Navigating the tax system in Taiwan can be a complex task, particularly for expats who may not be familiar with local regulations. This guide breaks down the key aspects of Taiwan’s tax system, including income tax rates, filing requirements, deductions, and special considerations for foreign residents.
Note that this is a synthesized guide. If you have serious concerns, please reach out to your nearest tax office. You can also refer to the excellent report by Grant Thornton for a more detailed explanation.
Income Tax Rates in Taiwan
Taiwan’s tax rates vary based on residency status, income levels, and the number of days an individual spends in the country within a calendar year.
1. Non-Residents (First 183 Days):
- Expats who stay in Taiwan for less than 183 days in a calendar year are considered non-residents.
- Tax Rate: A flat rate of 18-20% applies to their gross salary, including contributions to National Health Insurance (NHI).
2. Residents (183 Days or More):
- After staying in Taiwan for 183 days in a calendar year, individuals are classified as tax residents.
- Tax Rate: A progressive system applies, with rates ranging from 5% to 40% based on taxable income.
| Taxable Income (NT$) | Rate |
|---|---|
| 0 – 560,000 | 5% |
| 560,001 – 1,260,000 | 12% |
| 1,260,001 – 2,520,000 | 20% |
| 2,520,001 – 4,720,000 | 30% |
| Over 4,720,000 | 40% |
Tax Filing Requirements in Taiwan
Tax Filing Period:
- Dates: May 1 to May 31 each year.
- Filing can be done in person at district tax offices or online via the government’s e-filing system.
Required Documents:
- Alien Resident Certificate (ARC) or passport.
- Tax withholding statement from your employer.
- Bank account information for refunds or payments.
Special Considerations:
- First-time filers must submit their returns in person.
- Tax refunds, if applicable, are issued in August to a local bank account.
Deductions and Exemptions for Tax Residents
Exemptions:
- NT$92,000 per individual in the household (spouse, dependents).
- Increased to NT$138,000 for individuals aged 70 or above.
Standard Deduction:
- NT$124,000 for single filers; NT$248,000 for married couples filing jointly.
Itemized Deductions:
- Donations: Up to 20% of gross income, with some fully deductible exceptions.
- Insurance Premiums: National Health Insurance is fully deductible; other premiums capped at NT$24,000 per person.
- Medical and Maternity Expenses: Receipts required for claims.
- Rental Expenses: Deductible up to NT$120,000 annually, provided the landlord declares rental income.
Special Deductions:
- Savings and investments: Up to NT$270,000.
- University tuition: Up to NT$25,000 per child.
- Disability-related expenses: NT$207,000 per individual.
- Long-term care: Up to NT$120,000 annually.
Taxation for Self-Employed Expats
Foreign residents who are self-employed are taxed under the same rules as employees. Key points include:
- Income derived from Taiwan-based sources is taxable.
- Overseas income exceeding NT$1 million is subject to taxation.
Avoiding Double Taxation
Taiwan has signed 34 tax treaties with other countries to prevent double taxation. However, no treaty exists between Taiwan and the United States. U.S. citizens must file with the IRS and may not offset Taiwan taxes against their U.S. tax liabilities. For specific treaty details, refer to the Ministry of Finance website.
The following countries have signed comprehensive Income Tax Agreements with Taiwan:
| Region | Countries |
|---|---|
| Asia | India, Indonesia, Israel, Japan, Malaysia, Saudi Arabia, Singapore, Thailand, Vietnam |
| Oceania | Australia, New Zealand, Kiribati |
| Europe | Austria, Belgium, Czech Republic, Denmark, France, Germany, Hungary, Italy, Luxembourg, North Macedonia, the Netherlands, Poland, Slovakia, Sweden, the U.K., Switzerland |
| Africa | Gambia, Senegal, South Africa, Eswatini |
| The Americas | Canada, Paraguay |
Corporate and Business Taxes
Corporate Income Tax (CIT):
- Fixed rate of 20% for all companies.
- Non-resident companies are taxed solely on income generated within Taiwan.
Value-Added Tax (VAT):
- Standard rate: 5%, applicable to most businesses.
- Some industries, like financial services, may be subject to Gross Business Receipts Tax (GBRT) at rates between 1% and 5%.
Penalties for Late Tax Filing
Failing to file taxes in Taiwan can result in fines up to three times the tax amount due. Additionally:
- The National Immigration Agency may restrict the individual from leaving Taiwan until the issue is resolved.
- Interest accrues daily on unpaid taxes.
Understanding Taiwan’s tax system can feel overwhelming at first, but with the right preparation and knowledge, filing taxes can be straightforward. For personalized assistance, consider consulting the National Taxation Bureau or a professional tax advisor.
FAQ
Is income earned outside Taiwan taxable?
Yes, if you reside in Taiwan for over 90 days, income earned abroad for work conducted in Taiwan must be declared.
Can I claim foreign tax credits?
While Taiwan does not allow foreign tax credits, some countries may allow credits for taxes paid in Taiwan. Check with your home country’s tax authority.
What’s the best time to file taxes?
Early May is ideal to avoid crowds. Offices are busier during weekends and the final filing week.
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