Setting up a company in Taiwan is relatively easy, and the region has plenty of resources to support your growth. It’s even one of the regions worldwide that have a generally favorable taxation system. But every company in the area has to comply with the policies of the Taiwan government, especially regulations relating to taxation. As a result, you need to learn about taxation legislation in Taiwan to ensure that your company stays compliant with government laws. This piece will reveal essential details about Taiwan Corporate Income Tax.
What is Taiwan Corporate Income Tax?
Companies based in Taiwan’s jurisdiction are expected to pay corporate income tax. Failure to pay this income tax will result in heavy penalties. The chargeable income for Taiwanese companies depends on whether the business is a resident or non-resident company.
A resident company is taxed based on its net income. The net income for a company is the gross annual income after deducting costs, losses, taxes, and expenses. All offshore and onshore income for resident companies are taxable. However, certain items will not be taxed. On the other hand, a non-resident company is usually taxed based on income earned in Taiwan. According to Article 8 of the Income Tax Act, a specific income category is classified as earned in Taiwan. For instance, any fee for services rendered outside Taiwan is exempt from the corporate income tax assessment. However, the non-resident company has to provide the necessary evidence.
The following describe how corporate income tax is calculated;
- Inventory Valuation: The inventory of the company must be valued at its cost. If the value of the inventory is more than the net realizable value, then it must be calculated using revaluation the revaluation basis.
- Capital Gains Tax: Current-year income received from gains on fixed assets are taxable. However, gains made on sale of land under the old real estate tax regime are exempt from this tax.
- Dividend Tax: Dividends received from resident invested companies are not taxable. However, dividends from foreign subsidiaries are taxable.
- Foreign Income: Taiwan uses a worldwide taxation system. Any income received from the foreign investment of a Taiwan company is not taxed until it is deferred back to the country.
- Royalties and technical services: Non-resident companies who earned royalties from licensing patents registered in Taiwan and overseas, Taiwanese trademarks, and software copyright registered to a Taiwanese company may be exempt from taxation. However, you’ll need to apply for approval from tax authorities and the Industrial Development Bureau.
Compliance for Corporations
The following are compliance for corporations;
Tax Year
The tax year for companies in Taiwan is the calendar year, i.e January – December. If your company wishes to use another calendar year, they would need to seek approval for such actions.
Consolidated Returns
The Financial Holding Law states that financial holding companies that hold at least 90% of outstanding issued shares for at least 12 months in a tax year are expected to file for consolidated returns.
Filing and Payment
Eligible calendar year companies are expected to pay income tax of about 50% of the preceding year’s tax liability for its provisional income tax. Based on the examination by a certified public accountant, the company may opt to allow government authorities to charge their provisional tax on the operating income for the first six months of the present tax year. The final return must be filed before May 31 of the next fiscal year, and it must include payments for taxes owed. If your company utilizes a different fiscal year from the calendar year, then you must file your returns in the ninth month of the fiscal year and five months after fiscal year. Finally, the company must attach a report of the retained earnings to their return.
Penalties
Any company that fails to file its return before the deadline will have to pay a penalty. The value of the late filing penalty is fixed at 10% of the total tax amount, and is capped at NTD 30,000. However, this amount could be increased to 20% of the total tax amount and capped at NTD 90,000 if the company fails to file the tax return after receiving a reminder from the tax office. This late payment penalty is fixed at 1% the tax amount every three days, but it is capped at 10%.
The late payment penalty will begin a month after the due date. However, tax authorities may suspend business activities of the company till the payment of all owed amounts. If your company under-reports income, they would be subject to a penalty of twice the unpaid tax amount.
Rulings
A Taiwan-based company may apply to the tax authorities for confirm the amount that is due or deal with tax issues. However, you need to keep in mind that the Ministry of Finance will publish a list of tax rulings.
How Premia TNC Can Help
Taiwan taxes are an essential part of every company. However, it can be difficult for every company to successfully file its taxes while also monitoring their business’s activities. That’s why you need us to handle it for you. There are numerous benefits of letting Premia TNC handle your taxes.
To start with, we are an expert business consultancy service. As a result, we have several qualified professionals who can help you handle your corporate income tax calculations and filing. We’ll do our best to make sure that you can focus on other business activities. Regardless of the type of business you engage in, we will tailor our solutions to suit you.
FAQS
Is Taiwan a tax haven?
Yes, Taiwan is referred to as the Switzerland of Asia. This means that it’s one of the places with favourable tax in the country. Companies that are setup in Taiwan come here because of its favourable tax rate.
How is Taiwan Tax Calculated?
A Taiwan company is taxed based on its net income. The net income for a company is the gross annual income after deducting costs, losses, taxes, and expenses.
