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Taiwan's Duty Reduction and Exemption System

[Taiwan's Duty Reduction and Exemption System]





In Taiwan, reduction and exemption of customs duty(hereafter, referred to as duty reduction) is based on the Customs Act and other special Acts.


Like other countries, Taiwan‘s duty reduction system has been enforced by political needs or international agreements, practices, etc. which has more emphasis on increase in export.


In international trade, duty reduction issue is a very significant element to determine the competitiveness of exporters as well as importers.



Classification of Duty Reductions


Duty reductions may be classified in many ways as below with respect to specified duty reduction system.


Conditional or unconditional duty reductions


Unconditional duty reductions mean that the State takes a hand-off approach for the usage of the goods whose duty reductions are granted.


On the contrary, conditional duty reductions mean that the goods whose customs duty is reduced or exempted may not be used or transferred for the purpose(including lease) other than original purpose within a fixed period from the date on which import license was granted, and shall be subjected to post-management thereby.



Reduction or Exemption of Customs Duty


Literally, reduction of customs duty refers to reducing some amount of customs duty, and exemption from customs duty refers to exempting full amount of customs duty. A combination of two systems is reduction and exemption of customs duty.


Specified duty exemption and Customs approved duty exemption


A specified duty exemption refers to a system under which customs duty of goods imported for specified purpose according to the subject of import and usage of import goods are exempt(Article 49 of the Customs Act). In this case, there is no need of obtaining an approval of Customs.


On the contrary, an approval of Customs is necessary for duty exemption for articles necessary for educational and research purpose, damaged goods, provisional clearance license- ATA Carnet, import of raw material and reexport, and reimport of export goods, etc.


Duty exemption based on the subject of import and usage


The possibility of duty exemption is different depending on the subject of import and the usage after import.


The subject of import and usage may vary in a very wide spectrum on a case by case basis. Therefore, each importer must have a glimpse of duty exemption to avoid unnecessary disadvantages.


Duty exemption based on Chinese Commodity Classification (HS) Note


Note of Chinese Commodity Classification(HS code) specifies the possibility of duty exemption and necessary requirements by item. It's covering a broad range of items, which provides a significant meaning for the persons engaged in trade.



Relations with duty reductions of internal taxes


Internal taxes such as business tax, liquor tax, commodity tax, etc. which are collected as proxy by Customs according to imported item other than customs duty are not relevant to duty reduction in principle. Duty reduction is based on the Customs Act, but internal taxes are based on relevant tax law respectively. Therefore, attention is needed that goods subject to reductions of customs duty aren't also subject to reduction or exemption of internal taxes.


But, attention shall be paid to the requirements at the time of importing goods because, in some cases, goods subject to duty reductions are also subject to reductions of internal taxes(for example, for personal effects, moving goods, donated goods for charity or relief, diplomatic goods, goods reexported, etc., both customs duty and internal taxes are exempt.).



Procedure for Application of Duty Exemption and Reduction


In the case where there is a ground for reduction or exemption of customs duty, such duty reductions shall not be made by the authority of Customs, but declarants shall apply for duty reductions, or file application for duty reductions and statement of items when they're declaring import to the competent Customs.


Application for duty reductions becomes valid when qualification of applicant, reductions requirements, applicable goods, etc. are in compliant with regulations by reduction ground.


In addition, if deemed necessary by the head of a customhouse, the security equivalent to duty exempted or reduced shall be provided.


Customs approves duty reductions applied in case relevant application conforms to reduction requirements, and if necessary, unconditional duty reductions may be approved.



Permission of Double Reductions


In case where same imported goods are subject to multiple grounds for duty reduction or exemption, double reduction or exemption from customs duty isn't permitted but only one ground for duty reduction or exemption shall be selected. Such selection may be made in an order that reduction rate is greater, or reduction ground is easily verified.



Transfer of ownership or a change in their use, and Collection


Imported goods reduced or exempted from customs duty shall not be transferred or changed in their use.

In cases where the goods imported are transferred or changed in their use, the original duty-payer or the present holder of such goods shall pay duty to Customs at the port of importation within thirty days following the date of the transfer of ownership or the change in the use of the goods imported; the import duty levied shall be based on the value and tariff rate applicable at the time when such a transfer or change occurred. Criminal penality may be involved with it(Article 55 of the Customs Act).


Goods which are prohibited for transfer or change in use, and whose customs duty is exempt refer to new ones, or secondhand ones or, waste articles whose use value remains after use.

Additional duty may be exempt under any of the following circumstances:


where the transfer of ownership or change in use occurs after the expiry of the time limit prescribed by the Ministry of Finance;

where the goods are re-exported in their original condition as approved by Customs;

where the authority having originally issued the permit or certificate transfers the case to Customs, and the goods are re-exported in their original condition as confirmed by Customs; or

where the transferee satisfies the conditions of transfer, and the conditions for duty reduction or exemption.



Other Necessary Comments


It's very important for importers to take care of their own duty reduction, not entrusting it to others(including expertises) because it's easy to miss reduction chance by a small mistake. Following are details of the reasons.


The importers are well aware of the purpose and usage of imported goods.

The importers are well aware of precise standards and technological traits concerning relevant goods.

The importers have advantage over anyone else in adjusting requirements of reduction in consultation with exporters.

Without paying commission to an expert, it's hard for him/her to positively invest great amount of time in dealing with it.  

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