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SUPPLY OF STANDARD SOFT-WARE BY FOREIGN ENTITIES IS SALE OF GOODS
Item 6, Article 8 of the Income Tax Act provides that royalties received for making patents, trademarks, copyrights, secret formulas, or other licensed rights available for use by others within the Republic of China （ROC） are ROC-sourced income, and therefore subject to ROC income tax. In reply to the uncertainty over whether the payment received by a foreign entity for having sold directly or indirectly through a distributor in Taiwan to a user in Taiwan a computer or an optical media in which a standard software has been installed, and on the conditions that the user may not reproduce, alter, resell, or publicly ex-hibit the software, should be treated as royalty, or sales income, the Ministry of Finance stated in a ruling dated 9 April 2007 that such transaction should be treated as the sale of goods, and the amount of revenue generated therefrom should be determined in the same way as that from an ordinary international trade transaction.