Taiwan, a rapidly developing country, offers a favorable business environment and high quality of life, supported by government financial incentives aimed at attracting foreign investors. These incentives include special tax treatments for individuals and companies establishing residence or operations in Taiwan. To fully benefit from these incentives, it is essential to understand the different tax residency categories in Taiwan.
Understanding Taiwan Tax Residency
Taiwan tax residency refers to an individual’s status as a resident in Taiwan for tax purposes. Residents of Taiwan are obligated to adhere to the nation’s income tax regulations, which require them to declare and pay taxes on income earned both domestically and internationally. The administration of these tax laws falls under the jurisdiction of Taiwan’s National Taxation Bureau and the Ministry of Finance, ensuring compliance and proper tax collection. This comprehensive tax system underscores Taiwan’s commitment to maintaining a robust and transparent fiscal policy.
Types of Taiwan Tax Residency
Period of Stay
In Taiwan, tax residency is determined by the duration of an individual’s stay within a calendar year. If an individual resides in Taiwan for more than 183 days in a year, they are classified as a tax resident. Conversely, those who stay for less than 183 days are considered non-residents for tax purposes. Tax residents are obligated to pay taxes on their global income, which includes income earned outside of Taiwan.
Domicile
In Taiwan, an individual is considered a tax resident if they have a domicile in the country, regardless of their length of stay. A domicile is typically defined as a permanent residence, and having a home or significant economic ties in Taiwan increases the likelihood of being classified as a tax resident. For instance, a foreigner who owns property and spends considerable time in Taiwan may fall under this category. Tax residents must report and pay taxes on their global income, including income earned overseas.
Business Entities
The tax residency of a business in Taiwan is determined by factors such as the place of incorporation, business operations, management location, and activities conducted within Taiwan. A business incorporated in Taiwan is considered a tax resident regardless of its management location. Conversely, a foreign business entity is deemed a Taiwan tax resident if it has a place of management in Taiwan or engages in profit-seeking activities in Taiwan for over 183 days in a year.
Definition of a Non-Resident
Non-residents in Taiwan are categorized based on their stay duration: 91 to 182 days or 90 days or less. Those staying between 91 and 182 days must declare and compute income tax based on the withholding rate for income from Taiwanese sources, with foreign remuneration for services performed in Taiwan taxed at 18%. For stays of 90 days or less, income from Taiwanese sources is withheld and paid at the source, with no need to file a tax return unless specified otherwise.
Criteria for Becoming a Taiwan Tax Resident
A person is considered a Taiwan tax resident if they reside in Taiwan for over 183 days in a tax year or have a household registration or individual dwelling registered in Taiwan. From January 1st of the first full year as a resident, they must file an annual income tax return, regardless of income.
Tax Filing Deadlines in Taiwan
In Taiwan, the tax year aligns with the calendar year, starting January 1st and ending on December 31st. Individuals are required to file their income tax returns by May 31st of the following year. For example, the deadline for filing 2022 tax returns was May 31, 2023.
Calculating Taxes as a Tax Resident
Taiwan employs a progressive tax system, where higher income levels are subject to increased tax rates. For 2024, the tax brackets are as follows:
Income up to NTD 590,000 is taxed at 5%; income from NTD 590,001 to 1,330,000 at 12%, with a deduction of NTD 41,300; income between NTD 1,330,001 and 2,660,000 at 20%, with a deduction of NTD 147,700; income from NTD 2,660,001 to 4,980,000 at 30%, with a deduction of NTD 413,700; and income above NTD 4,980,001 at 40%, with a deduction of NTD 911,700. This structure ensures that tax liability increases progressively with income.
Essential Documents for Tax Filing
For aliens filing individual income tax in Taiwan for 2024, the required documents include the Alien Resident Certificate (ARC) card and passport, both in original and copy forms. Additionally, a tax withholding statement, dividend voucher, and certificate of earnings paid abroad for services performed in Taiwan are necessary. If the taxpayer is appointing an agent, a proxy statement with the taxpayer’s signature matching the one on the passport, along with the agent’s identification documents, ARC card, and passport copies, are required.
Other essential documents include a copy of the taxpayer’s bankbook, travel (boarding) certificate, and the Agent Appointment and Acceptance Form. These documents ensure that all income sources and tax obligations are accurately reported and processed by the National Taxation Bureau of Taipei. Proper documentation helps streamline the tax filing process and ensures compliance with Taiwan’s tax regulations.
Discovering Tax Exemptions, Deductions, and DTAs
Taiwan’s tax code offers various deductions and exemptions exclusively for residents, including an NTD97,000 exemption per taxpayer, spouse, and dependent. Filers can choose between standard deductions NTD 131,000 for individuals or NTD 262,000 for joint filers) and itemized deductions, which cover donations, disaster losses, medical, and maternity expenses, provided original receipts are attached. Additionally, Taiwan has double taxation agreements (DTAs) with several countries, reducing tax rates on specific income types.
Looking Over Tax Refund Online
To check your tax refund status online, visit the eTax Portal of the Ministry of Finance. You will need to provide specific details such as the tax year, your Alien Resident Certificate (ARC) number, your date of birth, and any additional details.
Ensure Seamless Tax Compliance with Premia TNC in Taiwan
If you’re uncertain about your tax residency status or need expert guidance on filing your tax return in Taiwan, Premia TNC is your trusted partner. We specialize in determining residency status, calculating tax liabilities, and ensuring timely preparation and submission of tax returns.
Our team of experienced tax professionals is committed to helping you maximize available deductions and credits while minimizing the risk of penalties or interest on unpaid taxes. With Premia TNC, you gain access to reliable expertise and personalized service, making us the ideal choice for navigating Taiwan’s tax regulations efficiently and with confidence.
In a Nutshell
Consulting a professional accountant or tax advisor is crucial for understanding the tax implications of your specific circumstances in Taiwan. This ensures compliance with tax regulations while maximizing the benefits of Taiwan’s tax incentives. Understanding the different types of tax residency helps individuals and businesses plan their financial activities in line with the country’s tax laws, minimizing liabilities and ensuring smooth business operations in this vibrant, growing country.
FAQs
Can non-residents be subject to Taiwan income tax?
Non-residents may be subject to Taiwan income tax on salaries, wages, and other employment income earned in Taiwan. They may also be taxed on income from businesses conducted in Taiwan or real property located there.
Can I apply for a Gold Card to become a Taiwan tax resident?
The Taiwan Gold Card program provides qualified professionals with a fast track to residency and tax residency in Taiwan. Gold Card holders benefit from tax incentives, including a lower tax rate on Taiwan-sourced income, which is advantageous for high-earning expats.
Do I need a Certificate of Residence?
A Certificate of Residence, issued by the local district or household registration office, is necessary for individuals to confirm their residency status in Taiwan for tax purposes and must be presented to the tax authority.
Who qualifies as a non-resident for tax purposes in Taiwan?
Non-residents are individuals staying in Taiwan for 182 days or less within a tax year. Those staying 91 to 182 days must declare income from Taiwanese sources and are subject to a withholding rate, with foreign remuneration taxed at 18%. For stays of 90 days or less, income tax is withheld at the source, and filing a tax return is generally not required unless specified.
Are non-residents eligible for tax deductions and exemptions in Taiwan?
No, Taiwan’s deductions and exemptions, such as the NTD 97,000 personal exemption and standard or itemized deductions, apply only to residents. However, non-residents may benefit from reduced tax rates under Taiwan’s double taxation agreements (DTAs) with certain countries.
