TaiwanTax Obligations Detailed

In Taiwan, employers face various tax obligations and compliance requirements related to payroll, social security, and other taxes.

Employer Tax Obligations

• Withholding Tax: Employers are responsible for withholding income tax from employee salaries. They can choose to withhold based on the Ministry of Finance Salary Income Tax Table or a flat rate of 5%. Income from commissions is withheld at a flat rate of 10%.
• Corporate Income Tax (CIT): The corporate income tax is due no later than the fifth month after the end of the tax year. Additionally, an estimated CIT payment is due in the ninth month of the enterprise's fiscal year.
• Social Security Contributions: Employers and employees contribute to several programs, including Labor Insurance, National Health Insurance, and the Labor Pension Program (foreign workers are not eligible for the LPP). Rates are based on the employee's insured monthly salary.
  • Labor Insurance: The employer's contribution rate varies based on industry risk classifications, with rates ranging from 0.05% to 1.9% of the monthly insured salary.
  • National Health Insurance: The current employer contribution rate is 4.69% of the monthly insured salary.
  • Labor Pension: The employer contribution rate is 6% of the monthly insured salary.
  • Supplementary Premium for National Health Insurance: A 2.11% supplementary premium applies to bonuses or incentives exceeding four times the monthly insured salary, up to TWD 10 million annually. Employers also contribute 2.11% on the difference between total monthly taxable salaries and employees' total insured salaries.
• Business Tax: All sales of goods and services, including imports, are subject to business tax, either Value Added Tax (VAT) at a standard rate of 5% or Gross Business Receipts Tax (GBRT) at rates ranging from 2% to 5% depending on the industry.
• Reporting and Payment: Employers must report and remit withheld taxes and social security contributions monthly. Income tax is due by the 10th of the following month, while social security contributions are generally due by the 15th of the following month.
• Minimum Wage Compliance: As of January 1, 2025, the monthly minimum wage in Taiwan is TWD 28,590 and the hourly minimum wage is TWD 190.
• Disability Employment: Companies with fewer than 67 employees must employ people with disabilities at a rate of at least 1% of their total workforce (minimum one person). Otherwise, they must contribute to the Disabled Employment Funds based on the statutory monthly minimum wage.

Employee Tax Obligations

• Income Tax: Residents are taxed on a progressive scale from 5% to 40% for 2023, while non-residents (staying 90 days or less) employed by a Taiwanese company are subject to a flat 18% withholding tax on gross salary. If the non-resident's salary is paid by a foreign employer with no recharge to a Taiwanese entity, there's no tax liability for stays up to 90 days.
• Tax Return Filing: Income tax returns are due by May 31st of the following year.

Payroll Cycle and Payments

• The common payroll cycle is monthly, with salaries typically paid on the 15th of each month.
• While not mandatory, 13th and 14th-month salary bonuses are often paid before Chinese New Year. Festival bonuses are also common before the Dragon Boat and Mid-Autumn Festivals.

Additional Information

• Tax Year: The tax year in Taiwan runs from January 1st to December 31st.
• Tax Authority: The Taxation Administration, under the Ministry of Finance, administers income tax in Taiwan. The National Health Insurance Bureau manages the National Health Insurance program, while the Ministry of Labor handles labor insurance and the labor pension program.

Employee tax deductions in Taiwan are determined by residency status, with residents benefiting from several deductions and exemptions not available to non-residents.

Residency Status

• Resident: Deemed resident if domiciled and residing in Taiwan, or if residing in Taiwan for at least 183 days in a tax year, even without domicile. If entering and departing Taiwan multiple times within a year, the resident days are accumulated.
• Non-Resident: Those not meeting the residency requirements are considered non-residents. Non-residents staying in Taiwan for more than 90 days during a tax year are taxed on their Taiwan-sourced income at a flat rate of 18%.

Tax Rates and Deductions (2025)

As of February 5, 2025, the tax rates are subject to adjustments based on the Consumer Price Index (CPI). While precise 2025 figures are unavailable at this time, the information below is based on the latest available data (2023) and may not reflect potential adjustments. It is strongly advised to confirm current rates with official sources closer to the relevant tax period.

• Residents: Taxed at progressive rates. Income tax brackets are adjusted if the accumulated CPI rises by at least 3% since the last adjustment. Refer to official sources for the most up-to-date brackets.
  • Standard Deduction: TWD 124,000 for single filers, TWD 248,000 for married couples filing jointly.
  • Itemized Deductions: Taxpayers can choose between standard and itemized deductions. Itemized deductions require supporting documentation and include:
    • Charitable donations (capped at 20% of consolidated gross income, except donations to government or military, which are fully deductible)
    • Insurance premiums (capped at TWD 24,000 per person annually, excluding national health insurance, which is fully deductible)
    • Medical and maternity expenses
    • Calamity losses
    • Housing loan interest (up to TWD 300,000) or rental payments (up to TWD 120,000) for self-use residences in Taiwan.
  • Special Deductions:
    • Losses from property transactions
    • Interest earned from bank deposits (up to TWD 270,000)
    • Disability/handicap (TWD 207,000 per person)
    • Dependent child tuition (TWD 25,000 per child for approved college/university)
    • Pre-school children (TWD 120,000 per child under specific income conditions)
    • Salaries/wages (fixed salary deduction up to TWD 207,000)

Income Subject to Tax

All income derived from services performed in Taiwan is considered taxable income, regardless of where payment is made. This includes salary, bonuses, allowances, and other benefits. Some reimbursements, such as for business-related car expenses (within limits), and home leave for expatriates (with proper documentation), may not be taxable.

Tax Filing and Payment

• Tax Year: January 1 to December 31
• Return Due Date: May 31 (For the previous tax year)
• Joint Filing: Allowed for married couples

Withholding Tax

Employers in Taiwan are required to withhold income tax from employee salaries monthly. Optimizations to this withholding tax system took effect January 1, 2025. Consult official sources or tax professionals for details on the latest changes.

Additional Information

• Employment Gold Card: Offers certain tax benefits to qualified foreign professionals, including a reduced tax rate on income above TWD 3 million and an exemption from alternative minimum tax on foreign-sourced income for the first five years of residency.

It's crucial to refer to the Taiwan Ministry of Finance and National Taxation Bureau of Taipei for the most current tax regulations and details. Consulting a tax professional is also recommended for personalized advice.

In Taiwan, businesses face Value Added Tax (VAT) and Gross Business Receipts Tax (GBRT). VAT is levied on most goods and services at a standard rate of 5%, while GBRT applies to specific sectors with varying rates.

Value Added Tax (VAT) in Taiwan

The standard VAT rate in Taiwan is 5%, applying to most goods and services sold within the country. Certain goods and services are exempt or zero-rated. As of February 5, 2025, the Taiwanese Ministry of Finance is proposing an amendment to increase the VAT registration threshold for non-resident digital service providers from TWD 480,000 to TWD 600,000, though this has yet to be officially enacted.

• VAT Registration Thresholds:
  • Resident Businesses: No threshold. Registration typically occurs upon incorporation.
  • Non-Resident Businesses (with Permanent Establishment): No threshold in most cases.
  • Non-Resident Digital Service Providers (without Permanent Establishment): Currently TWD 480,000 annual turnover. The proposed amendment suggests increasing it to TWD 600,000.
• VAT Filing and Payment:
  • Frequency: Bi-monthly (every two months). Businesses with regular VAT credits can opt for monthly filing.
  • Deadline: The 15th day of the month following the two-month reporting period (e.g., March 15th for January-February sales).
  • Method: Returns can be filed electronically or on paper. VAT due must be remitted before filing.
• VAT Rates:
  • Standard Rate: 5% (for most goods and services).
  • Zero Rate: Applies to exports and related services, as well as certain goods for international travelers.
  • Exempt Goods and Services: Basic foodstuffs, sale of land, certain financial instruments, medical services, medicine, hospital ward lodging and meals, and certain social welfare services.

Gross Business Receipts Tax (GBRT)

GBRT applies to specific sectors like financial institutions and small businesses. Rates vary depending on the industry, entity type, and nature of the supply, ranging from 0.1% to 25%.

• Examples of GBRT Rates:
  • Agriculture: 0.1%
  • Small Enterprises/Reinsurance Premiums: 1%
  • Financial Services: Typically 5% but it may also be 2%
  • Entertainment Services: Up to 15%

It's important to consult with a tax professional for specific guidance related to your business activities. Regulations can change, and this information is current as of February 5, 2025.

Taiwan offers a range of tax incentives for businesses and individuals in 2025, aiming to stimulate economic growth and attract investment.

Business Tax Incentives

• Infrastructure Projects: Businesses involved in major infrastructure projects may qualify for a five-year exemption from business income tax. Additional benefits include investment tax credits, tariff exemptions on imported construction machinery, and deductions on property taxes. Investors in these projects may also receive business income tax deductions.

• SMEs & R&D: Small and medium-sized enterprises (SMEs) investing in innovation and research & development (R&D) can claim a tax credit up to 30% of their current year's profit-seeking enterprise income tax. This credit can be calculated as either 15% of current-year R&D expenses or 10% of R&D expenses spread over three years.

• Securities Transactions: Business income from securities transactions is tax-exempt for Taiwanese nationals and foreign profit-seeking enterprises.

• Investment in Startups: Individual investors in new high-risk companies (less than two years old) can deduct up to 50% of their investment (capped at NT$1 million per company and NT$3 million annually) from their total consolidated income, provided they hold the shares for two years.

• AI and Carbon Emission Reduction: Investments in AI and carbon emission reduction technologies are eligible for tax credits. The investment ceiling has been raised to NT$1.8 billion, and this incentive is valid until December 31, 2029.

• Smart Machinery and 5G: Investments in smart machinery and 5G-related equipment are eligible for investment tax credits.

• Undistributed Earnings: Companies are exempt from the 5% business income tax on undistributed earnings if these earnings are reinvested. This also applies to multinational companies investing in Taiwan.

• Taipei City Incentives: Taipei City offers various subsidies and preferential tax programs for businesses engaged in strategic industries, including R&D subsidies, occupational training allowances, loan interest subsidies, and reduced housing and land value taxes. These incentives are also available to foreign companies registered in Taipei City.

Individual Tax Incentives

• Foreign Professionals: Foreign nationals with an Employment Gold Card or Foreign Special Professional Work Permit residing in Taiwan for work for the first time may be eligible for a five-year tax benefit. If they stay in Taiwan for 183 days or more in a calendar year and earn an annual Taiwan-sourced salary exceeding NT$3 million, 50% of the salary above NT$3 million is tax-exempt, and non-Taiwan source income is excluded from the individual's income basic tax (IBT) calculation.

• Salary Deduction: Individuals can choose between a fixed salary deduction (NT$207,000 as of 2019) or deducting specific work-related expenses up to 3% of total salary income per expense category annually.

• Electric Vehicles (EVs): Commodity tax exemptions are available for electric vehicles until the end of 2025. For passenger cars, the full exemption applies up to NT$1.4 million of the taxable value, with a 50% reduction for any value exceeding that amount.

• Dividends: Resident individuals have two options for taxing dividends from Taiwan companies. They can include dividends in their taxable income and receive an 8.5% tax credit (capped at NT$80,000) or have dividends taxed separately at a flat rate of 28%.

General Tax Information

• Exemptions: Taxpayers can deduct exemptions for each household member. Exemptions increase by 50% for taxpayers, spouses, and lineal ascendants aged 70 or older. For the 2024 tax year, the exemption is NT$97,000 per household member or NT$145,500 for those 70 and above.

• Foreign Income: Income from foreign employers is generally exempt from Taiwan income tax if the individual stays in Taiwan for less than 90 days (or 183 days if a tax treaty exists).

This information is current as of February 5, 2025, and may be subject to change.