Taiwan Income Tax Guide

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Company Income Tax - Tax on profit:

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Accounting and tax filing requirements in Taiwan

Taiwanese 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.

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Tax rate: 20% 

Despite the forms of company structures, the Limited company (有限公司), the Company Limited by Shares(股份有限公司), and the Branch Office of a Foreign Company(外國公司台灣分公司), the corporate tax rate is 20%.  

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Losses can carry forward for ten years

Companies that have their tax returns certified by a CPA (Certified Public Accountant) and do not defraud the revenue may carry losses forward for ten years. Losses may not be carried back.

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Provisional income tax

Companies registered in Taiwan or the Taiwan branches of foreign companies are required to remit, on the 30th day of September each year, an amount equal to half of the income tax payable of their previous year's tax return.

Provisional income tax is actually the prepaid tax payment that the company can deduct the tax payable with the paid provisional tax payment when they file the current year's tax return. Please see Provisional Tax and Relief for detailed information.

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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.

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Value-added tax(VAT/Sales Tax)

Value-Added Tax (VAT), also known as Sales Tax, is imposed based on the incremental value infused into goods or services during various stages within the production and distribution process. The standard VAT rate stands at 5%. However, certain items fall within the category of zero-rated transactions, which include exports, services directly linked to exports, merchandise vended by duty-free establishments, and products distributed to entities operating within tax-exempt export zones. Compliance entails the submission of a VAT return on a bimonthly basis, with corresponding payments to be tendered concurrently with the return filing. Please see VAT and GUI introduction for detailed information.

 

Profit retention tax

Any current earnings of a corporation that are not dispersed before the end of the next year are subject to an extra 5% profit retention tax. Foreign firms' Taiwan subsidiaries are exempt from the profit retention tax.

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Personal tax for foreign nations working in Taiwan:

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(A) Residing in Taiwan for 90 days or less within a fiscal year:

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1. A withholding tax (WHT) of 18% applies to salary compensation received from a company registered in Taiwan.

2. Salary compensation received from a company outside Taiwan is exempt from withholding tax (WHT).

3. Commissions, interest, rental income, and royalties are subject to a withholding tax rate of 20%.

4. Dividend income is subject to a withholding tax rate of 21%.

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(B) Staying in Taiwan for over 90 days but less than 183 days within a fiscal year:

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1. Salary compensation received from a Taiwan-registered company is subject to an 18% withholding tax.

2. Salary compensation received from a company registered outside Taiwan is also subject to an 18% withholding tax.

3. Commissions, interest, rental income, and royalties are subject to a withholding tax rate of 20%.

4. Dividend income is subject to a withholding tax rate of 21%.

 

(C) Residing in Taiwan for 183 days or more within a fiscal year:

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Becoming a tax resident of Taiwan is contingent upon staying in Taiwan for a duration exceeding 183 days. No withholding tax is levied on dividends distributed to a resident shareholder. The taxpayer is obliged to file an income tax return between May 1 and May 31 of the subsequent year and settle any outstanding tax liabilities. Furthermore, the taxpayer must include the income, exemptions, and deductions pertaining to their spouse and dependents in the tax return. If the individual departs from Taiwan during the fiscal year, they must file the tax return prior to their departure. An individual taxpayer must report their income between May 1 and May 31 of the following year.

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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.

 

 

Personal income tax for Taiwan tax resident

A resident taxpayer is required to submit an income tax return between May 1 and May 31 of the subsequent year and settle any outstanding tax liabilities. It is imperative for the taxpayer to incorporate their income, exemptions, and deductions for their spouse and dependents into the tax return. The applicable tax rates span from 5% to 40%.

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Q: How does a foreign national resident residing in Taiwan for 183 days or more in 2023 file his/her tax payable? What exemptions and deductions can he claim?
 

Answer: A foreign national who resides in Taiwan for at least 183 days in the Year 2023 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 2023 are stated as follows:

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1. Personal Exemptions: 

    92,000 exemption for each person (including the taxpayer, his/her spouse, and dependents below age 70.

  138,000 exemption for each person (including the taxpayer, his/her spouse, and dependents aged 70 or above.

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

  (1)Standard deduction: NT$124,000 for a single person and NT$248,000 for a married couple.

  (2)Salary deduction: NT$207,000 for received salary income.

  (3)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. 

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  (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 2023 (Unit: NTD)