Guide to Taiwan Custom Duties and Free Trade Agreements
Import duty and taxes are due when importing goods into Taiwan whether by a private individual or a commercial entity. The valuation method is CIF (Cost, Insurance and Freight), which means that the import duty and taxes payable are calculated on the complete shipping value, which includes the cost of the imported goods, the cost of freight, and the cost of insurance. In addition to duty, imports are also subject to sales tax, trade promotion tax, commodity tax, and in some cases to excise in the form of liquor tax and tobacco tax in addition to health welfare tax.
1. Customs Duties
Customs duties are levied under the Customs Law and Customs Import Tariff promulgated by the Ministry and Finance of Taiwan (MOF). Basically, the Taiwan customs mechanism, including valuation and classification, follows WTO rules and the WCO’s Harmonized Commodity Description and Coding System (HS).
(1) Customs Value
The assessment of customs value is based on the transaction price actually paid or payable by the buyer, plus the following:
(a) Commissions, brokerage, the cost of containers, and the cost of packing incurred by the buyer;
(b) The value, apportioned as appropriate, of the following goods and services supplied by the buyer to the seller free of charge or at reduced cost for use in connection with the production or sale for export of the imported goods:
(i) Materials, components, parts, and similar items incorporated into the imported goods;
(ii) Tools, dies, molds, and similar items used in the production of the imported goods;
(iii) Materials consumed in the production of the imported goods; and
(iv) Engineering, development, artwork, design, plans, and similar items undertaken elsewhere than in Taiwan and necessary for the production of the imported goods;
(c) Royalties and license fees related to the goods paid by the buyer as a condition of the sale of the goods;
(d) Proceeds for the use or disposal of the goods by the buyer accrues to the seller;
(e) Transport costs of the imported goods to the port or place of importation, and loading, unloading, and handling charges associated with transport; and
(f) Insurance costs.
Before importation, the duty-payer may apply to the Customs authorities for an advance ruling on customs valuation with respect to whether the expenses paid or payable for the imported goods should be added into the calculation of customs value.
(2) Related Party Transactions
Where the transaction price of a related party transaction is affected by the relationship of the parties, the customs authorities may disregard the transaction price and assess the customs value of the import goods by applying one of the following methods:
(a) The price of identical or similar goods sold to Taiwan at the time of export, before export, or after import of the goods sold in the related party transaction, with an adjustment for differences in the terms of sale, quantity, freight, or other factors affecting the price.
(b) The resale price in the domestic market to an unrelated third party after deducting the normal profit, selling expenses, taxes and duties, freight, insurance, and other related expenses incurred after import.
(c) Considering the computed value to be the customs value. The customs value is the production costs of the producer, plus movement costs from the port of export to the port of import.
(d) The best information available to the authorities if the customs value cannot be assessed by applying any of the above methods.
(3) Single Duty Rate for Unassembled Goods
Customs duties normally are assessed based on the type and function of the goods at the time of import. Where a complete set of machinery, together with all essential equipment used directly with the machinery in the production process, must be imported in an unassembled or disassembled state, packed separately due to excessive size or for other reasons, the machinery and equipment will be subject to customs duties. Customs duties will be assessed according to the relevant tariff classification. However, the importer can request from customs, prior to importation, verification and approval to assess a single tariff rate according to the tariff classification applicable to the machinery with equipment as a single set. To make the single tariff rate application, certain documents, such as the design or engineering blueprints, catalogues, and etc., should be submitted to the customs authorities for review.
Goods that contain various parts so that they must be imported in an unassembled or disassembled state but assembled as a single good before applying a tariff rate will be taxed as a single good if they meet any of the following criteria:
(a) The assembled goods, with title and amount, are reported in the same shipping list.
(b) The assembled goods need to be shipped as a complete good.
(c) The assembled goods are labeled as a complete good but contain insufficient parts to be assembled into complete goods and are valued at more than half of the value of a finished good.
(4) Re-import of Goods Sent Abroad for Repair, Assembly, or Further Processing
Customs duties are levied on goods at the time of import. However, where goods are exported from Taiwan for the purpose of repair and assembling, the customs duties upon reimport may be assessed based on the repair or assembling expenses.
If goods are exported for further processing outside Taiwan, when the completed goods are re-imported, customs duties may be paid only on the value-added part of the goods, which represents the difference between the value of the goods at the time of export and the value of the goods as assessed by customs authorities at the time of re-import.
(5) Customs Value of Leased Equipment
Goods imported under a lease agreement may be subject to customs duties based on the rental or use charges, plus movement costs, such as freight and insurance from the exporting port to the import port. In this case, the importer must provide a guaranty or bond to the Customs authorities based on the duty on the full value of the imported goods. If the rental or use charge is determined by Customs as lower than normal, customs can assess the rental or use charge based on its investigation. The assessed rental or use charge may not be lower than 10% of the full value of the imported goods as assessed by customs.
(6) Import and Re-export
Customs duties normally will not be refunded when imported goods are re-exported. However, based on the prior approval of Customs, certain goods may be exempt from customs duties if they are re-exported within six months (or a longer period granted by the MOF). Such goods include dutiable samples; goods used for scientific research, testing, inspection, or exhibition; equipment and tools used for installation or repair of machinery; containers; goods imported for repair and maintenance; or other goods approved by the MOF. An extension may be requested before the expiration of the six-month period or the special period granted by the MOF.
(7) Export and Re-import
Customs duties normally will not be refunded when exported goods are re-imported. However, based on the prior approval of customs, certain goods may be exempt from customs duties if they are re-imported within one year (or a longer period granted by the MOF).
Such goods include samples, articles for scientific research, engineering machinery, cinematographic equipment and supplies carried by professionals engaged in making motion pictures and/or television firms, instruments and tools needed for the installation and repair of machinery, articles for exhibition, artwork, containers used for importing cargo, costumes and paraphernalia of entertainment troupes, copies of motion pictures and video tapes mailed abroad by government agencies and other similar articles approved by the MOF. An extension may be requested before the expiration of the one-year period or the special period granted by the MOF.
(8) Temporary Admission
The duty-payer may hold a carnet instead of an import or export declaration form in order to clear Customs for temporary admission of goods. Where the goods are re-exported or re-imported within the period of validity, such goods may be exempt from customs duties.
If the goods are not re-exported within the time limit, the institution acting as guarantor as prescribed in the carnet must pay the duty rather than the duty payer; where the goods are re-imported after the relevant period, the customs duties will be levied according to the Customs Act.
For the regulations governing the scope of goods applicable to temporary admission, the guarantee liabilities of the guarantor institution, the endorsement, issuance, and management, and other relevant matters, see the Regulation of Goods Temporary Admission and the Practice Guideline of Application of Carnet.
(9) Advance Classification Application
A duty-payer can apply to customs for advance confirmation of the applicable tariff classification of importing goods. The customs office should respond within 30 days after the application; 120 days if the case requires the advice of local or international institutions or professionals. For the procedures, required documents and other details, see the Regulations Governing the Implementation of Advance Tariff Classification Ruling on Imported Goods.
(10) Duty Exemption
Article 49 of the Customs Act71 lists a duty exemption privilege for certain goods, such as necessary articles imported by educational and research institutions for the use of education, research, and experimentation.
In addition, certain machinery, equipment, instruments, parts, and accessories may be imported free of duty in accordance with the Additional Notes of the relevant chapter of the Taiwan Tariff Table.
Meanwhile, machinery, equipment, and parts thereof imported to use for the construction of a major infrastructure or transportation project are exempt from customs duties.
(11) Post-Clearance Audit
Customs can proceed with a post-clearance audit of duty-payers, exporters, and related persons after notifying the auditors within six months and within two years from the date following the release of the imports and/or exports. Depending on the post-clearance audit result, any duty refundable or receivable must be paid within three years from the date following the release date.
When Customs proceeds with a post-clearance audit, it may request the duty-payer, exporter, or related person to provide records, documents, account books, and/or relevant files or databases regarding the imports or exports, or notify related persons for inquiry at the customs office, or designate officers to proceed with an investigation at the premises of a responsible person. The person under investigation may not refuse or evade the investigation.
When Customs selects a case for investigation, customs should inform the entity to be investigated in writing within six months from the date following the release of the imports and/or exports.
2. Free Trade Agreements
In order to promote international trade and eliminate barriers between trade and non-trade, and reduce tariffs, Taiwan has been actively engaged in signing FTAs. Taiwan has signed FTAs with El Salvador, Guatemala, Honduras, Nicaragua, and Panama. Taiwan also has signed an Economic Cooperation Framework Agreement (ECFA) with Mainland China that will benefit enterprises that export raw materials to China and then tranship the processed materials to other ASEAN countries.
The Agreement between New Zealand and the Separate Customs Territory of Taiwan, Penghu, Kinmen, and Matsu on Economic Cooperation (ANZTEC) signed in July 2013 provides significant benefits and opportunities to industries exporting industrial products to New Zealand, such as iron or steel made products, plastics and plastic products, as well as bicycles and component parts. Since New Zealand is a member of the TPP and the RCEP, the signing of the ANZTEC will boost Taiwan trade with the countries in the Asia-Pacific Region.
Taiwan signed the Agreement between Singapore and the Separate Customs Territory of Taiwan, Penghu, Kinmen and Matsu on Economic Partnership with Singapore on 7 November 2014 and the agreement took effect on 19 April 2014. The agreement provides preferential tariff access that offers both Taiwan and Singapore exporters competitive advantage in the two important market. It is expected that it will liberalise and facilitate trade in goods, trade in services and investments between the Taiwan and Singapore markets
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