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  • Interpretation
  • No.519
  • Date
  • 2000/12/22
  • Issue
    • The MOF Interpretative Letter states that the export enterprises inside duty-free export processing zones, enterprises inside the Science-based Industrial Park, or a bonded factory or bonded warehouse supervised by Customs, which sell(s) goods within domestic tax zones and in accordance with relevant regulations, need not make customs declaration, but shall issue uniform invoices and pay business taxes. Does the said letter conflict with the Business Tax Act, thus violating Article 19 of the Constitution?
  • Holding
    •       The letter Ref. No. Taiwan-Finance-Tax-7623300 issued by the Ministry of Finance (MOF) on August 31, 1987, states: "Export enterprises inside duty-free export processing zones, enterprises inside the Science-based Industrial Park, or a bonded factory or bonded warehouse supervised by Customs, that sell(s) goods within domestic tax zones and in accordance with relevant regulations need not make customs declaration, but shall issue uniform invoices, and report and pay business tax according to Article 35 of the Business Tax Act." This is a technical supplementary regulation regarding business tax collection by the competent authority on the basis of its legal duty and responsibility, so as to prevent the duty-free-zone businesses from tax evasion by selling non-bonded goods, which do not require customs declaration, within domestic tax zones. The aforesaid is different from the exemption from business tax for the import of goods as referred to in Article 5, Subparagraph 2, of the Business Tax Act and the goods imported for business purposes as referred to in the first sentence of Paragraph 2 of Article 41 of the said Act. It fulfills the purpose of the Business Tax Act and does not contradict the principle of taxation by law, Article 19 of the Constitution, Article 2, Article 5, Subparagraph 2, or Article 41, Paragraph 1, first sentence, of the Business Tax Act.
  • Reasoning
    •       Article 19 of the Constitution stipulates: "The people shall have the duty of paying tax in accordance with the law." Accordingly, any tax should have a legal base. However, it is impossible to specify all the details in the law. For technical and detail matters, necessary interpretation, within the scope of the purpose of the law concerned, is made per administrative order.
      
    •       Article 1 of the Business Tax Act provides: "Business tax shall be levied in accordance with this Act on the sale of goods or services within the territory of the Republic of China (R.O.C.) and the import of goods." Under the proviso in Subparagraph 1 of Article 5 of the said Act, the goods imported to the export enterprises inside duty-free export processing zones, enterprises inside the Science-based Industrial Park, or a bonded factory or bonded warehouse supervised by Customs are not categorized as imports. The aforesaid goods are listed by the Customs as bonded goods, exempt from duties imposed under the Customs Act and the Business Tax Act. The reason why the goods imported to the export enterprises inside duty-free export processing zones, enterprises inside the Science-based Industrial Park, or a bonded factory or bonded warehouse supervised by Customs are exempt from business tax is because of the precondition that bonded goods are stored in bonded areas and that the original goods must be processed for re-exportation. If the export enterprises inside duty-free export processing zones and other aforesaid enterprises sell bonded goods to other domestic areas, customs declaration procedure must be completed because relevant duties on such goods have yet to be paid. Hence, Subparagraph 2 of Article 5 of the Business Tax Act provides that at this point, such goods shall be deemed as imports, for which the importer should complete the customs declaration procedure in accordance with the law and pay the duties concerned. Import exempted from customs declaration is outside the scope of import as prescribed in Subparagraph 2 of Article 5 of the Business Tax Act, and is the same as the act of general business operators selling goods locally. This is different from the goods imported by business entities for business operation purposes, which are exempted from business tax upon importation, and therefore a uniform invoice should be issued and business tax should be paid. The letter Ref. No. Taiwan-Finance-Tax-7623300 issued by the Ministry of Finance (MOF) on August 31, 1987, states: "Export enterprises inside duty-free export processing zones, enterprises inside the Science-based Industrial Park, or a bonded factory or bonded warehouse supervised by Customs, that sell(s) goods within domestic tax zones and in accordance with relevant regulations need not make customs declaration, but shall issue uniform invoices, and report and pay business tax according to Article 35 of the Business Tax Act." This is a technical supplementary regulation regarding business tax collection by the competent authority on the basis of its legal duty and responsibility, so as to prevent the duty-free-zone businesses from tax evasion by selling non-bonded goods, which do not require customs declaration, within domestic tax zones. The aforesaid fulfills the purpose of the Business Tax Act, does not contradict the principle of taxation by law, Article 19 of the Constitution, Article 2, Article 5, Subparagraph 2, or Article 41, Paragraph 1, first sentence, of the Business Tax Act.
      
    •       With regard to the term "to issue uniform receipts" referred to in the letter Ref. No. Park-Tou-6318 issued by the Science-based Industrial Park Administration on June 12, 1986, as mentioned by the petitioner, it is merely for the purpose of successful collection of the monthly administrative fee and for the convenience of subsequent auditing processes. The letter was an internal notification issued by the administrative body, not a regulatory order authorized by the law. Furthermore, the said Administration is not the competent authority in charge of tax collection, and is not authorized to interpret or change tax rules. There should be no conflict between the said letter and the aforementioned MOF letter. This is hereby also clarified.  
      
    • *Translated by Dr. C.Y. Huang of Tsar & Tsai Law Firm.
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