Taxation in Taiwan, Taiwan Personal Tax - Allo' Expat Taiwan
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Taxation in Taiwan Personal Taxation
 
 
 
 
 
 

General

Taxation on the income of individuals is levied on a territorial basis, that is, only the Taiwan source income of both resident and non-resident individuals is subject to Taiwan income tax. Generally, Taiwan source income of non-resident individuals is subject to withholding tax at source. For resident individuals, income tax returns (“consolidated personal income tax return”) must be filed with respect to the Taiwan source income. Husbands and wives are required to file a joint tax return; however, the taxpayer’s spouse may calculate the tax liability of his/her salary separately starting from the lowest tax bracket. The income of any dependants for whom the taxpayer has claimed a personal exemption must be also be included in the joint tax return.

There are no specific income tax concessions for expatriates but the correct structuring of housing and other benefits as part of the compensation package can result in significant tax savings.

Residence

An individual is considered as a resident for income tax purposes if:

• he/she has a domicile in Taiwan and frequently resides in Taiwan; or
• where he/she does not have a domicile, he/she stays in Taiwan for 183 days or more cumulatively in a given calendar year.

For a non-resident staying in Taiwan for less than 90 days in a calendar year, there is no tax payable if the expatriate’s compensation is paid by a foreign employer. However, if the compensation is paid by a Taiwanese enterprise or charged back to a Taiwan’s enterprise from the foreign employer, a 20% withholding tax applies on the expatriate’s compensation for services rendered in Taiwan.

Income Tax Rate



Taxable Income (NT$) Tax Rate (%)
0 – 410,000 : 6
10,001 – 1,090,000 : 13
1,090,001 – 2,180,000 : 21
2,180,001 - 4,090,000 : 30
4,090,001 and over : 40

Taxable Income

To calculate gross income for an individual’s income tax return, the following should be included:

• employment income;
• earnings and dividends from profit-seeking enterprises;
• remuneration from professional practice;
• interest;
• rents and royalties;
• profit from self-employment in farming, fishing, animal husbandry, forestry and mining;
• gain on property transactions;
• awards or prizes;
• retirement income and severance payment;
• other taxable income/profits.

To arrive at taxable income, the above gross income should be reduced by exempt income, personal exemption, standard or itemised deduction, special deductions and other deductions permitted by the law.

Capital Gains Tax

There is no separate capital gains tax in Taiwan. All gains, capital or otherwise, are taxed as ordinary income at the normal rates, except for gains from the sale of land or qualified securities, which are currently exempt from income tax.

Dividends

Resident

Dividend payments made to resident individuals are not subject to withholding tax. The amount of dividend income subject to individual income tax is the gross dividend income reported in the dividend statement. Basically, the gross dividend income equals the amount of net dividend income actually received by the individual, plus the imputation credit distributed to the individual. The imputation credit associated with the dividend received can be used to offset the individual income tax payable. Any excess credit is refundable.

Non-Resident

If foreign investment approval has been obtained, the dividend payment is subject to withholding tax at 20%. Only the imputation credit for the 10% surtax levied on the company may be used to reduce the withholding tax on dividends.

Exempt Income

Article 4 of the Income Tax Act provides exemptions for individual income tax purposes, and among these are:

• payout from life insurance, workers’ compensation insurance, and certain other civil servant insurance;
• gains from sale of land;
• gains from the sale of qualified securities and futures, etc.

Deductions

In 2008, the standard deduction is NT$46,000, regardless of the amount of gross income reported in the consolidated tax return. For joint returns filed by married couples, the standard deduction is NT$92,000.

For taxpayers who do not choose to take the above standard deduction, itemised deductions discussed below are available where proper documentation can be provided.

The taxpayer is also entitled to special deductions irrespective of whether he/she elects the itemised or standard deductions.

Itemised Deductions

• Contributions made to educational, cultural, public welfare or charitable organisations or agencies are deductible up to 20%t of gross income. Contributions made for national defence, troop-cheering and the government are fully deductible.
• Life insurance premiums of a taxpayer, the taxpayer’s spouse or lineal relatives are deductible up to a maximum of NT$24,000 for each person insured except for national health insurance expense.
• Medical or childbirth expenses of the taxpayer, the taxpayer’s spouse, and dependants.
• Losses incurred by the taxpayer, spouse, and dependants due to natural disasters are deductible.
• Mortgage interest up to NT$300,000 paid by a taxpayer to financial institutions on loans acquired for an owner-occupied residence is deductible. However, their interest expense shall be reduced by the amount of interest income special deduction claimed in the return. Also, the deduction for mortgage interest is limited to one house.
• House rental up to NT$120,000 paid by a taxpayer for self use and not for business use is deductible. However, this is not deductible if the taxpayer has claimed deduction for mortgage interest.

Special Deductions

• Loss generated from sale of properties can be deducted against gain from sale of properties, with any remaining loss carried forward for three years.
• In 2008, the taxpayer and other individuals filing under the same tax return may each deduct up to NT$78,000 against his/her salary income.
• The first NT$270,000 of interest earned from financial institutions and savings trust funds can be deducted from gross income.
• In 2008, an NT$77,000 deduction is allowed for mentally ill or physically disabled taxpayer or dependants.
• An education deduction of NT$25,000 is allowed per tax return for dependent children who are attending college or university.

Personal Allowances & Rebates of Tax

The exemption is NT$77,000 for each taxpayer, his/her spouse, dependants under the age of 20 and lineal ascendants having attained 60 years of age (or under the age of 60 but incapable of earning a livelihood). Additional exemption of NT$38,500 is available for each of the above persons with 70 years of age or over.

Tax Compliance & Administration

Income tax returns must be filed and any tax due paid by May 31 of the following year, of assessment using either:

• Ordinary form – used by all individuals; or
• Simplified form – used by individuals with few income and deduction items.

When a foreign individual has resided in Taiwan for over 90 days during a calendar year, they are required to obtain tax clearance prior to leaving Taiwan. The taxpayer may either request a local national to be their tax guarantor or file a tax return and pay their taxes prior to the date of departure. Without a tax clearance, exit from Taiwan may be denied.

Taiwan operates a withholding tax system. However any income derived from abroad for services rendered in Taiwan or any income that is not subject to withholding tax, should be declared and tax paid before departure or before the tax filing deadline.

 
 

 



 


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