue separate uniform invoices for taxable, zero-rate and tax-free items. This will be indicated on the relevant invoice, i.e. stipulating the tax classification of the uniform invoice.

Article 9 of the RGUUI lists the specific required fields that are to be disclosed on the generated eGUIs. The general fields, such as: Actual date of the invoice, item name, quantity, unit price (if any), item subtotal, sales amount and the total amount of the transaction; and the more specific fields, such as: alphabetical letter and number of uniform invoices, tax classification and the tax rate and the name or uniform serial number of recipient.

The above listed fields are required in order to meet the standard of e-invoices in Taiwan, as deviating from the standard can lead to sanctions, errors messages and possible fines.

Under Taiwan law it is imperative to note the use of a digital signature certificate (‘DSC’), regulated by the Electronic Signatures Act, Art.10, The use of a DSC is similar to that of the Qualified Electronic Signature (‘QES’) in Europe.

P.S.

It is important to note that the failure to comply with the mandate, as discussed above, will result in sanctions being implemented by the Ministry of Finance.

Thus, in light of the prescribed mandate, early preparation and adaptation would ensure compliance and avoid severe repercussions. Business entities should prioritise the planning and implementation of the pre-requisite technical infrastructures necessary, well in advance to avoid any disruptions and guarantee a smooth transition to the execution of the e-invoicing mandate.