Recently, the Taiwan National Taxation Bureau (NTB) reiterated that payments received by foreign companies for authorizing Taiwanese businesses to use trademarks do not qualify for the simplified income calculation under Article 25 of the Income Tax Act.
In other words, if a foreign company provides not only technical or professional services but also includes the licensing of trademarks, brands, patents, trade secrets, or other intellectual property (IP), such income will be regarded as royalty income, which is subject to Taiwan withholding tax rather than the Article 25 tax benefit.
This distinction is critical — the line between “technical service” and “use of intangible assets” is often the deciding factor in whether the Article 25 incentive can be applied.
For example, if a Taiwan company pays a foreign affiliate and the contract does not clearly separate “service fees” from “license fees,” the tax authority may treat part of the payment as royalty income, making the entire transaction ineligible for Article 25 relief.
In practice, Taiwan tax authorities often examine whether the payer in Taiwan obtains control or ownership of the IP after the service is completed — such as the right to modify, sublicense, or exploit the IP — to determine whether the payment includes a royalty component.
✅ LY CPA Firm Recommends:
Before entering into or executing cross-border service contracts, foreign companies should:
1⃣Conduct a tax risk review of the service agreement
2⃣Assess Article 25 applicability and filing strategy
3⃣ Clearly allocate fees if both service and licensing elements are involved
📌 How LY CPA Firm can help:
We assist in analyzing which Taiwan tax relief mechanism provides the best cost-benefit outcome —
whether under Article 25, Article 8-15-1 of the Source Income Regulations, or applicable tax treaties — to help you legally minimize taxes, expedite refunds, and improve cash flow.
👉 Partner with LY CPA Firm — clarity and confidence in your Taiwan cross-border tax matters.
