The North Regional Tax Bureau of the Ministry of Finance stated that when a business faces financial difficulties and uses their remaining inventory or assets to offset debts, whether through agreement with creditors or when creditors take the goods to offset outstanding debts, this should be regarded as a sales of goods activity, and the business is required to issue unified invoices and pay VAT.
Furthermore, according to Article 3, Paragraph 1 of the Value-Added and Non-Value-Added Business Tax Act (hereinafter referred to as the Business Tax Act), transferring ownership of goods to others in exchange for consideration is considered the sale of goods. The consideration received by the business for the sale of goods is not limited to the price. In accordance with Article 3, Paragraph 3, Subparagraph 2 of the same law, when a business dissolves or ceases its operations and has remaining goods or uses goods to offset debts, it is treated the same as selling goods. Therefore, when goods are transferred to others, unified invoices should be issued based on the fair market value (fair market value refers to the market price of goods sold during the same period in the local market).
As an example, the bureau mentioned that Company A, which operates water and electricity engineering-related accessories and materials, applied for dissolution registration with the competent authority on December 1, 2021, and applied for deregistration with the bureau on December 15 of the same year. Subsequently, the bureau discovered that Company A had NT$34 million worth of inventory remaining on its books. Company A stated that due to financial difficulties, all of its inventory had been taken by creditors to offset debts, and unified invoices were not issued in accordance with the aforementioned regulations. In addition to a supplementary sales tax of NT$1.7 million, Company A was fined NT$850,000 under Article 51, Paragraph 1, Subparagraph 3 of the Business Tax Act and Article 44 of the Tax Collection Act, which allows for either penalty.
The bureau advises businesses to self-assess their situations. If they have engaged in activities deemed as the sale of goods and have failed to issue unified invoices before investigation by tax authorities designated by the Ministry of Finance or without being reported, they can voluntarily report and pay the unreported tax amount, including interest, in accordance with Article 48-1 of the Tax Collection Act to avoid penalties.
Source: mof.gov.tw
