Taxes are a headache no matter where you live and where you're moving to. They're especially difficult for American expats who still have to file US taxes every year. Payroll taxes for expats in Taiwan are complicated. However, when it's time to file annual tax returns, the government makes the process as easy as possible.
Basics of payroll taxes in Taiwan
For the first 183 days in Taiwan, expats are taxed at 18-20% of their gross salary. This includes money that goes to your national health insurance. Depending on one's income, the applicable tax rate after the calculation of relevant deductions will be anywhere from five percent at the low end to 40 percent at the maximum.
After 183 days in Taiwan (excluding any trips outside the country), the payroll tax can be dropped to 3% of the gross salary for the remainder of the year.
On January 1, the payroll tax will return to 18-20% until you have been physically in Taiwan for 183 days.
This process causes some consternation among expats in Taiwan, particularly those who start their jobs mid-year. If you were to begin work in Taiwan in June or July, you would be taxed at 18-20% through the end of the year. You would also be taxed at that rate for the first 183 days of the following year.
Filing taxes in Taiwan
Taxes must be filed for anyone who has been in Taiwan for 183 days or more during the previous year. The tax-filing time is May 1-31 (or June 1 if the 31st is a Sunday or national holiday) each year. The tax offices are open on Saturdays, but they are more crowded then. They are also busier during the final week of May. It is recommended to file taxes during the week.
To file taxes in May, you can file online if it is not your first time. Otherwise, you can visit your nearest district tax office. The National Taxation Bureau will have a separate line for foreign residents to file taxes as well as staff ready to assist in the process.
Documents needed to file taxes in Taiwan are:
- ARC or passport
- Tax form provided by your employer
- Bank card or statement with local bank account number
In some cases, the tax form from an employer may not be accurate. However, the National Taxation Bureau will have a record of your salary to ensure accuracy. This may, however, cause problems if you are also filing taxes in your home country.
If you are owed a refund, it will be deposited in your local bank account in August. If you plan to leave Taiwan before receiving a refund, you can assign a trusted recipient to receive and forward the refund.
The program to e-file taxes can be found on the government website.
When e-filing, you can use your Taiwan bank account to pay any tax due online. Or, you can print out the tax information and pay at any bank you choose.
For additional information about taxes in Taiwan, check the FAQ on the National Taxation Bureau website.
Tax exemptions and deductions in Taiwan
Foreign residents in Taiwan may take advantage of one exemption and several types of deductions when filing a yearly income tax return.
Tax exemptions
When filing a tax return in Taiwan, there is a NT$92,000 exemption for each person listed in the filing of the return, including the taxpayer, the taxpayer's spouse, and the taxpayer's dependents. If the taxpayer, their spouse, and any dependents have reached 70 years of age, that exemption rises to NT$138,000.
Tax deductions
Deductions fall under three main categories when filing a return in Taiwan: standard, itemized, and special deductions.
Standard deductions
Regarding standard deductions, there is a NT$124,000 deduction for a single person filing an income tax return. That amount doubles to NT$248,000 for a married couple filing a joint return. According to Article 15 of the Income Tax Act, married couples in Taiwan must file jointly, except in cases where they have not cohabitated for more than six months or one party has filed an ordinary order of protection against the other. In cases wherein a couple gets either married or divorced, they may choose to file separately during that fiscal year only if they wish. From then on, unless any of the above conditions are met, they must file jointly.
Itemized deductions
One can list six different kinds of itemized deductions on an income tax return in Taiwan, for which original receipts and/or other supporting documents must be provided.
Regarding donations, deductions cannot exceed 20 percent of the taxpayer's gross income. There are exceptions, as donations made to national defense, the military, or the government are fully deductible. These sorts of donations, however, are not open to non-citizens and thus would not apply.
Personal insurance premiums may also be listed as deductions. These include premiums paid for life insurance, labor insurance, and employment insurance for the taxpayer and their dependents. These deductions, except those for national health insurance, cannot be higher than NT$24,000 for each person on the yearly tax return. The premiums paid for national health insurance are fully deductible.
Deductions can also be claimed for expenses related to maternity and medical expenses. To determine which expenses can be claimed as deductions, it is best to consult with personnel at the National Taxation Bureau directly.
Losses from what may be defined as “disaster” can also be claimed as deductions, and once again, consultation with National Tax Bureau personnel, in person, is advised in these matters.
Deductions can be claimed, too, for interest paid on loan for a residence in which the person filing the return resides, as long as that residence is in Taiwan. However, this deduction cannot exceed NT$300,000 and can only be claimed for one house in one fiscal year.
When it comes to home/apartment rental expenses in Taiwan, these, too, are deductible up to NT$120,000 per fiscal year. However, this can be tricky for foreign residents and even for Taiwanese citizens, as it is relatively common for landlords not to list income accrued from rental properties on their own tax returns. If a tenant were to file for a deductible on a property that is not listed on a landlord's own return as a rented property, this could be cause for an audit of the landlord. As such, one should always consult with their landlord before filing an income tax return as to whether the landlord is officially declaring rental income from the property or not.
Special deductions
There are also several special deductions that residents of Taiwan can claim on their income tax returns.
If one suffers losses from property transactions, those can be listed as deductions. However, those deductions cannot be higher than any profits one may also have made from property transactions within the same fiscal year.
When it comes to savings and investments, special deductions of up to NT$270,000 can also be made.
Special deductions for disabilities can also be made, up to NT$207,000 for each disabled person listed on the return. It is worth noting, however, that in many cases, claiming expenses or benefits related to disabilities requires a R.O.C. ID number and/or Household Registration, which foreign residents may not have.
University tuition can be listed as a special deduction, up to NT$25,000 for each child attending a college or university each fiscal year.
Taxpayers residing in Taiwan may also claim special deductions for children aged five or under, up to NT$120,000 per child. There are some conditions for this deduction, and consultation with tax authorities before making this claim is advised.
Finally, a special deduction is available for those who require long-term care due to a mental or physical disability. This can be the taxpayer, the taxpayer's spouse, or any dependents listed on the return. This deduction can be up to a maximum of NT$120,000 per year and is also subject to certain conditions. Please consult the relevant tax authorities to ensure you meet those conditions before filing your return.
Is there a US-Taiwan tax treaty?
Tax treaties between the U.S. and other nations allow U.S. citizens or residents to be taxed at a reduced rate on certain types of income they may accrue abroad. The official Double Taxation Agreement policy of the government of Taiwan is to avoid cases of double taxation wherever possible.
However, due to Taiwan's compromised diplomatic status in many countries worldwide, this is not always possible due to the Taiwan/China conflict. As such, there is no U.S.-Taiwan tax treaty at present. Thus, U.S. citizens residing in Taiwan and gaining income from sources in Taiwan are still obligated to file an income tax return with the Internal Revenue Service in the United States.
Taiwan's income tax treaties with other countries
Currently, Taiwan has 34 comprehensive income tax agreements with other countries worldwide to prevent double taxation. The U.K. and Canada, for example, have such an agreement, meaning that citizens of those nations need not file income taxes in their home countries — they must only do so in Taiwan while living and working there. Currently, only certain E.U. nations have this agreement in place. For a full list of countries with which Taiwan has a comprehensive income tax agreement, see the official website of Invest Taiwan, an initiative of the Ministry of Economic Affairs.
Other types of taxes in Taiwan
Property tax in Taiwan
Those who own land, buildings, houses, or apartments in Taiwan must pay property tax annually based on the assessed value. Assessments are done yearly. For land, the tax rate varies from one to 5.5 percent of the estimated value. For commercial property, the rate is between three and five percent. For non-commercial properties, the rate is 1.2 to 3.6 percent.
Corporate Income Tax (CIT) in Taiwan
The corporate income tax rate in Taiwan is 20 percent. A non-resident company, one that is registered overseas but does business in Taiwan via a representative office, is taxed only on income that is derived from sources that are within Taiwan.
Business tax systems in Taiwan
Taiwan has both Value Added Tax (VAT) and Gross Business Receipts Tax (GBRT). The rate for VAT is five percent, which is applied to most industries in general. GBRT is a little different because it is only applied to certain industries, such as financial institutions and small businesses. The rate varies between one and five percent, depending on the classification of the business.
Paying tax as a self-employed expat in Taiwan
Foreigners who are self-employed in Taiwan, owing either to having an Alien Permanent Resident Certificate, or being married to a Taiwanese citizen, are obligated to pay taxes the same as if they were employed by a private or public enterprise. This is not a complicated process, as self-employed foreigners can report to their local taxation bureau with their Taiwan I.D. card, and any income they have derived from local businesses in Taiwan will be on the taxation bureau records already, as long as those businesses have legally reported the transaction, as they are obligated to. Income derived from sources overseas is only subject to taxation in Taiwan if it exceeds NT$1 million.
Penalties for failing to file a tax return in Taiwan
If a foreign resident in Taiwan stays within the country for 183 days or more in a calendar year and has income accrued from employers or clients within Taiwan but fails to file an individual income tax return, penalties may be incurred up to three times the amount of tax payable.
Furthermore, should the above occur, the National Taxation Bureau will inform the National Immigration Agency, and the NIA may disallow a foreign resident from exiting the country before the case is resolved. There is a way around this, though, and that is if the foreign resident files a supplementary tax declaration and makes a payment covering any amount they originally failed to declare. Daily interest may also be charged on the amount owed, which may preclude the foreign resident from having their exit privileges revoked. This only applies, however, if the case was not brought about via a complaint made by an informant or if the case is not currently under investigation by an investigator appointed by the National Taxation Bureau or the Ministry of Finance.
Is income earned from outside Taiwan taxable?
The short answer to this is that if one is an alien resident and stays in Taiwan for more than 90 days, they are obligated to list income accrued from employers outside of Taiwan for services rendered within Taiwan as taxable income. This income will be considered sourced within Taiwan as if sourced from a local Taiwanese employer.
Proof of earnings from sources overseas may come in the form of any relevant certificates or documents issued by either tax authorities, a Certified Public Accountant, or a notary public. If those certificates or documents are provided via a CPA, a photocopy of their license is also required for submission to Taiwan's tax authorities. Income accrued in foreign currencies is calculated based on the average exchange rate.
Can I credit my native country's tax to my Taiwan income tax?
According to the Income Tax Act of Taiwan, this cannot be done. However, in some cases, taxes paid in Taiwan may be credited to taxes paid in one's native country. To find out if this applies to you, please inquire with tax authorities in your native country.
What income must be declared in Taiwan?
Any income accrued overseas by foreign residents filing a tax return in Taiwan must be declared in one's basic income unless the total amount is less than NT$1 million.
Life and annuity insurance payments should also be declared, so long as the beneficiary and the proposer are not the same, and on the condition that the life insurance policies or annuities did not come under contract before the Income Tax Act was enacted.
Income from the securities transaction is also included in the calculation of one's basic income in Taiwan.
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