By Jeffrey K.S. Hung & Alvin Teng, C.P.A., Partner & Associate Partner of Formosan Brothers, Attorneys-at-Law

With the development and widespread use of technologies, the Internet has become the best channel for obtaining all sorts of information and the best medium for people to voice their opinions nowadays. The rise of blogs and social media (e.g. Facebook, Instagram, YouTube, Podcast, etc.) has given everyone the capability to function as a communication medium. Through texts, pictures, and audio and video content, people can share their insights, present themselves, or even just chat or talk about stocks trading. The commercialization of such functions also give rise to many new professions such as social media influencers, streamers, YouTubers, or Podcasters (hereinafter collectively as “influencers”). The influencers turn their interests into professions, expertise, or even businesses, creating many dimensions of lifestyles and a diversity of income sources. They are people who move into “slashie” career.

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However, few realize that, whether it is just for fun as a personal hobby or for business where a studio or a company is established, the income generated might incur individual consolidated income tax, profit-seeking enterprise income tax, or even business tax! That’s right, even it is operated by only one person or a studio, business tax may be levied.

In taxation practice, the term “business” often means “a regular, continuous, and sustaining economic activity for the purpose of obtaining income.” As long as a business is operated for profit, regardless whether it is government-owned, privately-owned, or co-owned by the government and private entities, and regardless whether it is a sole proprietorship, partnership, or corporation (juridical person), it is a business entity as referred to in the Value-added and Non-value-added Business Tax Act (hereinafter the “Business Tax Act”). Therefore, be it full-time or part-time, influencers may meet the qualifications of a business entity and are thus required to file an application for taxation registration and pay business tax and income tax.  

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How to calculate, file, and pay taxes

For income less than NT$200,000, it is recommended to use the business tax collection threshold for small business entities to differentiate how it should be handled.

Pursuant to Article 9 of the Enforcement Rules of the Business Tax Act, the term "small business entity" means a business entity of a small-scale with sporadic transactions, and its monthly sales of services amount (such as for recording or uploading videos) is more than NT$40,000, or sales of goods amount is more than NT$80,000, but the average monthly sales is less than NT$200,000. If the monthly sales is more than NT$200,000, then uniform invoices shall be used.

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The following is a brief introduction to tax filing:

I. Monthly sales of goods is less than NT$80,000 or sales of services is less than NT$40,000: 1. Such a business can be exempt from applying for taxation registration and does not need to pay business tax. 2. Pursuant to the proviso of Paragraph 2 of Article 71 of the Income Tax Act, such a business does not need to pay profit-seeking enterprise income tax. 3. According to Category 1 of Paragraph 1 of Article 14 of the Income Tax Act, relevant income pertains to income from profit-seeking  in the individual consolidated income. If no specific cost is provided, income from profit-seeking is estimated to be 6% of the total sales of the year. Such income is combined into the individual consolidated income filing in the following year and taxed according to the tax bracket of the individual consolidated income (5%, 12%, 20%, 30%, or 40%).

2. Monthly sales of goods is more than NT$80,000 or sales of services is more than NT$40,000, but less than NT$200,000: 1. Pursuant to Article 28 of the Business Tax Act, the business shall apply for taxation registration, but does not need to use uniform invoices. The National Taxation Bureau shall assess the sales amount and calculate the tax payable at 1% of the sales amount pursuant to Subparagraph 1 of Article 13 of the Business Tax Act, and issue a payment notice every three months (pursuant to Paragraph 1 of Article 40 of the Business Tax Act). 2. The part regarding income tax is as stated in part I.at point 2 & 3 above.  

III. Monthly sales amount is over NT$200,000:

1. The business shall apply for taxation registration and use uniform invoices as provided in Paragraph 1 of Article 32 of the Business Tax Act. It shall also file and pay business tax at the tax rate of 5% every two months on its own.

2. The business shall file profit-seeking enterprise income tax pursuant to Paragraph 1 of Article 71 of the Income Tax Act, but it does not need to calculate and pay the tax payable. Its profit-seeking enterprise income amount shall be combined into the individual consolidated income tax filing in the following year. Under the circumstances, it is very likely that the tax bracket would be 30% or 40%. Compared to the single tier profit-seeking enterprise income tax rate of 20% applicable to corporations, the influencer can consider establishing a corporation to operate his/her business.

3. If the business operates under the corporation, it shall file profit-seeking enterprise income tax. If there is surplus earnings, it shall pay the profit-seeking enterprise income tax at a 20% tax rate. If the surplus earnings is not distributed to its shareholders, an additional 5% tax on such undistributed surplus earnings shall be levied. As for the dividends the shareholders receive, those pertain to income from profit-seeking enterprise in the individual’s consolidated income.

(This article was published in the Expert’s Commentary Column of the Commercial Times：https://view.ctee.com.tw/tax/30127.html）

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