Tax Law: Purchasing Commission Is Distinct from Sales Commission; Importers Must Declare them Correctly to Avoid Penalties.

[2016/04/15]

On 16 March 2016 the Customs Administration, Ministry of Finance, issued a press release reminding importers that they must correctly and honestly declare the dutiable value of imported goods. Importers that inflate their import costs by falsely declaring purchasing commission, so as to evade customs duty, will be required to make up the unpaid duty and will be subject to administrative fines.

The Customs Administration pointed out that purchasing commission is not the same as sales commission: “purchasing commission” refers to the remuneration received by an agent that purchases goods for importation on behalf of the importer. If the importer can produce a contract signed with the agent, whereby the agent is to conduct purchasing operations abroad on behalf of the importer, and it is confirmed that the agent acts independently and has no connection with the seller, then the importer’s expenditures in respect of the agent’s activities can be recognized as purchasing commission, and will be regarded as part of the importer’s operating expenses. Under Taiwanese tax law, such payments need not be included when calculating the dutiable value of imported goods.

The Customs Administration further explained that “sales commission” refers to remuneration received by an agent that sells imported goods on behalf of the seller. In case where, according to the terms of the transaction, the agent’s sales commission is to be paid by the purchaser, such commission must still be included when calculating the dutiable value of the goods. Therefore, if an importer were to falsely declare an excessive amount of purchasing commission, such as to inflate its import costs, this would constitute submitting a false invoice, and the importer would be required to make up the unpaid duty and would be subject to an administrative fine.

If an importer is unsure as to whether commission should be included in the calculation of dutiable value, they may apply to the Customs Administration for an advance valuation ruling. The application and supporting documents should be submitted before the goods are imported. The Customs Administration will issue a written response.