Taiwan Income Tax Guide

 

Company Income Tax:

 

Accounting and tax filing requirements in Taiwan

Taiwan companies are required to maintain accounting records and prepare annual financial statements in accordance with Taiwan Generally Accepted Accounting Principles (GAAP).  The tax rule may not always be the same as the GAAP. 

 

Tax year: Calendar year January 1st ~December 31st

Filing and payment: A Taiwan company must file income tax returns and pay any tax due between 1 May and 31 May of the year following the tax year.

 

Tax rate: 20% 

Despite the forms of company structures, the Limited company, the Company Limited by Shares and Branch Office of a Foreign Company, the corporate tax rate is 20%.  However, for companies with annual taxable income less than NTD 500,000, the CIT rate will be gradually increased from 18% to 20% for the three year period from 2018 ~ 2020

 

Retention tax rate: 10%, 5% of profit retention tax after 2017.  

10% profit retention tax is imposed on any current earnings that remain undistributed by the end of the following year. 5% of profit retention tax after 2017.  

 

Losses can carry forward for ten years

Companies who have their returns certified by a CPA and do not defraud the revenue may carry losses forward for ten years. Losses may not be carried back.

 

The tax of Branch Office versus Tax of Subsidiary

Subsidiaries are subject to withholding taxes; however, there is no withholding tax on the remittance of after-tax profits by a branch to its foreign head office. The withholding tax on dividends paid to foreign shareholders is 20% if no tax treaties.

 

Value-added tax(VAT/Sales Tax):

VAT is levied according to the value added to goods or services at each stage in the production and distribution chain. The basic rate of the VAT is 5%.  The following items are zero-rated: exports, export-related services, items sold by duty-free shops, goods sold to export-oriented entities within a tax-free export zone.  A VAT return must be filed every two months, and payment must be made at the time the return is filed.  Please see VAT and GUI introduction for detailed information.

 

 

Foreign Individuals:

 

(A) stay in Taiwan under or equal 90 days within a taxable year:

1. 18% withholding tax (WHT) on salary remuneration received from a Taiwan registered company.

2. Withholding tax (WHT) exempted on salary remuneration received from a company registered outside Taiwan.

3. The withholding tax rate on commissions, interest, rental and royalties is 20%.

4. The withholding tax rate on the dividend is 21%.

 

(B) stay in Taiwan over 90 days but under 183 days within a taxable year:

1. 18% withholding tax on salary remuneration received from a Taiwan registered company.

2. 18% withholding tax on salary remuneration received from a company registered outside Taiwan.

3. The withholding tax rate on commissions, interest, rental and royalties is 20%.

4. The withholding tax rate on the dividend is 21%.

 

(C) stay in Taiwan over or equal 183 days within a taxable year:

You become a Taiwan tax resident if you stay in Taiwan longer than 183 days. No withholding tax is imposed on dividends paid to a resident shareholder.  He/she must file an income tax return between May 1 and May 31 of the following year and pay any tax due. The taxpayer must include the income, exemptions, and deductions of his/her spouse and dependents in the tax return. If the individual leaves Taiwan in the middle of the year, he/she has to file the tax return before leaving Taiwan. An individual taxpayer files the income between May 1 and May 31 the following next year.

 

Non-resident shareholders

When non-resident shareholders, individuals, and corporate entities, receive dividends from a Taiwan company, a 21% withholding tax is imposed, but this may be reduced to between 5% and 15% under double taxation agreements.

Please see tax treaty benefit application.

 

 

Resident Individual income tax rates

A resident taxpayer must file an income tax return between May 1 and May 31 of the following year and pay any tax due. The taxpayer must include the income, exemptions, and deductions of his/her spouse and dependents in the tax return. The applicable rates range from 5% to 40%. 

 

How does a non-resident individual who works in Taiwan over 183 days in 2017 file his/her tax payable? What exemptions and deductions can the foreign resident claim when calculating his/her income tax?

 

Answer: A foreign national who resides in Taiwan for at least 183 days in the Year 2017 is considered a resident of Taiwan. The individual income tax for a foreign resident is computed by a progressive rate on his/her net consolidated income which shall be the annual gross consolidated income minus the exemptions and deductions. The exemptions and deductions for the fiscal year of 2017 are stated as follows:

 

 1.Personal Exemptions: 85,000 exemption for each person (including the taxpayer, his/her spouse, and dependents).

 

 2.Deductions: Foreigners can claim either standard deduction or itemized deductions and special deductions.

  (1)Standard deduction: NT$90,000 deduction for a single person an NT$180,000 deduction for a married couple.

  (2)Itemized deductions: There are six items included:

   a.Donation: 

   b.Personal insurance premiums: 

   c.Medical and maternity expenses:

   d.Losses from disaster: 

   e.Mortgage Interest paid on loan for an owner-occupied residence:

   f.Rental expense: The maximum deduction for the rental expense is NT$120,000. 

  (3)Special deductions:

   a.Losses from property transactions: 

   b.Special deduction for salary or wages: 

   c.Special deductions for savings and investment: 

   d.Special deduction for disability: 

   e.Special deduction for tuition: 

   f.Special Deduction for Pre-School Children: 

 

Note: A non-resident alien is not eligible for any personal exemptions and is subject to 18% withholding tax (WHT) on salary remuneration received from a Taiwan-registered entity

 

Progressive Tax Rate 2020 (Unit: NTD)