Taiwan's Cloud Invoice Lottery for Foreign Digital Services | VAT Compliance Update

National tax authorities take many different approaches to ensuring that foreign digital service providers pay their fair share of taxes to provide services to local consumers. One innovative measure implemented in 2023 in Taiwan was imposing an obligation on local consumers to obtain a cloud-based invoice from a foreign digital services provider.

However, the National Taxation Bureau created a prize game to encourage local consumers to comply with these rules.

Impact on Local Consumers and Foreign Providers

When purchasing electronic or digital services from foreign providers, local consumers must obtain a cloud-based invoice containing all relevant business taxes, including VAT, in the price. Foreign digital services providers should deliver the cloud-based invoice to the consumers' email addresses provided at the time of purchase.

If the invoice wins a prize in the lottery system, the electronic invoice platform will notify the winner and provide a link to a one-time password that is valid for 48 hours. Winners can either print the winning invoice at a convenience store, KIOSK, and claim their prize at the designated redemption locations or use the Ministry of Finance’s unified invoice redemption app to receive the amount directly to their bank accounts without visiting a physical location.

The Ministry of Finance notified all local consumers who purchase digital services from foreign providers to provide a correct e-mail address to be eligible for prizes. The Ministry also provided contact information for consumers with questions about obligations or prizes.

Conclusion

Taiwan's Ministry of Finance's approach balances enforcement and consumer engagement. For example, the Ministry ensured tax compliance by requiring cloud-based invoices while incorporating a lottery system incentivizing local consumers to participate actively.

Taiwan's model or strategy highlights how innovative policies can encourage compliance and increase transparency in cross-border transactions without imposing undue burdens on consumers. As the global taxation landscape continues to evolve, it is essential to see how governments adapt to new circumstances and the results of implementing those measures.

Source: Ministry of Finance