Tax for IP licensing

[jona]

hey
I understand there are some taxes to be paid in Taiwan if Taiwanese company licenses IP from outside of Taiwan.
Can anyone provide an appropriate literature / reference to the same?
Does the tax need to be paid by the Licensee or Licensor?
What is the percentage?
For what kind of activities (licensing, customization etc) are the taxes applicable and for what activities is there exemption?

Thanks, Jonathan

[Mother_Theresa]

IP royalties paid by a Taiwan company to a foreign company are subject to a 20% withholding tax. An exemption may be available in some circumstances, by application to the competent authorities, but I don’t know what is required to obtain such an exemption and I’ve worked on many licensing arrangements and have never heard of someone obtaining such an exemption. One can avoid the withholding tax by arranging for the payment to be made to a Taiwan company, but then you still have to get the money out of Taiwan and I understand you’ll be taxed then.

Edit:

The ROC’s withholding tax rate on dividends, interest, and royalties payable to a non-resident is 20%, but the dividend withholding rate is 30% for non-resident individuals and 25% for non-resident enterprises for investments not approved under the Statute for Investment by Overseas Chinese or the Statute for Investment by Foreign Nationals. However, with respect to dividends, interest, and royalties, reduced withholding tax rates ranging from 5-15% are provided for by treaty

etax.nat.gov.tw/wSite/ct?xIt … Node=10785

[jona]

thanks for the info. who pays this 20% withholding tax? the licensor or the licensee

[Mother_Theresa]

It’s a critical contract issue and the parties have screwed up if they fail to explicitly address it in the contract, but it is an income tax withholding, so it should rightfully be the licensor’s problem, not the licensee’s, and that’s how I’ve always seen it, but I could imagine a clever licensor pushing the obligation off on a careless and unsuspecting licensee.

The licensee should always be sure the license states that licensee is not liable for any required tax withholdings.

The licensor should require the license to state that the licensee must provide receipts showing payment of all required tax withholdings and to provide reasonable assistance obtaining any exemption from such withholding obligations.

Both of the above are perfectly fair, reasonable and customary positions.