A Guide to Taiwan’s Taxation System

Date published: 2020-11-26   — by Celestine Loh

Everything you need to know about how Taiwan’s taxation system works

taiwan skyline

Taiwan’s taxation system makes processes transparent and smooth with revised taxation laws to stay afloat with the global competitive economy.

Essentially, Taiwan is a booming economy with a thriving background and a highly capable government body. Taiwan’s economic policies have proven to be successful, shown by the 2020 economic growth the country has recently reported despite the looming fate of Covid-19. 

Taiwan’s Taxation System

In all, Taiwan’s taxation system is no less inferior, having revised taxation laws to stay afloat with the global competitive economy. Its taxation system complies with the Taxpayer Rights Protection Act and the Administrative Procedure Law, making taxation processes between the government and its people transparent and smooth. 

To date, the Ministry of Finance oversees the handling of all tax-related matters. With its immediate branch being the National Taxation Bureau of Taipei. Additionally, Taiwan has signed over 30 treaties with various countries to eliminate double taxation for cross-border transactions. Promoting the country as a favourable international business hub. 

To start, the taxation year follows the calendar year, 1st January to 31st December. However, companies can apply for special permission to follow a different period of 12 months. 

Generally, business taxes are imposed through two systems. The VAT system and the special BT system, also known as the GBRT (gross business receipts tax). The BT system is applicable to all sales of goods, services and imports. The VAT system is applicable to an input tax credit or a refund for tax levels in which the tax paid exceeds the tax received. 

Additionally, for individual taxation, a person is considered a Taiwan resident if they are residing in Taiwan for 183 days or more within a calendar year. Alternatively, if a person is domiciled in Taiwan and resides habitually in Taiwan for 31 days or more, he/she is also considered a resident. Taiwan’s personal income tax is applicable for all Taiwan-sourced income. This is regardless of whether you are a resident of Taiwan. 

Personal Income Tax:

Level of Income (in Taiwan Dollars, TWD)

Tax Rate

Up to 540,000

5%

From 540,001 to 1,210,000

12%

From 1,210,001 to 2,420,000

20% 

From 2,420,001 to 4,530,000

30% 

Above 4,530,000

40%

 

Corporate Income Tax: 

Level of Income (in Taiwan Dollars, TWD)

Tax Rate

Up to 120,000

0%

Above 120,000

20%

Alternative Minimum Tax

12% (applicable for companies with a turnover of over 500,000)

Surcharge Chargeable on Undistributed Profits

5% 

In a nutshell, this is how Taiwan’s taxation system works. Now you can get yourself set up to do business in this ‘beautiful island’. 

This article does not constitute legal advice.

The opinions expressed in the column above represent the author’s own.

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READ MORE: A Guide to Singapore’s Taxation System

FURTHER READING: Guide to Cayman Island’s Taxation System

Tags: Corporate Tax | legal | personal income tax | taiwan | taxation system

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