[Taxation] Principles for Determining Income from Sources in the ROC Regulated in Article 8 of Income Tax Act (2)

6. “Rental obtained from lease of property situated within the territory of the ROC” stated in Item 5 Article 8 of the Act refers to rental obtained from lease of property within the territory of the ROC as follows: (1) Real estate: House or land situated within the territory of the ROC. (2) Movable property: I. Movable property registered within the territory of the ROC, such as ships, aircrafts or vehicles; or negotiable securities offered/issued or traded in the ROC with approval from competent security authority, such as stocks, bonds, TDR or other negotiable securities. II. Property provided to individuals, corporations or organizations within the territory of the ROC for using, such as machineries, transport equipments (ships, aircrafts, and vehicles), office equipments, satellite transponder devices or Internet directly or indirectly regarding manufacture. (Principle for determining royalty income) 7. “Royalty obtained from patents, trademarks, copyrights, secret methods and franchises by virtue of their being made available for use by other persons within the territory of the ROC” stated in Item 6 Article 8 of the Act refers to royalty obtained from investment of right to use or authorization of use provided to individuals, corporations or organizations regarding intangible assets as follows: (1) Intangible assets such as copyright and registered patents, trademarks, franchises, corporation names, brand names. (2) Intangible assets such as secret methods or expertise not registered: Secret formulas or manufacture procedures, designs or models, plans, trade secrets, information or expertise regarding industry, trade or scientific experience, various franchises, marketing network, client information, channel agency and other rights with value of asset. The secret methods refer to various methods, techniques, procedures, formulas, programs, designs and other information regarding manufacture, sales or operation, which are of practical or potential economic value but are not generally known by persons with related knowledge. Royalty obtained by corporations in the ROC for use of the intangible assets outside the territory of the ROC by processing, manufacturing or researching outside the ROC are regarded as income from sources in the ROC. For corporations in the ROC using the intangible assets whose authorization is obtained by foreign corporations for process or manufacture while no additional royalty shall be paid, the income shall not be regarded as income from sources in the ROC. 8. “Profits from the transaction of properties within the territory of the ROC” stated in Item 7 Article 8 of the Act refers to income from the transaction of properties within the territory of the ROC as follows: (1) Real estate: Real estate situated within the territory of the ROC, such as houses or lands. (2) Movable property: I. Movable property registered within the territory of the ROC, such as ships, aircrafts or vehicles; or negotiable securities offered/issued or traded in the ROC with approval from competent security authority, such as stocks, bonds, TDR or other negotiable securities (e.g. Hong Kong ETF listed and traded in the ROC), exclusive of negotiable securities approved by competent security authority and actually traded outside the territory of the ROC (e.g. Hong Kong ETF listed and traded outside the ROC). II. Movable properties in addition to aforesaid term: i. In case disposition of movable property requires transportation, place of departure is within the territory of the ROC. ii. In case disposition of movable property does not require transportation, location of the property is within the territory of the ROC. iii. In case disposition of movable property is completed through auction, location of auction is within the territory of the ROC. III. Intangible assets: i. Intangible assets such as patents, trademarks, franchises, corporation names, and brand names registered in accordance with law of the ROC. ii. Intangible assets in addition to aforesaid term, supposing the owner of the assets is person residing in the ROC or corporations whose headquarter is located in the ROC. Corporations registered outside the ROC in accordance with foreign laws are not subject to the limitation. 9. “Remuneration for services performed by personnel sent abroad by the government of the ROC on overseas missions and for services rendered abroad by employees in general” stated in Item 8 Article 8 is applicable to remuneration for service performed in the country of expatriation which is tax-free in that country. (Principle for determining profits from business operation) 10. “Profits from operation of industry, commerce, agriculture, forestry, fishery, animal husbandry, mining, and metallurgy corporations within the territory of the ROC” stated in Item 9 Article 8 refers to operating profit from operation (including sales of goods and rendering services) related to specified business scope by corporations within the territory of the ROC. In case aforesaid operation is performed simultaneously within and outside of the ROC, tax collection authority shall calculate and determine the profits of operation subject to the ROC if the corporation can provide certificate of determining respective contribution of services performed inside and outside of the ROC such as audit report from CPA, certificate of transfer pricing, work plan or work report. In case the operation is performed outside the ROC and under one of the following circumstances, remuneration obtained by foreign corporations shall be not regarded as income from sources in the ROC: (1) No permanent establishment or business agent within the territory of the ROC. (2) Business agent within the territory of the ROC is engaged, but the service is not included in business scope of the agent. (3) Permanent establishment within the territory of the ROC is applied, but it is not used for rendering of the service. Sales of goods from foreign corporations to persons, corporations or organizations in the ROC are subject to general international trade under one of the circumstances as follows: (1) Offshore headquarter of foreign corporations sells goods to customers within the ROC directly. (2) In case foreign corporation sells uncustomized standard software, including shrink wrap software downloaded via Internet and installed in the hardware of computer or written on the disk, packaged software or other standard softwares to buyers in the ROC directly or via corporation in the ROC (not sales agent), the buyer or corporation in the ROC is not allowed to copy, modify or publicly display the software. (3) Foreign corporation without permanent establishment or business agent sells goods to buyer in the ROC through Internet outside the ROC and the buyer declares and pick up the goods directly. 11. “Awards or grants obtained from participating in various skill contests, games, or lotteries, etc. within the territory of the ROC” stated in Item 10 Article 8 refers to awards or grants obtained from participating in various contests, games, or lotteries etc. held in the territory of the ROC. (Principle for determining other incomes) 12.  “Any other income obtained within the territory of the ROC” stated in Item 11 Article 8 refers to the incomes that are not definitely subject to any items from Item 1 through Item 10 in Article 8.