Paying Taxes are always a pain in the neck for anyone. Paying taxes as a foreigner can even be more daunting since you have all these questions and rules you may not be familiar with. Here are some information about paying your taxes as a foreigner working an average white-collar job in Taiwan.
In Taiwan, the time period to file your taxes is between May 1st to May 31st. Tax payments are due by June 3rd, after which there will be penalties for late payments.
When are you eligible to pay taxes?
You become a Taiwan tax resident if you stay in Taiwan longer than 183 days. If you worked in Taiwan and stayed more than 90 days, you are also required to be taxed on your income. If you stay 90–183 days you need to pay the fixed rate of 18%. If you stay less than 90 days in Taiwan, in general you do not have to file taxes, and VAT or sales taxes are reimbursable.
The 2021 tax rates are as follows (source: Taiwan Ministry of Finance):
You can also use the Ministry of Finance’s Alien Individual Income Tax Calculator so you won’t need to calculate on your own!
Income basic tax (IBT)
In addition to regular income tax calculations under the Income Tax Act, Taiwan also imposes IBT, at a flat rate of 20%, on individuals who are tax residents in Taiwan (including expatriates who stay in Taiwan for 183 days or more in a tax year). Foreign-sourced income is included in the calculation of IBT if the following criteria are met:
- The individual is a tax resident of Taiwan.
- Foreign-sourced income is equal to or more than TWD 1 million with basic income exceeding TWD 6.7 million.
Under the IBT Act, a taxpayer must calculate the amount of IBT due on income subject to IBT after adding back certain items and compare the result with the regular income tax payable. If the IBT payable is greater than the regular income tax payable, the taxpayer has to calculate and pay IBT based on the following formula:
- Income subject to IBT = Regular taxable income + add-back items
- IBT = (Income subject to IBT — TWD 6.7 million) x 20%
The add-back items include qualified insurance benefits, income derived from transaction of beneficiary certificates of privately-placed securities investment trust funds, non-cash charitable donations, and foreign-sourced income totalling TWD 1 million or more.
*Note that although the inclusion of foreign-sourced income increases the IBT burden, any foreign taxes paid on foreign-sourced income may be credited against IBT payable, with certain limitations.
Filing of Taxes:
You can file online or in person. You can file in person at your local tax office. You can also pay your taxes in cash, card, bank transfer, ATM, by check, or even at a convenience store. Tax refunds (if applicable), will be paid to you by check or direct deposit. However, it may take a couple of months or so for you to receive your refund.
If you want to know more on the taxation process, please see the links below:
Taiwan Ministry of Finance
Guide to Income Tax Filing FAQ for Foreigners in Taiwan