Tax Declaration In Taiwan: Step-By-Step Guide
Embarking on the journey of tax declaration in Taiwan may seem like navigating uncharted financial waters, but fear not – this guide is your compass, right? Worry Not! We’ve got you covered!
Whether you’re a resident or an expatriate, unraveling the intricacies of Taiwan’s tax declaration process is essential for financial clarity and compliance. Join us as we demystify the complexities and equip you with the knowledge to navigate the fiscal landscape of Taiwan with confidence.
Let’s dive in!
What Is The Taxation System Of Taiwan?
Before one considers paying taxes in Taiwan or after collecting the required documents to reach the people for filing the taxes, to make the correct decisions, one needs to have a bird’s eye view of the whole tax system of Taiwan.
The tax system of Taiwan has been divided into two levels:
- Local
- National
National Level
The government holds the regional offices responsible for collecting taxes on the following:
- Construction
- Land
- Acquisitions
Local Level
The local government is responsible for the collection of direct taxes. There are various direct tax categories.
Following are some of those:
- House
- Deed
- Agricultural Land
- Land value incremental
- Land value
- Gifts
- Future transactions
- Security transactions
Taiwan also has various indirect taxes at the local and national levels.
Income Tax In Taiwan
Income tax can be defined as the direct tax that has been imposed on one’s income or the profits generated by any independent business.
It’s imposed by the governments that then use the taxes to fund features or resources which provide the citizen’s life.
So, there are two recipients of Income Taxes:
- Income Tax on Individuals.
- Income Tax on Corporations.
Income Tax On Individuals
For an individual to be eligible to pay taxes in Taiwan, consider the following conditions:
- One is a Taiwan National
- One has Taiwanese dual citizenship.
- One has stayed in Taiwan for more than 183 days.
- One has a household registration in Taiwan and visits it at least one day.
An individual is exempted from taxes in Taiwan when:
- If one spends less than 90 days in Taiwan
- If one works less than 183 days but more than 90 days and has received Taiwan Taiwan-based salary, one will need to pay a fixed rate of 6%-18% of income tax.
One must also confirm before paying the tax if one’s company may have already deducted it.
Income Tax On Corporations
It would be unfair if only the service industry had to pay taxes. Just individuals don’t earn the actual income, but corporations do.
So, all the organizations in Taiwan that earn profits can pay taxes on all the revenue earned onshore and abroad.
- Corporate taxation is 20%.
- As May 31, is the deadline for declaring taxes in Taiwan, all the companies are obliged to showcase their earnings by presenting a settlement statement.
- Corporation taxes must be filed within five months of the end of the fiscal year if the company’s fiscal year is different from the average January 1 to December 1.
Suppose the company already pays taxes abroad because its earning depends on sources outside of Taiwan. In that case, the corporation taxes regulation allows the taxes paid abroad to be deducted from those paid in Taiwan.
However, it must follow the guidelines of Taiwan’s applicable tax rate.
What Is The Rate Of Income Tax In Taiwan?
Taiwan has an efficient tax system. Its rate of income tax is also lower as compared to other countries. The income tax rate in Taiwan is different for residents and non-residents.
One can access relevant information after reading the text given below.
For Non-Residents
The non-residents that make 1.5% of the minimum wage per month, equivalent to an approximate amount of 39,000 NT in 2023, are charged with 18% income tax.
One can quickly get a refund if a person pays 18% taxes. 18% might seem to be an astounding amount, but it is usually valid for foreigners who have white-collar jobs.
The income tax rate is 6% for non-residents earning less than 39,600 NT, which is less than 1.5 times the monthly minimum wage.
The non-residents who work blue-collar jobs are primarily charged with a 6% income tax rate.
For Residents
The income tax rate is different for residents or those who have stayed in Taiwan for more than 183 days and own a house.
The following table shows the income tax rate for residents: (source: Taiwan Ministry of Finance):
Taiwan Progressive Tax Rate Table For The Year 2022
| Net Taxable Income | Tax Rate | Progressive Difference |
| 0-560,000 TWD | 5% | 0 |
| 560,001-1,260,000 TWD | 12% | 39,200 TWD |
| 1,260,001-2,520,000 TWD | 20% | 140,000 TWD |
| 2,520,001-4,720,000 TWD | 30% | 392,000 TWD |
| 4,720,001 and above TWD | 40% | 864,000 TWD |
What Are The Documents Needed For Annual Income Tax Return?
In Taiwan, one needs to download a tax filing form from their official website. One can also get the form from the associated department.
It is written in Chinese. It requires several documents to be attached to it before filing.
The required documents are:
- Balance sheet
- Calculation of Corporate income tax
- Undistributed income tax form
- Revenue and expense reconciliation forms
- Alternative minimum tax (atm) calculation
- List of fixed assets
- Dividend distribution schedule
Also, suppose any Taiwanese company’s net worth or sales exceed NTD$ 100 million. In that case, the tax return must first be audited by a local Certified Public Accountant (CPA) before the tax declaration to the government is to be submitted.
What Are The Other Taxes In Taiwan?
Taxes are needed for any country to work efficiently. Other than imports, taxes are a significant shareholder in building the economics of any nation.
Efficient taxing systems have led to the development of nations.
Just like other countries, taxes other than income taxes, Taiwan also charges different taxes on its residents and non-residents, which include the following:
- Withholding Tax
- VAT
- Stamp tax
- On Commodities
- Securities Transaction Tax
- Property Tax
Withholding Tax
When the one who pays the income rather than the one who receives it has to pay the tax to the government, it’s known as Withholding Tax.
So, this tax is usually withheld from the person’s income or deducted. The rate of withholding income tax is different for residents and non-residents.
The table shown below shows the percentages charged on both:
| Type of Income | Resident | Non-Resident |
| Pension | 6% | 18% |
| Rentals/ Royalties/Professional fees | 10% | 20% |
| Interests | 10% | 20% |
| Salaries | 5% | 18% |
| Dividends | 0% | 21% |
How To File For Annual Withholding Tax Reporting?
To file for annual withholding tax by the end of January of the coming year, one needs to report to the National Taxation Bureau about the local employees or any other associate who is being given any professional fee like a lawyer or consultant.
One would need the employees’ personal information for filing for withholding tax. Their name, ID, address, and similar documents would also be required for any hired firm.
Value-Added Tax (VAT)
VAT is also known as the business tax. It is a tax that is charged on all the products and services at every level of the supply chain that works inside the terrain of Taiwan. This tax is evaluated incrementally.
The table given below can be used to assess the rate of tax charged to different businesses in Taiwan:
| Type of Business | Tax Rate |
| Small-Scale Businesses | 1% |
| Small Agricultural Product Suppliers | 0.1% |
| Bars and Coffee Shops | 25% |
| Nightclubs and Restaurants | 15% |
| Export goods and Services | 0% |
| Wholesale Agricultural Traders | 0.1% |
How To File VAT?
According to the Tax Regulatory Department of Taiwan, VAT filing is usually performed every 2 months and the deadline is the 15th of the coming month.
This tax is charged on the sales, goods, and services that take place in the territory of Taiwan.
Exporting companies can apply for 0% VAT and request a VAT refund in Taiwan to encourage independent businesses.
Stamp Tax In Taiwan
The government usually imposes stamp taxes on some legal documents.
For example, this tax is charged for selling personal property, real estate transactions, contractual agreements, or payment receipts.
The one who issues the document is supposed to pay the stamp tax. If both parties retain the original documents, then both parties will have to pay the stamp tax.
The rate charged for the stamp taxes in Taiwan is usually given below:
| Document Type | Resident |
| Deeds of real estate transactions | 0.1% |
| Receipts of payments | 0.4% |
| Deeds of sales of movable properties | NTD$12 |
| Contractual agreements | 0.1% |
Tax On Commodities
This tax is charged on goods that are either imported or made domestically. The tax rate varies from 8% to 30% on different commodities in Taiwan. Commodity tax is a one-time tax only.
Tax levied on commodities in Taiwan includes the following commodities:
- Rubber tires
- Beverages
- Cement
- Plate glass
- Oil and gas
- Electrical appliances
- Vehicles
The following table shows the tax rate charged on the commodities mentioned above in Taiwan:
| Items | Tax Rate |
| Rubber Tires | 10% or 15% |
| Beverages | 8% or 15% |
| Cement | TWD 280 to TWD 600 per ton |
| Plate Glass | 10% |
| Oil and Gas | TWD 110 to TWD 6,830 per kilolitre or TWD 690 per ton |
| Electrical Appliances | 10% to 20% |
| Vehicles | 15% to 30% |
Securities Transaction Tax
All securities transactions in Taiwan are taxed, excluding some specific government bonds. An average tax levied on security is 0.3% on gross goods.
| Types of Security Transaction | Tax Rate (on selling price) |
| Transactions of Futures | 0.000001% to 0.6% |
| Shares and Options | 0.3% |
Property Tax
Property is an asset. It’s an asset not just for an individual who owns the property but also for the government. The land and buildings are annually evaluated for their tax.
The government authorities then specify an applicable tax rate that land or building owners must pay.
The following table determines the tax rate levied on property in Taiwan according to the year 2022:
| Property | Tax Rate |
| Land Value | 1% to 5.5% |
| Commercial Building | 3% to 5% |
| Non-Commercial Properties | 1.2% to 3.6% |
Tax Filings And Methods Of Payments In Taiwan
Thankfully, the tax filing and methods of payment in Taiwan are simple. One has two options. Do it online by accessing Taiwan’s electronic filing system or visiting a tax office.
One can pay taxes quickly through different methods in Taiwan:
- Pay via cash
- Wire transfer
- Pay through debit or credit cards
- Pay using paper checks
- Online bank transfer
Taiwan, like other countries, has multiple tax categories. However, the tax rate charged in each category is lower than in other countries.
Especially the tax rate for expats is lower.
What Are The Other Queries Related To Tax Declaration In Taiwan?
The details given in the article have described the tax system of Taiwan, the tax rates, the deadlines, the documents required for filing, and the different methods of paying the tax.
People may have other queries. Some of these are addressed below:
Are There Any Tax Exemptions In Taiwan?
The tax dependents are exempted from paying taxes up to 92,000 NT. The exemption for each taxpayer’s dependents, the taxpayer, and the taxpayer’s spouse are 138,000 NT if the dependent is over seventy years old.
What Are The Standard Deductions In Tax Payments In Taiwan?
124,000 NT is the standard deduction for a single taxpayer. When it comes to married taxpayers, the standard deduction is 280,000 NT.
Are There Any Other Special Deductions In Taiwan’s Tax System?
There are additional or special deductions that are different from the tax rate set by the taxing regularities.
The special deductions for 2022 in Taiwan were as follows:
| Special Deductions | Tax |
| Savings and Investment | 270,000 NT |
| Salary or Wages | 207,000 NT per person |
| Tuition | 25,000 NT per person |
| Preschool Children | 120,000 NT per person |
| Disability | 207,000 NT per person |
| Property Transaction Losses | 3 Years |
Are There Any Tax Benefits Given To Foreign Exceptional Professionals In Taiwan?
Any foreign exceptional professionals who are tax residents for the tax year and hold a gold card will be taxed only on half of their income above the earning of 3 million NT.
What Is The Amount For Tax Filing Exemption On Low Salaries?
One is only exempted from tax filing if the total annual salary is 196,000 NT times the number of dependents and the taxpayer.
How Does One Calculate Income Tax In Taiwan?
Taiwan’s computer and online filing system can also compute the taxes required.
If one must manually calculate one’s annual taxes, one can first take the gross net salary and subtract the applicable exemptions and unique/standard deductions.
After this, one can see one’s wage and then see in which tax range the wage falls.
Once the tax bracket has been identified, one can multiply the progressive difference and the answer with the tax rate. One will end up paying the required tax amount to the government.
Are There Any Alternative Minimum Taxes (ATM) Charged On Overseas Income?
Yes, Alternative Minimum Taxes are only charged for overseas income if the person is a Taiwanese Tax resident and earns more than 6.7 million NT.
Other Regulatory Filing Deadlines
According to the 2018 Company Representative and Major Shareholder Reporting Policy, companies must register their director, supervisor, and 10% shareholders.
Their nationality, birth date, ID, and amount of holding shares need to be registered too.
The deadline for the reporting is as below:
- If any changes are made during the year, the deadline will be 15 days after the change.
- The deadline for a completely new company will be 15 days after it’s set up.
- When no change is made during a year, the deadline will be by the end of 3rd month, March 31.
Conclusion
As we wrap up our exploration of tax declaration in Taiwan, you’re now armed with the insights needed to navigate the financial currents of this dynamic island. Filing your taxes becomes a manageable journey toward compliance and fiscal success.
Here’s to a future where your understanding of Taiwan’s tax regulations empowers your financial decisions and ensures a smooth sail through the country’s economic waters.
Compliance Made Easy!
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