Expatriates taking up employment in Taiwan are subject to comprehensive tax rules and employment visa requirements. Grant Thornton’s Expatriate Tax team is here to help expatriates and their employers in dealing with Taiwanese tax and immigration matters.
Please contact Grant Thornton Taiwan, a member firm of Grant Thornton International to discuss your specific situation.
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Before commencing employment in Taiwan, expatriates requiring a work permit must apply for one. As part of the work permit application process, an employment contract must be submitted to the Workforce Development Agency. It is important that the contract and benefits package be structured in a tax-efficient manner before applying for the permit.
The tax year runs from 1 January to 31 December.
Individuals who resided in Taiwan for 90 days or more in a tax year have to file an individual tax return the following year between 1 May and 31 May.
Individuals who resided in Taiwan for 90 days or more in a tax year have to file an individual tax return the following year between 1 May and 31 May.
Upon completing the assignment in Taiwan and leaving permanently, tax return needs to be filed before the individual departs Taiwan or before the tax filing deadline, whichever comes first.
Tax is charged on net assessable income, less the higher of the following two amounts.
Resident individuals can choose to have dividends received from Taiwan companies included in their individual income tax return as taxable income with a tax credit of 8.5% of dividend income (capped at TWD 80,000) or have the dividends received taxed separately at a flat rate of 28% with no tax exemption.
The following is a copy of the progressive personal income tax table for 2022:
| 2022 (NT$) | Rate (%) | Progressive Diff |
| 0 – 560,000 | 5 | 0 |
| 560,001 – 1,260,000 | 12 | 39,200 |
| 1,260,001 – 2,520,000 | 20 | 140,000 |
| 2,520,001 – 4,720,000 | 30 | 392,000 |
| 4,720,001 and above | 40 | 864,000 |
Exemptions and deductions – 2022
Taiwan taxpayers are entitled to exemptions, standard or itemised deductions, and special deductions.
| NT$ | |
| Personal exemption – taxpayer, spouse, qualifying dependents (Under 70 years old) | 92,000 per person |
| Personal exemption – dependents (Over 70 years old) |
138,000 per person |
| Standard deduction – single | 124,000 |
| Standard deduction – married / filing jointly | 248,000 |
A resident taxpayer can elect to claim itemised deductions instead of the standard deduction listed above.
We assume the taxpayer is a tax resident with no dependents and will take the standard deduction, and has NT$ 3,000,000 in salary income and no other types of income. The below calculation is based on rates for the year 2022.
| NT$ | |
| Salary and Wages | 3,000,000 |
| Special Deduction for Salary and Wages | -207,000 |
| Standard Deduction | -124,000 |
| Personal Exemption | -92,000*1 |
| Taxable income | 2,577,000 |
| Progressive tax rate 30% | 773,100 |
| Progressive Difference | -392,000 |
| Total Tax Due: | 381,100 |
Taiwan levies income tax on a territorial basis. Both resident and non-resident individuals must pay taxes on income derived from Taiwan sources, although the tax rate depends on the residency status of the individual. A resident individual in Taiwan is someone who is:
Income tax is levied on an individual’s employment or pension income derived from Taiwan sources. Please note that the worldwide income and qualified CFC (Controlled Foreign Corporation) income of an individual who is considered to be a tax resident of Taiwan is subject to Alternative Minimum Tax (AMT).
Article 7 of the Income Tax Act defines a tax resident as an individual meeting one of the following criteria:
A person who has domicile in and resides at all times within the territory of the Republic of China;
A person who has no domicile in the territory of the Republic of China but resides within R.O.C. territory for a period of more than 183 days during a taxable year.
In practice, it is difficult to assess whether a person has domicile in the country. Historically, the Taxation Administration has tended to rely on whether a person has registered a household with the district Municipal Office. When such a registration exists, the Taxation Administration deems the person to have domicile within the country.
Ruling issued on 1 January 2013
In September 2012, the Taxation Administration announced a set of rules to assess whether a person has domicile in Taiwan. This rule took effect from 1 January 2013.
The rule stated that a person is deemed to have domicile in the Republic of China if one of the following conditions are met:
In determining whether the individual’s principal place of living and carrying out economic activities is in the R.O.C., the following questions, among others, are taken into account:
Whether a person falls within the definition of tax resident will affect the person’s tax filing status in Taiwan. If you are in doubt as to your status or that of your employee, please consult with one of our tax advisors.
Taiwan levies income tax on a territorial basis. Both resident and non-resident individuals must pay taxes on income derived from Taiwan sources, although the tax rate depends on the residency status of the individual. A resident individual in Taiwan is someone who is:
Income tax is levied on an individual’s employment or pension income derived from Taiwan sources. Please note that the worldwide income and qualified CFC (Controlled Foreign Corporation) income of an individual who is considered to be a tax resident of Taiwan is subject to Alternative Minimum Tax (AMT).
Expatriate employees working in Taiwan during a stock option lock-in period are liable for Taiwan tax on stock option profits pro-rata to the number of days the expatriate employee stayed in Taiwan.
Non-taxable benefits in kind for qualified foreign professionals
Additional non-taxable benefits can be provided to an expatriate that meets the qualifications of a “qualified foreign professional” (QFP). In order to be considered a QFP, the expatriate employee’s work responsibilities must be of a technical or specialised nature, as defined in Items 1 and 2, Section 1, Article 46 of the Employment Service Act and other related Regulations. The expatriate’s annual taxable salary from both Taiwan and foreign employers must exceed NT$1.2 million, and the person must possess a valid work permit and be a tax resident of Taiwan.
Additional non-taxable benefits in kind available for QFPs include:
Payments to cover travel expenses to and from Taiwan of the QFP and his/her family members at the beginning and end of the contract;
Payments to cover travel expenses to the QFP's home country for holidays;
Payments to cover moving expenses to Taiwan and back to the QFP's home country, as well as any other moves related to the QFP's employment in Taiwan;
Payments to cover the costs of water, electricity, natural gas, and telephone services supplied to the QFP's residence in Taiwan;
Housekeeping expenses;
Rental payments for housing and home repairs; and
Educational scholarships for the QFP's children in Taiwan.
Expatriate income tax concessions (Employment Gold Card)
Taiwan has published a set of new rules to allow high income earning foreign professionals meeting certain criteria or holding immigration gold cards to enjoy special income tax concessions. The objective of this program is to help Taiwan to attract foreign talent to fill domestic talent and skill gaps. The concessions allow qualifying foreign special professionals a tax break of having income assessed on only half of their salary above NT$ 3 Million and an exemption from alternative minimum tax for foreign source income for their first five years as a tax resident in Taiwan. It also must be their first time receiving an employment work permit in Taiwan. If the expatriate does not meet the qualifications for tax residency, then they may defer this tax benefit for up to five years. The implementation date for the new set of rules is February 8th, 2018.
The gold card is also known as the “4 in 1” visa since it provides a resident visa, Alien Resident Certificate(ARC), multiple entry permit, and an open work permit. An open work permit is typically viewed as the most attractive benefit as the holders of the cards are not obliged to be attached to one organization and can remain in Taiwan while changing jobs.
Taiwan has an extensive income tax treaty network with 35 countries.
In Taiwan, personal income tax is levied on a territorial basis (AMT is levied on a global basis). Where an employee has Taiwan-source employment, he/she is subject to income tax on all of his/her income from that employment. If an employee has been assigned to work outside of Taiwan on a permanent basis, his/her income is deemed non-Taiwan source, and it is not subject to personal income tax in Taiwan. Through this principle, Taiwan has, to a large extent, avoided the problem of double taxation of individual income.
Taiwan taxpayers are entitled to exemptions, standard or itemised deductions, and special deductions. The standard deduction amounts for 2022 are as follows:
Single - $124,000
Married Filing Jointly - $248,000
Personal exemption – taxpayer, spouse, qualifying dependents (Under 70 years old) - 92,000 per person
Personal exemption – dependents (Over 70 years old) - 138,000 per person
Itemised deductions can include:
Donations
Donations made to officially-registered educational, cultural, public welfare, and charitable organisations or agencies are deductible. The deduction should not be more than 20% of the taxpayer's combined gross income. However, donations made to national defence, for troop support, or to the government are fully deductible.
Insurance premiums
Insurance premiums paid by or for the taxpayer, his/her spouse and dependents for life insurance, labour insurance, national annuity and insurance for military personnel, public servants, or teachers are deductible up to NT$24,000 per person per year. Premiums paid for National Health Insurance are not subject to the NT$24,000 limit.
Medical and maternity expenses
Medical and childbirth expenses incurred by the taxpayer, his/her spouse, or dependents are deductible as long as the expenses are paid to public or private hospitals or clinics appointed under National Health Insurance, or hospitals with complete and accurate accounting records recognized by MOF. There is no upper limit on medical and maternity expenses. However, no deduction shall be made for the portion of expenses covered by an insurance payout.
Losses from disasters
Losses incurred by the taxpayer, his/her spouse, or dependents from a disaster caused by force majeure are deductible. No deduction is allowed for any portion of such a loss for which insurance benefit or relief has been received. To claim deductions, one should apply to the Taxation Administration for an investigator to appraise the losses within 15 days after the disaster's occurrence.
Interest paid on a loan for an owner-occupied dwelling
Interest paid on a home mortgage for an owner-occupied primary residence is deductible. This deduction can only be applied to one residence. Up to NT$300,000 can be deducted per year per tax return. However, if the taxpayer also claims a special deduction for savings and investment, the special deduction should be subtracted from the above-mentioned interest.
Rental expenses
Rent for housing in Taiwan paid by a taxpayer, his/her spouse, or dependents is deductible as long as the rental property is used as a residence (not for business use). Up to NT$120,000 can be deducted per year per tax return. This deduction is not available to taxpayers who have claimed the deduction for interest paid on a home mortgage on the same tax return.
In addition to the standard or itemised deductions, a taxpayer can also claim special deductions, which include:
Losses from property transactions
Losses from property transactions incurred by a taxpayer, his/her spouse, or dependents may be deducted up to the amount of declared gains from property transactions in the same year. If the deductible amount exceeds the gains, the difference may be carried forward for three years. This deduction does not apply to losses sustained from selling land or securities.
Special deduction for salary or wages
Each person receiving a salary may claim a deduction for his/her salary up to a maximum of NT$207,000 for tax year 2022. One may deduct the full salary amount if it is less than the deductible amount.
Special deduction for savings and investment
Interest derived from deposits in financial institutions, income from trust funds in the nature of savings, or earnings and dividends derived at the time of transfer, gift, distribution of estate or upon giving up a tax-deferring right or delivering the stock to the custodian, on tax-deferred publicly issued and traded stocks acquired on or before December 31, 1998 by a taxpayer, his/her spouse or dependents may be deductible up to NT$270,000. However, this deduction does not apply to tax-exempt interest on postal pass-book savings under the Post Savings Act or interests subject to separate taxation as stipulated in applicable laws or regulations.
Special deduction for disability
A taxpayer, his/her spouse, or dependent who is disabled or handicapped or is mentally ill as defined in Article 3, Paragraph 4 of the Mental Health Act and holds the proper certification can enjoy a deduction of NT$207,000 for tax year 2022.
Special deduction for tuition
A deduction of up to NT$25,000 per student per year may be made for the tuition of children of a taxpayer that are studying in a college or university. The deduction does not apply to tuition paid to the Open University, vocational colleges, or for the first three years of five-year vocational colleges, or to students who have accepted government subsidies.
Special deduction for preschoolers
A taxpayer may claim a special deduction of up to NT$120,000 per dependent child aged 5 or younger. This deduction is subject to the following conditions:
The taxpayer is not in the 20% or higher tax bracket
Income subject to alternative minimum tax is less than NT$6.7 million.
Special deduction for incapacitated dependents under long-term care programs
A taxpayer may claim a special deduction of up to NT$120,000 per incapacitated dependent that is under a long-term care program. This deduction is subject to the following conditions:
The taxpayer is not in the 20% or higher tax bracket
Income subject to alternative minimum tax is less than NT$6.7 million.
The taxpayer did not elect to use a fixed 28% tax rate for paying tax on investment income.
There is no capital gains tax for trading in shares listed on Taiwan’s stock exchange. Profits earned from trading in shares not listed on stock exchange is subject to AMT for tax residents.
Estate tax is levied ranging from 10% ~20% pending on the net worth of the deceased after deductions and exemption. Estate tax applies to worldwide property if the individual is a Taiwanese national. If a Taiwanese resident is not a Taiwan national, then only assets located within the territory of Taiwan are subject to this tax.
Taiwan-source interest income such as dividends and other investment income is taxable in Taiwan.
There are no local taxes imposed on individual income in Taiwan.
Profits earned from selling real estate in Taiwan are subject to land value increment tax and capital gains tax, deed tax, and stamp tax. Changes to the application of these taxes took effect on 1 January 2016. There are also annual assessment taxes relating to property holding.
The Specifically Selected Goods and Services Tax (also known as luxury tax)
Taiwan introduced the Specifically Selected Goods and Services Tax (also known as luxury tax) in May 2011. Items covered by this tax include:
The tax rate for most of these goods is fixed at 10%. Supplier of the above will pay this and then add this to its cost.
Please note that the worldwide income and qualified CFC (Controlled Foreign Corporation) income of an individual who is considered to be a tax resident of Taiwan is subject to Alternative Minimum Tax (AMT). This needs to be reported in annual personal income tax filing.
It is often beneficial for employers to engage CPA firms to conduct tax planning on their behalf. Most tax planning involves structuring employment contracts and benefit plans in the most tax-efficient way possible. Some of the benefits can be fully tax deductible for the employer even if the benefits are received tax-free by the employee.
Grant Thornton’s Expatriate Tax team can advise expatriates and employers regarding these and related opportunities.
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For further information on expatriate tax services in Taiwan please contact: |
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Jay Lo |
Margaret Lin |