When finding a business address and rental in Taiwan, it's crucial to understand the contractual obligations. This article clarifies common questions faced by foreign clients regarding rental agreements in Taiwan, specifically for business purposes. Here, we'll address unfamiliar terms, language barriers, and key tenant responsibilities.
Key Takeaways
Tenant Responsibilities: As a tenant using the property for business, you're responsible for a 10% withholding tax and a 2.11% supplementary insurance premium, but only if the monthly rent exceeds NTD 20,000.
Tax Filing: Landlords might advise against declaring rent as a company expense or in individual income tax filings. Be aware, this is not always legal or in your best interest.
Illegal Practices: Landlords cannot include "house tax" payments in the rental agreement. The house tax is the landlord's sole responsibility.
Understanding Withholding Tax and Insurance
The additional 10% withholding tax and 2.11% supplementary insurance premium apply when three conditions are met:
The landlord is an individual.
The tenant uses the property for business purposes.
The monthly rent exceeds NTD 20,000.
Note: Foreign landlords not insured under Taiwan's National Health Insurance are exempt from paying the supplementary insurance premium.
Rent Calculation Examples
Let's consider the landlord asking Mr. Lee to pay an NTD 26,000 monthly rental fee for the property.
A. Tax-Excluded Rent: 26,000÷87.89%(1-10%+2.11%) = 29,582
Withholding tax: NTD 2,958
Supplementary insurance: NTD 624
The rent you will have to pay to the landlord is NTD 33,164 (the landlord receives NTD 26,000 for a monthly rental fee)
B. Tax-Included Rent: 26,000-(26,000 x10%-26,000x2.11%)=22,851
Withholding tax: NTD 2,600
Supplementary insurance: NTD 548.6
The rent you will have to pay to the landlord is NTD 26,000 (the landlord receives NTD 22,851 for a monthly rental fee)
Note: In most cases, landlords prefer the tax-excluded amount.
Important Notes
Rents exactly at NTD 20,000 only incur the supplementary insurance premium.
Landlords may request to avoid declaring rental income. However, this can impact you and might be illegal depending on your income.
Rental Expenses and Your Taxes
If you're not renting for business purposes, landlords might ask you not to declare rent in your individual income tax filing to reduce their tax burden.
Whether declaring impacts your benefits depends on your reported income. Incomes under NTD 423,000 (for the 2023 tax year) are exempt from taxes. Therefore, unless your declared income is above NTD 423,000, declaring rental expenses will not get you tax refunds.
House Tax and Your Responsibilities
The payment period of the house tax is from May 1 to May 31 each year. Please take note of the following important points:
The tax should be paid by the owner of the building.
In the case of joint ownership, the joint owners must designate one person to pay the tax. If not designated, the present occupant or user should pay on behalf of the joint owners.
If the building is rented, the house tax shall be paid by the tenant and deducted from the rent payable to the owner.
🚫Some landlords ask tenants to pay a part of the house tax and put it on the agreement, which is illegal. Please be aware that house tax and land value tax are holding taxes, and the taxpayer is the owner of the house, that is, the landlord. Relevant regulations also stipulate that the landlord should bear all taxes on the leased property. Therefore, according to the regulations, the landlord cannot pass on the land value tax and house tax to the tenant.
Understanding these key points can help you navigate rental agreements for business use in Taiwan. Remember, if you have complex tax situations, consult a professional for personalized advice.
The information in this section is current as of May 2024.
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