Taxation in Taiwan

All legal entities, sole proprietorships and partnerships, as well as branches in Taiwan of parent companies from abroad, which have a taxable income above TWD 120,000, must acquit taxes on their profits at a rate of 20% (resident companies on their worldwide income, branches on their Taiwan-source income). Businesses also have to pay the VAT, which is generally set at 5% on all the transactions inside the country.

In this article, our company formation consultants in Taiwan explain the taxation system in Taiwan.

Residence rules in Taiwan

For taxation purposes, a person is considered to be a resident of Taiwan if he or she:

• Lives in Taiwan and resides in the country; or
• Does not live in Taiwan, however, he or she stayed in the country for 183 days or more during a tax year. Our Taiwan company formation advisors can provide more details on this matter. We can also assist you to set up a company in Taiwan.

A person is considered to be a non-resident in case he or she does not meet either if the above-mentioned criteria.

For individuals, Taiwan has a progressive taxation system, according to which persons are taxed between 5% and 40% from their income. Please mind that you will become liable for taxation once you are the holder of a residence permit, as you will most likely work here or have a business activity. 

The tax year in this country is the same as the calendar year.

Any foreign citizen who is a non-resident, however, who works in Taiwan for more than 90 days during a year has to acquit his or her income tax at a rate of 18% (6% on salaries up to 1.5 times the minimum wage), which is deducted by the employer. If you will immigrate to Taiwan, you will become liable for taxation here.  

Taxes on dividends in Taiwan

Until 2017, Taiwan had an imputation system meant to avoid the double taxation of dividends; it was abolished from 1 January 2018. According to this system, when a local company distributes its after-tax profits as dividends to persons who are residents of Taiwan, the distributing entity also allocates the profit-looking company income tax paid on the dividends for the shareholders as an imputed tax credit.

The private shareholders then can utilize the imputed credit to offset their private income tax responsibility.

Therefore, the profit-looking entity income tax acquitted by a domestic company becomes an advance taxation payment for the shareholders. Our Taiwan company registration agents can offer further information on this subject.

According to the partial imputed taxation credit system which has replaced the total imputed taxation credit system, only 50% of the imputed taxation credit could be utilized to offset a resident shareholder’s private income tax responsibility (2015-2017). Since 2018, resident individuals either add dividends to taxable income with an 8.5% credit (capped at TWD 80,000 per household) or pay a separate 28% tax on them.

If you have more questions about the Taiwan income tax, or for help to open a company in Taiwan, please feel free to contact our friendly staff.