In general, any Taiwan-derived income, salary or otherwise, needs to be reported in your annual tax return. It’s important to note that as a foreigner, any foreign-sourced income that is earned for services rendered in Taiwan needs to be reported as part of your annual taxable income.
There are ten general categories of income classified by the Taiwan tax code:
Corporate dividends and profit distribution
Professional practitioner income
Salaries and wages
Interest
Rentals and royalties
Self-employment income from agriculture, fishing, forestry, mining, etc.
Gains from property transactions
Prizes or winnings from games or lotteries
Severance and retirement payments
“Other”
For the purposes of this article, we’ll focus primarily on tax related to Salaries and wages. If you have questions or concerns about other types of tax, please don’t hesitate to contact us.
For non-resident taxpayers (under 90 days)
Income from a Taiwan company will be subject to 18% withholding tax
Income from a foreign enterprise will be exempt (as long as the payment is not drawn from a Taiwan company).
For non-resident taxpayers (between 91 and 183 days)
Income from Taiwan OR foreign enterprises is subject to a flat 18% withholding tax.
For tax residents, Taiwan uses a progressive tax structure. Consult the following table to determine your taxable income (all amounts are in Taiwan Dollars):
Tax Rate | Income bracket | Progressive Difference |
40% | $4,720,001 or more | $864,000 |
30% | $2,520,001 to 4,720,000 | $392,000 |
20% | $1,260,001 to 2,520,000 | $140,000 |
12% | $560,001 to 1,260,000 | $39,200 |
5% | $0 to 560,000 | $0 |
Note: The information in this section is current as of March 2023. Please be aware that the rates and deductions for each bracket can vary from year to year. Always check the official Ministry of Finance website or consult a licensed tax professional for accurate information.
Each “chunk” of your annual income is taxed at a progressively higher rate. A fixed sum is also deducted from each “chunk” of taxable income above the first bracket.
For example:
if you earn TWD 1,200,000 in a year, the first 560,000 will be taxed at 5%. The remaining 640,000 will be taxed at 12%, minus the progressive difference (39,200).
Your total taxable income will be calculated as follows:
First bracket: 560,000 * 5% = 28,000
Second bracket: 640,000 * 12% = 76,800 ( - 39,200 progressive difference) = 37,600
Gross taxable income: 28,000 + 37,600 = 65,600
Note on Benefits and reimbursements: cash allowances, remuneration for benefits and other similar payments are considered taxable income.
Alternative Minimum / Income Basic Tax
If you have foreign-sourced income, another component of your tax obligations to be aware of is the Income Basic Tax (IBT). IBT is a flat-rate tax of 20% on foreign-sourced income. This applies if you:
Are a tax resident in Taiwan
Have foreign income equal to or more than TWD 1 million
Have basic income exceeding TWD 6.7 million
In short, if you meet these criteria you must calculate how much you owe under the IBT structure:
IBT owed = (Regular income + “add-back income” - TWD 6.7 million) * 20%
“Add-back items” can include income such as insurance benefits, investment returns, and foreign-sourced income.
You are obligated to pay whichever amount is greater (IBT or regular tax rate).
Calculating your AMT/IBT rate correctly can be complex. If you find yourself meeting the criteria mentioned above, we recommend consulting a tax professional to ensure that you are in compliance with tax regulations while also taking advantage of all possible exemptions and deductions that you are eligible for.
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