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September 11, 2019
2019-1609

Taiwan issues new VAT ruling for transfers of renewable energy certificates

Taiwan's Ministry of Finance issued Tax Ruling No. 1080054900 (the Tax Ruling) relating to Article 1 of the Value-added and Non-value-added Business Tax Act (the VAT Act) on 26 August 2019. The Tax Ruling states that the transfer of renewable energy certificates (RECs) should be treated as a sale of services, resulting in the transaction being subject to value-added tax (VAT). The Tax Ruling applies to all transfers of RECs, including transfers occurring prior to the release of the Tax Ruling.

  • RECs held by renewable energy generators and users of power from onsite renewable facilities1 may be transferred to a third party but the transfer is subject to VAT under Article 1 of the VAT Act.
  • A REC includes certain valuable rights and is not limited merely to a proof of renewable energy utilization; accordingly, the transfer of a REC is treated as a sale of services, subject to a 5% VAT.
  • Failure to file a return and pay VAT on any REC transfer is generally subject to penalties; however, such penalties may be waived provided that the VAT liability is paid by 15 November 2019.
  • Business entities engaging in the renewable energy industry and transferring RECs should review the REC transfer compliance and payment requirements and take actions to correct such noncompliance and/or payment to eliminate potential penalty assessment.

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ENDNOTE

1 They are also owners of the facilities and generate the power for their own use.

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CONTACTS

For additional information with respect to this Alert, please contact the following:

Ernst & Young (Taiwan), Taipei

  • Sophie Chou
    sophie.chou@tw.ey.com
  • Anna Tsai
    anna.tsai@tw.ey.com
  • Chien-Hua Yang
    chienhua.yang@tw.ey.com
  • Vivian Wu
    vivian.wu@tw.ey.com

Ernst & Young LLP (United States), Asia Pacific Business Group, New York

  • Chris Finnerty
    chris.finnerty1@ey.com
  • Kaz Parsch
    kazuyo.parsch@ey.com
  • Bee-Khun Yap
    bee-khun.yap@ey.com

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ATTACHMENT

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