What is My Taiwan Tax Residency Status? Does It Affect My Withholding Tax Amount?

The first step to navigating Taiwan tax regulations is understanding your tax resident status. Your tax resident status determines:

• What income you need to report

• How much tax you owe on that income

• How much withholding tax is applied to the income

An individual is considered a tax resident in Taiwan if they meet any of the following criteria:

• Have resident status or a domicile in Taiwan;

• Are in Taiwan for 183 days or more in a given year;

• Have a registered residence (i.e.) household registration, AND

  • Are in Taiwan for 31 or more days in a year, OR

  • Are in Taiwan for under 30 days, but have economic, family or business ties to Taiwan
    

More information: NTB Reference

You are a non-tax-resident if:

• You are in Taiwan for under 183 days a year

  • Note: if you’re in Taiwan for less than 90 days, you’re still a non-tax resident, but some different rules apply.

What is Withholding Tax in Taiwan?

Encountering Taiwan’s withholding tax can be an unwelcome and unpleasant surprise for many foreign taxpayers living in Taiwan for the first time, especially for new arrivals who haven’t obtained full tax resident status. As the name implies, withholding tax is withheld (deducted) from payments made to individuals on many sources of income. Each year when you file your taxes, the withheld amount from the previous tax year will be applied towards what you owe.

Non-tax-residents generally have a much higher withholding tax rate (18-20%) on their income compared to tax residents, who only have up to 5% tax withheld.

Be advised: Often, expats (even residents) working freelance or part-time jobs for Taiwan companies will be frustrated to see this flat 18% deduction from their income on the invoice. The reason for this is that the companies often have no guarantee that you will stay in the country for over 183 days in the year, and therefore are required to withhold the mandated 18%. Rest assured that if you do qualify as a tax resident for the year, the balance will be returned to you in your next tax return (as long as you file).

Copyright © 2023 by Del Sol CPA Services