For many foreigners in Taiwan, the annual individual income tax filing period from May 1st to May 31st can be daunting. Key concerns often revolve around the amount of tax owed and the possibility of receiving a tax rebate. In this article, we’ll address these concerns through a real case study and provide clear guidance on managing your tax obligations effectively.
Background
A UK citizen spent 100 days in Taiwan in 2023, working remotely for a UK-based company. Currently, he is not in Taiwan and lacks both a Taiwanese credit card and a bank account, making tax payment challenging. Additionally, he seeks to avoid double taxation between the UK and Taiwan, prompting him to seek our assistance.
Does He Have to Pay Tax in Taiwan?
Considering his residency status, having spent 100 days in Taiwan, he falls into the category of residents staying between 90 and 183 days. Income that is not subject to withholding, such as income from overseas for services provided in Taiwan, must be declared and taxed at the prescribed withholding rate before leaving the country. Therefore, the answer is yes, he does have to pay tax in Taiwan.
Understanding Double Taxation Agreements (DTA)
When an individual is considered a resident of both Contracting States under their respective tax laws, the relevant DTA criteria determine their sole resident status. This is crucial for understanding tax liabilities and benefits.
Key Questions and Steps
1. Has the client filed his UK tax return?
Yes, he has. After reviewing his UK tax return, we confirmed that all his income is from salary.
2. Is the client looking to claim the Taiwan tax credit through the Taiwan-UK tax treaty?
Yes.
Required Documents for Tax Exemption in Taiwan
To apply for tax exemption in Taiwan, we need the following documents:
Resident Certificate issued by the UK tax authority
Employment Contract
Declaration of Employer Abroad
Confirmation of Days Worked in Taiwan: Verifying the actual presence and the proportion of employment exercised in Taiwan
Alien Resident Certificate (ARC)
Valid Passport
Claiming Tax Credit in Another Contracting State
Some clients choose to take the tax credit in other countries such as the UK, Denmark, Australia, or the Netherlands. In these cases, clients must first pay tax in Taiwan and then obtain a tax payment certificate to claim the tax credit in their home country. Each country has specific requirements for tax exemption, so consulting with an accountant or the relevant tax office is essential.
Getting a Tax Refund in Taiwan
If eligible for a tax refund in Taiwan, the tax authority will issue a cheque or transfer the refund to your Taiwanese bank account. If you’ve left Taiwan and don’t have a local bank account, you can designate a trusted person to collect the cheque on your behalf. Note that a Power of Attorney (POA) is required, and it must be an original document.
Conclusion
Navigating tax obligations as a foreigner in Taiwan can be complex, but with the right guidance, it becomes manageable. At Delsol CPA & Associates, we specialize in assisting expats with their tax issues, ensuring compliance while maximizing benefits. Contact us today to learn how we can help you with your tax needs in Taiwan.
Copyright © 2024 by Del Sol CPA Services
Comments