The NTB announced that compensation or penalty fees arising from the sale of goods or services must be invoiced and reported for business tax under the Business Tax Act.
Taiwan’s Taipei National Taxation Bureau of the Ministry of Finance stated, on 13 November 2025,
that if a business operator collects compensation or penalty fees arising from the sale of goods or services, these fall within the scope of taxation under the Value-Added and Non-Value-Added Business Tax Act (hereinafter referred to as the Business Tax Act). Accordingly, a uniform invoice must be issued, and business tax must be reported and paid in accordance with regulations.
The Bureau explained that, under Articles 1 and 16, Paragraph 1 of the Business Tax Act, the sale of goods or services and the import of goods within the territory of the Republic of China are subject to business tax by law.
The sales amount of goods or services refers to the total consideration received by the business operator for the sale, including all additional charges collected on top of the price of the goods or services. Therefore, whether compensation or penalty fees collected by a business operator must be invoiced and reported for business tax depends on whether they arise from the sale of goods or services. If the fees are collected due to the sale of goods or services, a uniform invoice must be issued and business tax reported. Conversely, if the compensation or penalty fees are not related to the sale of goods or services, they are not subject to business tax.
The Bureau gave an example: Company A earns rental income of TWD 60,000 from leasing a property. Due to the tenant’s delayed payment, a penalty of TWD 30,000 is charged. Since this penalty arises from the rental of the property, it falls within the sales amount and must be invoiced and reported for business tax.
However, if Company A only issued a uniform invoice for rental income of TWD 57,143 and business tax of TWD 2,857, the Bureau will calculate the omitted penalty income of TWD 28,571 and assess an additional business tax of TWD 1,429, along with a fine.
The Bureau reminds that compensation or penalty fees collected due to sales activities fall within the scope of business tax. A uniform invoice must be issued, and business tax reported.
If there is underreporting of sales or other violations, taxpayers who voluntarily correct and pay the omitted tax before an investigation by the tax authorities or personnel designated by the Ministry of Finance, according to Article 48-1 of the Tax Collection Act, may be subject to interest but exempt from fines.
