For those of you with registered companies here (@Marco, @jimbob132 @Satellite_TV off the top of my head) to what extent were you able to claim general expenses as business expenses and what were some of the best methods you used for legally reducing your corporate tax responsibilities?
For claiming business meals, this article is good, but itās from 2009:
https://blog.xuite.net/jccpb/accounting/26125545
I had ChatGPT summarize it in English:
According to tax regulations, expenses incurred by a company as a reward for employees cannot be deducted from input tax, except for the few exceptions, such as meal expenses paid for business meetings. However, some companies disguise high-end restaurant entertainment or dinner expenses as business meals, thinking that the tax bureau cannot distinguish the difference in invoice certificates, but they are still subject to tax under the āsubstantial taxation principleā. Under the sales tax law, the input tax cannot be deducted from the output tax for goods or services purchased by a company as a reward for employees. This includes expenses such as employee dining costs, employee meal services, rental costs for providing employee accommodation, water and electricity bills, and death taxes. However, there is an exception to this rule, which is if a company pays for meal expenses for business meetings, then the input tax can be claimed as a deduction. Nevertheless, many companies face challenges from the tax bureau when claiming input tax deductions for business audit meeting meal expenses due to the difficulty in distinguishing between invoice certificates for these expenses and those for general entertainment or employee dining. To claim the deduction, the company must be able to provide evidence of the purpose of the dinner, such as meeting records and attendance. In practice, if a company includes restaurant invoices in the input tax deduction report, it will likely be inspected by the tax bureau. Therefore, companies should be cautious and ensure that they have legitimate evidence before claiming the deduction.
Does anyone have any experience in claiming business meals as expenses?
We use a local accountant. First thing make sure electricity ISP etc are registered in business name. Labor insurance NHI Pension all company paid as wellā¦ Iāve never claimed any meals as expenses. We get slugged on incoming transfers from overseas clients as they pay once a year. So not many incomings. Also this, go to the tax office. If you are a service company you can have your clients pay into an overseas account such is in Hong Kong. You can keep and have funds there and bring them into Taiwan with very little taxes.
You can expense business trips. Need to write a trip report. You can put hotels, transportation, other types of expenses, and per diem rate / day. Thereās some information here:
https://www.taxathand.com/article/2149/Taiwan/2015/Tax-savings-on-salary-and-other-income
- Per diem: When an employee travels in Taiwan or overseas for business purposes, the per diem received is tax-exempt if it does not exceed the following limit per day:
- Within Taiwan: NTD 700 per day for a chairman, general manager, manager or factory director; and NTD 600 per day for other employees; and
- Overseas: In accordance with the Guidance for the Overseas Travel Allowance Disbursement, the amount does not exceed the prescribed limit in the Table for the Foreign Per Diem Allowance of the Central Government Agency
Foreign expenses are a bit strange with Taiwan companies. My CPA said if I report foreign expenses/receipts, I need to pay extra service tax on behalf of the merchant/contractor. For example if your company pays a foreign contractor, you have to pay extra taxes on top of that to the government (which is something ridiculously high like 20%). Or you withhold taxes from the non-resident contractor, which they probably wouldnāt be too happy about because no other country does this and they get double taxed in their home country.
Iām wondering how it works with bigger companies like TSMC - surely theyāre not paying extra tax on top of bought goods/services to the government? Or do they require their contractors have a Taiwan branch that theyād contract with? It seems to discourage Taiwan companies from buying foreign goods/services.
Very useful information!
Itās for services only AFAIK and yes, itās 20%. The idea is probably to flat tax profit base erosion (transfer the likely profit from the Taiwanese company to a BVI company two days before end of year, invoice says āconsulting feeā). Other countries audit you, Taiwan taxes you at the normal profit tax rate.
TSMCās suppliers likely all have local branch offices.
That seems to put Taiwan businesses at a big disadvantage. If they canāt find talent locally and need to hire a foreign contractor who works outside of Taiwan, they need to pay 20% more than a competing company from another country.
Though this is assuming the Taiwan company is reporting deductions properly and not just taking the industry standard deduction and paying everyone under the table.
Some countries are even stranger than that! Their governments want you to collect W8-BEN-E forms from foreign suppliers, then you need to figure out if there is a tax treaty between your country and their country and then you need to withhold the right amount of tax from their payment and if you get it wrong you have to pay a fine! Madness!
Since itās tax seasonā¦ hereās another pro tip
Donāt forget to issue dividends to yourself to maximize those tax rebates. You can claim a flat tax rebate of up to 80k NTD for dividends you issue to yourself.
This means if you issue 1M NTD dividends, assuming no deductions (for examples sake), your gross income would be 1M NTD. Tax rate of 12% and progressive difference of about 40k means you owe around 120k - 40k = 80k NTD tax right? Well after that 80k tax rebate for dividends, now you owe 80k - 80k = $0 in taxes. This is subtracted after payable tax is calculated. Realistically your deductions would be much more than that. If youāre in the 40% bracket, the 80k tax rebate would also be valued much more since it happens post tax calculations.
As we open an office weāll be needing a bit of warehouse space, and it seems like itās possible to have living quarters in the same building and provide them as a benefit to myself and spouse on the basis of being a foreign worker.
Does this actually work though? Can I effectively turn my personal housing costs into a business expense this way?
I think thereās some restrictions to keep in mind
If you use company retained profits to reinvest in offices, theyāre not supposed to be leased out within the first 5 years. Iām not sure if providing employee living benefit is considered leasing out, since from tax perspective you should charge reasonable rent rather than provide free rent. In addition if you get a loan, the bank states that the space canāt be used for residential purposes. I will check with my accountant since Iāve also been thinking similarly.
However if you rent the warehouse, thereās less restrictions. You can provide dormitory as benefit too, but might need to add it to employee taxable income.
The Costco business membership is only $1,150, which seems cheaper than their individual memberships (which start at $1,350)
https://www.costco.com.tw/BazaarVoiceExclusion/Membership/Business-Membership-New-Member/p/61
Just donāt be like the foreigner who got audited by immigrations and said they put all Costco groceries on their business books (canāt find the article right now)
Who in Taiwan dared to put human fuel for work on their business reciept?!?
I know a guy who does that
Sadly common. Nothing wrong with actual employees food being on the books though. it is an expenseā¦ We put our groceries for work meals on the books as well. nothing fraudulent about it.
if you ātake people out for mealsā there is normally a paper one signs that this was for a business reasons. transportation, accomodation etc are all the same.
Itās sad to say our expenses are so limited that we really canāt even deduct obvious thing, like new pcs. I have never understood why.