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ZERO TAX FOR SCIENCE PARK EXPORT GOODS TRANSFERRED TO BONDED WAREHOUSES
In an interpretation dated 21 September 2005, the Ministry of Finance explained the time point for tax filings to claim zero-rate business tax for goods originating from an enterprise located within a science-based industrial park, when on the instructions of a foreign client such goods are placed into a bonded warehouse for inspection and testing before subsequent export.
Previous related MOF interpretations, dated 20 October 1990 and 15 July 1998, stated that when, on the instructions of a foreign client, goods destined for export originating from an enterprise located within a science park are turned over to an exporter within an export processing zone, another enterprise in a science park, or to a bonded factory, for processing before subsequent export, the originating science-park enterprise may apply for zero tax rate for the goods after they have been handed over to the other entity. But the above two interpretations did not address the issue of goods being transferred to a bonded warehouse for processing.
Science parks, duty-free export processing zones, and bonded factories and bonded warehouses under Customs supervision, are all special eco-nomic zones; thus it is appropriate that uniform taxation principles should apply to them all. Accordingly, the MOF's latest interpretation states that if an enterprise located in a science park is instructed by its overseas customer to transfer goods to a Customs-supervised bonded warehouse for inspection and testing before subsequent export, the science-park enterprise may apply for zero business tax rate for the goods once the goods have been handed over to the bonded warehouse for processing.
Because the interpretation names the time at which goods are "handed over for processing" as the point from which zero tax rate applies, if for any reason such goods are not in fact exported after being transferred to the bonded warehouse, but are for example resold within Taiwan, this may give rise to the problem of goods not having been exported but the taxpayer having already enjoyed zero tax rate. It remains to be seen how this problem will be dealt with.