Quick Answer
An OBU (Offshore Banking Unit) is a separately accounted bank branch set up in Taiwan under the Offshore Banking Act. Under Article 4 of the Act, an OBU may accept foreign currency deposits from individuals, legal entities, government agencies or financial institutions outside Taiwan, and handle issuing, advising and negotiating foreign currency letters of credit and import/export collections and foreign exchange for offshore clients. In triangular trade, offshore companies often use OBU accounts to receive and pay foreign currency. Note: the tax exemptions in Articles 13–16 apply to the OBU branch’s own income, sales and documents; whether the account holder’s income is taxed depends on each country’s tax laws.
Legal Basis and Purpose of OBUs
Article 1 of the Offshore Banking Act: to strengthen international financial activity and build a regional financial center, banks, securities firms and insurers are licensed to set up offshore banking units, offshore securities units and offshore insurance units in Taiwan. The competent authority is the Financial Supervisory Commission, and the authority for business matters is the Central Bank (Article 2).
Trade-Related Services an OBU Can Provide
Summarized from Article 4 of the Offshore Banking Act (excerpt):
| Service | Clients |
|---|---|
| Foreign currency deposits | Individuals, legal entities and government agencies outside Taiwan, or financial institutions in or outside Taiwan |
| Foreign currency credit | Individuals, legal entities, government agencies or financial institutions in or outside Taiwan |
| Issuing, advising and negotiating foreign currency L/Cs; import/export collections | Individuals, legal entities, government agencies or financial institutions outside Taiwan |
| Foreign exchange, FX trading, lending | Between the branch and other financial institutions and offshore clients |
OBU business is mainly in foreign currency, and depositors must be offshore clients, so OBU accounts are usually opened by offshore companies (companies registered in other jurisdictions).
What the OBU Tax Exemptions Really Cover
Articles 13–16 of the Offshore Banking Act provide:
- Art. 13: the income of an offshore banking unit is exempt from business income tax (except income from credit to domestic borrowers).
- Art. 14: the sales of an offshore banking unit are exempt from business tax (except sales to domestic parties).
- Art. 15: documents used by an offshore banking unit are exempt from stamp tax (with exceptions).
- Art. 16: when an offshore banking unit pays interest or structured product income to financial institutions or offshore individuals, entities or governments, no withholding tax applies.
The subject of all these articles is the “offshore banking unit”, that is, the bank’s OBU branch. A common misconception is “if you receive payment through an OBU, your trading profit is tax-free”, but that is not what the Act says. How an offshore or Taiwanese company’s trading income is taxed depends on its place of incorporation, its place of effective management, and Taiwan’s income tax and anti-avoidance rules, so always confirm with your accountant.
How Are OBUs Used in Triangular Trade?
A common structure: an offshore company acts as the contracting or settlement entity, receiving the buyer’s foreign currency payment and paying the supplier through its OBU account, or issuing and negotiating foreign currency L/Cs through the OBU. In practice:
- The account holder must qualify as offshore: OBU depositors are offshore clients.
- Payments must match contracts, invoices and bills of lading: transaction documents and fund flows must correspond and be auditable.
- Assess tax separately: an OBU is not a tax exemption; the offshore company’s tax and filings must be evaluated on their own.
- Bank due diligence: banks perform customer reviews and transaction monitoring, so be ready to provide documents explaining the trade.
For business tax in triangular trade, see Triangular Trade and Taiwan Business Tax.
How Tang Sugar Can Help
Tang Sugar’s triangular and multilateral trade service designs logistics and payment routes by product and market, arranges payment terms (L/C, T/T) and invoice structures sensibly, and keeps logistics, payments and documents consistent. For tax questions raised by a payment structure, we recommend planning together with your accountant. Contact us.
FAQ
What is an OBU?
An OBU is an offshore banking unit: a separately accounted bank branch in Taiwan set up under the Offshore Banking Act, mainly doing foreign currency business with clients outside Taiwan.
Who can open an OBU account?
Under Article 4 of the Act, OBU deposits may be accepted from individuals, legal entities and government agencies outside Taiwan, or from financial institutions. Each bank sets its own account-opening requirements.
Is income received through an OBU tax-free?
No. The exemptions in Articles 13–16 cover the OBU branch’s own income, sales, documents and interest withholding; whether the account holder’s income is taxed depends on each country’s tax laws.
Can an OBU issue letters of credit?
Yes. Under Article 4, an OBU can issue, advise and negotiate foreign currency letters of credit and handle import and export collections for offshore clients.
What is the difference between an OBU and a DBU?
A DBU (domestic banking unit) handles ordinary foreign exchange business mainly for clients in Taiwan; an OBU is set up under the Offshore Banking Act and takes deposits from clients outside Taiwan. Account and business rules vary by bank.
Further Reading
- Triangular Trade and Taiwan Business Tax
- Triangular Trade Process Flowchart
- What Is Multilateral Trade?
Sources
- Laws & Regulations Database of Taiwan: Offshore Banking Act (latest amendment 2025-07-16)
- Tang Sugar: Triangular and Multilateral Trade
