Go to Content Area :::

Constitutional Court R.O.C. (Taiwan) Logo

Home Sitemap 中文版
   

Decisions

Home > Decisions > Interpretations (before 2022)
:::
:::
  • Interpretation
  • No.688【Under Translation】
  • Date
  • 2011/06/10
  • Issue
    • Whether the requirement for package contracting businesses to issue sales certificate “at the time a receivable payment is due in each period under the construction agreement” is constitutional?
  • Holding
    •     In the timetable of business operator’s issuance of sales certificates under the Value-added and Non value-added Business Tax Act (hereinafter Business Tax Act), the regulation on the timeframe for package contracting businesses to issue sales certificate is “at the time a receivable payment is due in each period under the construction agreement.” It does not contravene the principle of equality under Article 7 of the Constitution, the principle of proportionality under Article 23 of the Constitution, nor does it contradict the meanings and purpose of protecting property rights and the freedom to operate business under Article 15 of the Constitution. However, [questions remain] when a business operator issues the sales certificate with time limit earlier than the actual receipt of payment, if the purchaser should subsequently become insolvent or for other reason render the business operator not able to transfer liability to the purchaser the already paid business tax. The Business Tax Act should appropriately address the non-transferrable business tax so that the legislative intent that business tax is a consumption tax and its integrity is conformed. The governing authority shall promptly review and improve the relevant provisions of the Business Tax Act in accordance with the meaning and purpose of this Interpretation.
  • Reasoning
    •     The protection of the people’s right to equality under Article 7 of the Constitution is intended to prevent arbitrary or capricious acts of the legislators and to avoid unreasonable differential treatment to people. Whether a law meets the requirement for the protection of equal rights shall hinge on whether the purpose of the differential treatment under that law is constitutional and whether there is a certain level of nexus between the categorization adopted and the objective [intended] to achieve under the law (see J.Y. Interpretation No. 682). With regard to the related matters on the imposition of a concerted obligation to assist in tax collection, given that they involve professional considerations on tax collection techniques, the judicial review shall give deference as long as the legislative authorities make reasonable differentiations based on adequate purpose and without acting arbitrarily or capriciously. Furthermore, the time limit provision for business entities on when to issue sales certificate is the realization of the above joint obligations to assist. Although it concerns the filing and payment of the business operator’s business tax and thus affects the protection of property rights and freedom to operate business under Article 15 of the Constitution, as long as the means thereof are reasonable and justified with legitimate public interest objective, it does not contradict the purpose of Articles 15 and 23 of the Constitution.
      
    •     The levying of business tax under the Business Tax Act adopts a combination of value-added sales tax and cumulative transfer tax system, with the former being assessed on the difference between a business operator’s input and output tax in accordance with Chapter 4, Section 1 of the Business Tax Act and the latter being levied on a business operator’s total sales in accordance with Chapter 4, Section 2 of the same Act (see J.Y. Interpretation No. 397). As a matter of principle, a business operator shall file a tax return for the sales amount, payable taxes or overpaid taxes once every two months (see Article 35 of the Business Tax Act). To ensure that business operators have timely and appropriate means to prove the occurrence of a sale and the amount of such a sale, Article 32 of the Business Tax Act imposes on the business operators a concerted obligation to assist by issuing the uniform sales receipts to the purchasers for the goods or services provided within the timeframe stipulated under the Time Table for the Issuance of Sales Certificate by the Business Operators (hereinafter Time Table) of the same Act.
      
    •     The Time Table expressly states the timing at which business operators shall perform the obligation to issue sales certificate, and, depending on different industries, provides different timeframe to issue. Among the business operators in the sale of goods such as the retail, manufacturing, or handicraft sector, among others, the Time Table in principle sets the time for issuing the sales certificate at the time the goods is dispatched; for business operators in the sale of services, such as labor contracting service, warehousing, leasing, among others, the Time Table in principle sets the time for issuing the sales certificate at the time of payment collection. With regard to the timeframe of contracting business operators to issue sales certificate, the Time Table sets it “at the time a receivable payment is due in each period under the construction agreement.”
      
    •     The package contracting business is defined by the Time Table as “every contracting operation of civil construction, water, electric and gas utility installation, and construction painting whereby the contractor uses its own materials or provide pricing and sale of materials to the undertakers, including building construction, architecture, civil engineering contracting, road pavement and surfacing, well drilling, electrical and plumbing, paint contracting, among other things.” Given that such business operators provide both their own materials and the undertaking of the construction services, their services simultaneously entail the nature of selling goods and services, which is different from business operators that purely engage in the sale of goods or services.  The preparation of materials for the sale is similar to the business operators in the sale of goods, yet on the other hand, in the ordinary course of package contracting businesses usually condition the installed payments on the completion of certain progress in the construction. Should the package contracting businesses, merely because it has a certain character of sale of goods, be required to issue sales certificate upon the delivery of goods similar to that of the operators for the sale of goods and as a result liable for output taxes, then it can overburden the package contracting operators. Furthermore, although package contract businesses also possess the character of sale of services, given that the payments between the parties are in installments, the risk of default payments can usually be excluded. Therefore, as a compromise, the Time Table stipulates that contracting businesses to issue the sales certificate “at the time a receivable payment is due in each period under the construction agreement,” so that the business operators and the tax levying authority have a certain, objective date for reference. Accordingly, the regulation on the timeframe is for purpose of such public interest as promoting the efficiency of tax levy and affirming the creditor’s right of the state’s taxing authority, taking into consideration that the nature and customary transactions of package contracting operations is different from those engaged in the sale of services, provided that there is a reasonable nexus between the differential treatments and the purpose it intends to achieve, and, therefore, not arbitrary or capricious. Furthermore, the means being adopted is to ensure that adequate and timely evidence is available to prove the collection of business tax. It can hardly be said that the disputed timeframe regulation overburdens the property rights and the freedom to operate on package contracting businesses. Thus, the disputed regulation does not contravene the principle of equality under Article 7 of the Constitution or the principle of proportionality under Article 23 of the Constitution, nor does it contradict the meanings and purpose of protecting the property rights and the freedom to operate businesses under Article 15 of the Constitution. 
      
    •     In accordance with the spirits of the business tax system, the business tax is a levy to the person who purchases goods or services, and reflected on the capacity to bear the tax burden through such consumption. Although technically the taxpayer is the business operator, [the burden] is transferred to and borne by the final purchaser, i.e., the consumer. Therefore, the rights and interests of the business operator to transfer the amount of business taxes must be adequately protected to comply with the legislative purpose and the integrity of the system that business tax is a consumption tax. To ensure the accuracy and efficiency of business tax levy, while it is not impossible to require business operators to issue sales certificate prior to the payment being made depending on the nature of the business, such a business operator who has legitimately issued the sales certificate, filed the return and made the tax payments may be unable to transfer such tax burden due to the purchaser’s subsequent insolvency or other causes. This does not affect the constitutionality of the taxpayer’s obligation to issue sales certificate and pay the business taxes prior to the actual receipt of payment. Yet the Business Tax Act should nevertheless take appropriate actions to deal with the taxes the business operators cannot transfer to the purchasers with proper justification such as allowing the business operator to request a refund of the already paid tax or credit it against the payable tax amount without rescinding the contract and returning the goods. The competent authority shall promptly review and improve the relevant provisions of the Business Tax Act.
      
    • Translated by Eleanor Chin, Esq. and Chien Yeh Law Offices
Back Top