Finance ministry to begin taxing online auctions

Auction sales in cyberspace will no longer be tax-free starting Nov. 5, when the government begins to levy a maximum 5 percent value-added tax (VAT) on such sales.

How much of an impact the move will have on the burgeoning Internet auction business remains to be seen.

The Ministry of Finance said virtual auctioneers earning more than NT$60,000 (US$1,805) a month in sales should register their businesses with the government by Nov. 5 in order to avoid punishment.

Taxation Agency Deputy Director-General Yang Chung-hwa (楊重華) said earnings from Internet auctions will be taxed at the same rates levied on brick-and-mortar shops.

Monthly earnings of less than NT$60,000 will not be taxed. Revenues between NT$60,000 and NT$200,000 a month will face a VAT tax rate of 1 percent, he said.

Auctioneers whose monthly sales exceed NT$200,000 a month will be taxed at 5 percent, and the sellers must issue invoices to buyers, Yang said.

Besides paying VAT, online sellers must also pay property and land taxes, Yang said.

Whether the sellers keep their stock of goods in their homes will determine which property tax rate -- residential or business -- will be applied, no matter how much a seller earns every month, he said.

For example, if a seller stores goods in his or her home, they will be levied a 3-percent house tax, the same as real shops pay. Those who do not will only pay a 1.2-percent house tax.

Electricity and telephone fees also differ for residential and business premises.

Yang said government officials will examine sellers' homes to determine which tax rates will apply.

The ministry will not, however, demand auction sites provide confidential data on their registered sellers, in accordance with the Law for the Protection of Computer-managed Personal Information (電腦處理個人資料保護法), he said.

Although the government began publicizing the new taxation regulations six months ago, it has been lambasted for a lack of comprehensive measures.

Taipei City Councilor Lin Yi-hua (林奕華) held a press conference yesterday morning to criticize the government for using the wrong regulations as the basis for its rationale to tax online auction transactions.

She said the VAT regulation is made to manage business-to-customer (B2C) behavior, which is completely different from the customer-to-customer (C2C) style used in online auctions.

Lin said the government's decision is extremely unreasonable.

"These auctioneers are not against paying taxes," she said.

"But since the finance ministry has failed to devise well-rounded measures before implementing its new rule, we demand that it halt implementation of this wrong regulation," Lin said.