Taiwan Individual Tax Guide

Taiwan

Taipei

EY

Taipei World Trade Center

International Trade Building

9th Floor 333, Keelung Road, Sec. 1 Taipei Taiwan 110

Executive contact

Heidi Liu

Immigration contact

+886 (2) 2757-8888, Ext. 88858 Fax: +886 (2) 2729-4176 Email: heidi.liu@tw.ey.com

Heidi Liu +886 (2) 2757-8888, Ext. 88858 Fax: +886 (2) 2729-4176 Email: heidi.liu@tw.ey.com

Private Client Services contact

Michael Lin

A. Income tax

+886 (2) 2757-8888, Ext. 88876 Fax: +886 (2) 2729-4176 Email: michael.lin@tw.ey.com

Who is liable. Resident and nonresident individuals are subject to consolidated (personal) income tax on income earned from Taiwan sources. Taiwan-source income includes all employment income derived from services performed in Taiwan, regardless of where the compensation is paid.

Individuals are considered residents of Taiwan if they are domiciled and reside in Taiwan or, if not domiciled, if they have resided in Taiwan for at least 183 days in a tax year. If an expatriate enters and departs Taiwan several times within a calendar year, the resi dent days are accumulated.

Income subject to tax. Individuals in Taiwan are subject to Taiwan consolidated income tax. However, the amount of income subject to tax and the applicable rates depend on the length of stay as well as on the individual’s residence status.

An individual’s consolidated gross income is the total of the fol lowing categories of Taiwan-source income:

• Business profits, including dividends, profits distributed by cooperatives and partnerships, profits from a sole proprietor ship and profits from sporadic business transactions

• Income from a professional practice

• Salaries, wages, allowances, stipends, annuities, cash awards, bonuses, pensions, subsidies and premiums paid by an employer for group life insurance policies that offer payment on maturity, but not including the voluntary pension contribution and the voluntary annuity insurance premiums based on the Labor Pension Act, which are up to 6% of the individual’s monthly wage or salary

• Interest income

• Rental income and royalties

• Self-employment income from farming, fishing, animal hus bandry, forestry and mining

• Gains from sales of rights and properties other than land

• Cash or payments in kind received as winnings in competitions or lotteries

• Retirement pay, severance pay, non-insurance old-age pension payments and insurance payments made under annuity insurance based on the Labor Pension Act received by the individual

• Other income

Taxable income of residents is computed by deducting from con solidated income certain allowable exemptions and deductions (see Exemptions and deductions). The income of a taxpayer’s dependents is also included in the taxpayer’s taxable income.

Employment income. In general, a nonresident staying in Taiwan for no longer than 90 days during a calendar year is not subject to Taiwan income tax on salary received from an offshore employer, provided the payment is not charged back to any Taiwan entity; otherwise, the income is subject to an 18% withholding tax on salary received from a resident employer.

Nonresidents are subject to Taiwan income tax on Taiwan-source employment income, regardless of where the income is paid, at a fixed rate of 18% on salary income.

For foreigners with foreign employers who stay in Taiwan less than 300 days in a calendar year, salary not borne by a Taiwan entity may be allocated based on the number of days present in Taiwan to determine the amount taxable in Taiwan.

The following benefits are exempt from consolidated income tax for all expatriates:

• Traveling expenses paid for expatriates on home leaves

• Rental payments for a house leased by the employer for expatriates

• Durable furniture purchased by a Taiwan-registered entity

Individuals who qualify as “Foreign Professionals” (see Foreign Professionals) are also exempt from consolidated income tax on the following assignment-related benefits:

• Moving expenses paid for expatriates and their families when they report for duty and at the time of repatriation

• Water, electricity, gas, telephone and cleaning services for expatriates’ houses leased by Taiwan entities

• Automobiles leased by employers for expatriates

Investment income. Dividend and interest income are subject to consolidated income tax and are taxed together with other income at the rates set forth in Rates. However, interest income from postal savings accounts is excluded from gross income. In addition, the following types of interest income are subject to withholding tax and are not included in gross income:

• Interest income from short-term commercial paper is subject to a 10% withholding tax for residents and 15% for nonresidents.

• Interest income from beneficiary securities or asset-based securities issued according to the Financial Asset Securitization Act

and the Real Estate Securitization Act is subject to a 10% with holding tax for residents and 15% for nonresidents.

• Interest income from public debts, corporate bonds or financial bonds is subject to a 10% withholding tax for residents and 15% for nonresidents.

The rate of withholding tax on other interest for nonresidents is 20%. For dividends, the rate of withholding tax is 0% for resi dents and 21% for nonresidents.

Rental income and royalties are included in taxable income. For rental income, the rate of withholding tax is 10% for residents and 20% for nonresidents. For royalties, the rate of withholding tax is 10% for residents and 20% for nonresidents.

Other income. The taxable amount of a lump-sum severance pay ment received in 2021 is calculated in accordance with the fol lowing rules:

• If the total amount received in one lump sum is less than TWD180,000 multiplied by the number of service years at the time of separation, the entire amount is tax-exempt.

• If the total amount received in one lump sum is more than TWD180,000 multiplied by the number of service years at the time of separation, half of the excess over TWD180,000 but less than TWD362,000 multiplied by the number of service years at the time of separation is taxable income.

• The excess over TWD362,000 multiplied by the number of service years at the time of separation is taxable income.

• If the individual spent only certain years rendering service in Taiwan among the total service years with an employer, the severance payment may be allocated based on the ratio of the number of years in Taiwan to the total service years in order to arrive at the amount subject to tax in Taiwan.

For severance payments received in installments, the taxable income amount is the total of all payments received in 2021 in excess of the TWD781,000 annual deduction.

The exemption amount for the severance payment may be adjust ed if the accumulated consumer price index has increased by at least 3% over the last adjustment.

Income tax paid by an employer on behalf of its expatriates should be treated as the expatriates’ salary income if the employment contract or other related document states that such tax pay ments constitute part of the expatriate’s compensation package. If the income tax paid by an employer does not constitute part of the expatriate’s compensation package, it is considered a gift to the expatriate and is treated as the expatriate’s other income.

Foreign Professionals. The decree “Preferential Tax Treatment for Foreign Professionals” provides for the preferential taxability of certain assignment benefits paid in accordance with an assign ment agreement for a foreign national who qualifies as a “Foreign Professional.”

To qualify as a “Foreign Professional” and accordingly enjoy cer tain preferential tax treatment for assignment-related benefits, an individual must satisfy the following conditions:

• He or she must be physically present in Taiwan for 183 days or more during a calendar year.

• He or she must not hold dual nationality of Taiwan and another jurisdiction.

• His or her annual taxable salary income must exceed TWD1,200,000.

• The individual must have obtained a working permit from the authority in Taiwan in accordance with Article 46 of the Employment Service Act.

Foreign special professionals. Effective from 8 February 2018, the Act for Recruitment and Employment of Foreign Professionals (the Act) provides a tax incentive for individuals who have obtained the foreign special professional work permit or Employment Gold Card and are approved for residing in Taiwan as a result of employment for the first time (see Section H).

If a foreign special professional meets both of the following requirements, 50% of the annual salary income in excess of TWD3 million is exempt from Taiwan income tax and non-Taiwan source income is excluded from the calculation of the individual Alternative Minimum Tax (AMT; see Alternative Minimum Tax):

• The individual physically resides in Taiwan for at least 183 days during the tax year.

• The individual receives Taiwan taxable salary income in excess of TWD3 million during the tax year.

The above tax incentive applies for three tax years. If a foreign special professional does not meet both requirements for three consecutive tax years, the tax benefit can be sequentially deferred to a tax year in which both requirements are met. However, the tax benefit must be claimed within a five-year period from the first tax year in which the requirements are first met.

Under the June 2021 amendment of the Act, starting from the first tax year that the foreign special professional meets both requirements, the above tax incentive can be applied for five consecutive years. However, if the foreign special professional does not meet both requirements in any one of the tax years dur ing the five-year span, the tax incentive for that particular year is forfeited and cannot be deferred. At the time of writing, the effective date of the amendment had not yet been determined.

Taxation of share-based compensation. Based on tax decrees issued by the Ministry of Finance, on the exercise of a stock option, the difference between the fair market value of the shares at exercise and the exercise price (that is, the option spread) is taxed as other income.

Taiwan employers have a reporting requirement, but not a with holding requirement, with respect to the option spread. Taiwan employers must issue non-withholding statements to employees who exercise stock options.

For foreign employees who are sent to Taiwan for assignment, the option spread can be prorated based on the ratio of the number of days the employee is physically present in Taiwan during the peri od from the date of grant through the date of vesting to the total days in such period. However, based on the tax authority’s current

practice, for Taiwan employees on assignment to foreign jurisdic tions if the individuals remain as employees of the Taiwan entity (that is, the Taiwan entity continues the enrollment of National Health Insurance and Labor Insurance for the relevant employees), the proration of stock option income may not be allowed.

The Ministry of Finance also issued decrees indicating that the income (discount) derived from employee stock purchase plans, income derived from stock appreciation rights granted by foreign companies, and restricted stock issued by Taiwanese companies should be treated as other income.

For other types of equity income, no specific Taiwan income tax laws or regulations addressing Taiwan taxation currently exist.

Under Article 19-1 of the Statute for Industrial Innovation, effec tive from 1 January 2016 to 31 December 2029, employees who receive share-based compensation issued by Taiwanese compa nies may choose to defer taxation on the compensation until the date on which the shares are transferred. The amount deferred is based on the fair market value of the shares received and is lim ited to TWD5 million per year. If the employee continues to hold the shares and work for the same employer for two years, the taxable income is based on the fair market value on the date the shares were received or on the date the shares were transferred, whichever is lower.

Capital gains and losses

Gains from securities transactions. Effective from 1 January 2016, income tax on capital gains derived from securities transactions is suspended and losses on such transactions are not deductible.

A securities transaction tax is imposed on proceeds from sales of shares at a rate of 0.3%.

Income tax on income derived from transactions in futures is suspended, and losses on such transactions are not deductible.

Gain from sales of real properties. Effective from 1 January 2016, capital gains from sales of real properties are subject to different tax schemes, depending on the property acquisition date and the length of the holding period.

For real properties acquired before 2014 or acquired on or after 2 January 2014 and held for more than two years, gains from the sale of houses and apartments are taxed together with other income at the rates described in Rates.

For real properties acquired on or after 1 January 2016, the new capital gain tax scheme applies. For resident taxpayers, the final tax rate on the capital gains ranges from 15% to 45%, depending on the length of holding period. For a resident taxpayer who sold his or her home used for the purpose of self-dwelling for more than six years, the capital gains up to TWD4 million are exempt from tax, and the portion exceeding TWD4 million is subject to a 10% tax rate. For nonresident taxpayers, the tax rate is 35% for property held for more than two years and 45% for property held for not more than two years.

Gain from sales of other properties. Capital gains from sales of other properties are taxed together with other income at the rates described in Rates.

Losses. Losses from disposals of properties are deductible only to the extent of gains from the disposals of properties in the same tax year. Net losses may be carried forward for three years.

Exemptions and deductions. A nonresident taxpayer is not entitled to personal exemptions or deductions. Income tax is computed on gross income. The exemptions and deductions described below apply to residents only.

A resident may deduct the personal exemption, and either the standard deduction or itemized deductions, whichever is higher, as well as special deductions, from consolidated gross income to arrive at taxable income.

Personal exemptions. For 2021, a taxpayer is entitled to personal exemptions of TWD88,000 each for the taxpayer, his or her spouse, and each dependent. If the taxpayer, or if married, either the taxpayer or taxpayer’s spouse, is more than 70 years of age, the exemption amount is increased to TWD132,000 per person. The exemption amount is also increased to TWD132,000 for a lineal ascendant dependent who is older than 70 years of age.

The personal exemption amount may be adjusted if the accumu lated consumer price index has risen at least 3% over the last adjustment.

Itemized deductions. The following itemized deductions are avail able:

• The following contributions and donations:

— Up to 20% of gross consolidated income for a taxpayer, his or her spouse, and qualified dependents if given to officially registered educational, cultural, public welfare or charitable organizations

— Up to 100% of gross consolidated income for a taxpayer, his or her spouse, and qualified dependents if given for national defense or troop support or if contributed directly to govern ment agencies

—

Up to 20% of gross consolidated income for a taxpayer, his or her spouse, and qualified dependents, if given to political parties, political associations and persons planning to participate in a campaign and subject to limitation provided by the Political Donations Act

• Insurance premiums, up to TWD24,000 per person per year (except for the National Health Insurance, which is 100% de ductible), for life insurance, medical insurance, labor insurance, national pension, and government employee insur ance for a taxpayer, his or her spouse, and lineal dependents.

• Unreimbursed medical and maternity expenses incurred by a taxpayer, his or her spouse, and dependents living with the taxpayer, provided the expenses are incurred in the following recognized institutions:

— Government hospitals.

— Hospitals that have entered into contracts with the govern ment under the national health insurance program.

— Hospitals maintaining complete and accurate accounting records recognized by the Ministry of Finance. Expenses incurred outside of Taiwan may be allowed as deductions only if such expenses are incurred in a foreign public hospi tal, university hospital, or private foundation hospital. Claims for deductions of expenses incurred in foreign hospitals must be supported by evidence of the officially registered status of the hospitals.

• Uncompensated casualty losses (uninsured portion of losses caused by a natural disaster of force majeure). To claim this deduction, the loss must be appraised by an investigator appointed by the tax authorities within 30 days after the disaster occurred.

• Rental expenses paid by the taxpayer, taxpayer’s spouse and/or lineal dependents for housing located in Taiwan, up to TWD120,000 per household. To qualify for the deduction, the property must be used for residential purposes and not for busi ness purposes. However, the deduction will be disallowed for taxpayers who claim interest payments on loans to purchase owner-occupied dwellings. Taxpayers must provide supporting documents.

• Mortgage interest paid on loans from financial institutions for the purchase of an owner-occupied dwelling (limited to one), up to TWD300,000, after subtracting the special deduction for savings and investments claimed for the same tax year. The dwelling must be a principal residence located in Taiwan.

Standard deduction. For 2021, a taxpayer may claim a standard deduction instead of the itemized deductions listed above. The standard deduction is TWD120,000 for a single taxpayer and TWD240,000 for a married taxpayer filing jointly.

The standard deduction amount may be adjusted if the accumulated consumer price index has increased by at least 3% over the last adjustment.

Special deductions. The following special deductions are available:

• Special deduction for salary or wages: The lesser of either total salaries and wages earned or TWD200,000 is deductible by each salary and wage earner included in the same return. Effective from 1 January 2019, each salary and wage earner may choose to deduct the following expenses from salary income if the sum of the deductible expenses exceeds the TWD200,000 special deduction for salary or wages:

— Expenses incurred for purchasing, leasing, cleaning or maintenance of clothes or costumes that are specifically for professional use

— Expenses incurred for attending courses or training that are specifically work-related

— Expenses incurred for purchasing books, journals or tools that are specifically work-related

The deductible amount for each type of the above expenses is limited to 3% of the individual’s annual salary and wage income.

• Special deduction for savings and investments: Up to TWD270,000 for each family unit is deductible for income realized from a

savings trust fund and for interest income realized on deposits with financial institutions, excluding interest income from postal savings accounts (which is not taxable), from short-term commercial paper (which is subject to a final 10% withholding tax) and from beneficiary securities or asset-based securities issued according to the Financial Asset Securitization Act and the Real Estate Securitization Act (which is subject to a final 10% withholding tax).

• Special deduction for individuals with disabilities: Up to TWD200,000 is deductible for an individual meeting the defi nition of a person with disabilities or diagnosed as having mental illness under the Mental Health Law.

• Special deduction for losses from property transactions: Losses derived from disposals of property are deductible to the extent of gains derived from disposals of property in the same tax year. Any remaining losses may be carried forward for three years.

• Special deduction for tuition fees paid for post-secondary edu cation: Up to TWD25,000 of tuition fees paid for each depen dent child less any reimbursement received for post-secondary education is deductible.

• Special deduction for preschool children: TWD120,000 for each dependent child who is five years of age or younger.

• Special deduction for long-term care: TWD120,000 for each individual, including the taxpayer, spouse and dependents, who is deemed disabled by the Ministry of Health and Welfare.

The deduction for preschool children and the deduction for longterm care are not allowed if the taxpayer meets one of the following conditions:

• The taxpayer’s annual net taxable income after subtracting the deduction is subject to a progressive tax rate of 20% or higher tax rates.

• The taxpayer elects to separately apply the flat 28% tax rate on dividend income (see Rates).

• The taxpayer’s minimum income under the Alternative Minimum Tax Law exceeds the TWD6,700,000 deduction (see Alternative Minimum Tax).

The amounts of the special deductions for salary or wages and for persons with disabilities may be adjusted if the accumulated consumer price index has increased by at least 3% over the last adjustment.

Basic living expenses. Under the Taxpayer Rights Protection Act, which took effect on 28 December 2017, the expenses that taxpayers pay for maintaining their basic living in accordance with human dignity for themselves and their dependents is not taxed.

Effective from the 2017 tax year, the basic living expense is cal culated in accordance with the amount announced by the Ministry of Finance multiplied by the number of persons consist ing of the taxpayer, spouse and dependents. If the sum of per sonal exemptions and deductions is less than the basic living expenses, the taxpayer may deduct the difference from the gross consolidated income. When comparing the sum of exemptions

and deductions with basic living expenses, the special deduction for salary or wages and the special deduction for loses from property transactions should be excluded.

The Ministry of Finance should announce the amount of basic living expenses before the end of December each year. For the 2020 tax year, the basic living expense was TWD182,000 per person.

Rates. The progressive consolidated income tax rates for residents for 2021 are set forth in the following table.

Taxable income Tax rate Tax due Cumulative tax due TWD % TWD TWD

First 540,000 5 27,000 27,000

Next 670,000 12 80,400 107,400

Next 1,210,000 20 242,000 349,400

Next 2,110,000 30 633,000 982,400

Above 4,530,000 40 —

The income tax rate brackets may be adjusted if the accumulated consumer price index has risen at least 3% over the previous rate adjustment.

Effective from 1 January 2018, taxpayers can choose to calculate the tax liability for dividends by the more beneficial of the fol lowing methods:

• Combine dividend income with gross consolidated income and apply progressive tax rates as set forth in Rates. The total tax payable can be offset by a tax credit at 8.5% of the dividend income with a limitation of TWD80,000 per year.

• Separately apply a flat tax rate of 28% on the dividend income.

The flat tax rate for nonresident individuals varies according to the type of income. The following are the flat tax rates:

• Salary income and severance and retirement payments: 18%

• Interest income other than those specifically identified in the tax regulation (see Investment income): 20%

• Dividends: 21%

• Commissions, rentals, royalties, gains from winnings in compe titions or lotteries, income from independent professional prac tice and other income: 20%

Alternative Minimum Tax. The AMT Law applies to both profitseeking enter prises and individuals.

Under the AMT Law, for residents, the following items are added back to net income as calculated under the general income tax system to determine minimum income (MI) subject to AMT:

• Foreign-source income, if such income for each filing house hold unit exceeds TWD1 million in a tax year

• Insurance payments from life insurance policies or annuities contracted on or after 1 January 2006 in which the beneficiary and the purchaser are not the same person (TWD33,300,000 exemption may be claimed)

• Capital gains derived from transactions of the following securi ties:

— Shares issued by companies not listed on the stock exchange or traded on over-the-counter markets

— Beneficiary certificates of privately placed securities invest ment trust funds

• Deductions claimed for noncash charitable contributions

• Other items published by the Ministry of Finance

The AMT rate for individuals is 20%. A TWD6,700,000 deduc tion may be claimed from the minimum income (MI) by each fil ing household unit to arrive at the minimum taxable income (MTI) subject to AMT.

Under the AMT scheme, individual taxpayers calculate both the tax due under the general income tax rules and the AMT rules, and pay the higher of the two amounts. If foreign-source income has been included in the calculation of the AMT, any foreign tax paid on these amounts may be offset against AMT.

Relief for losses. Except for losses derived from the disposal of properties described in Capital gains and losses, no loss may be carried forward or back.

B. Other taxes

Estate tax. Estate tax is imposed on the estate of a decedent who was a national of Taiwan or who owned property (including mov able property, immovable property, and all other rights and inter ests of monetary value) in Taiwan. If the decedent was a Taiwan national regularly domiciled in Taiwan, tax is levied on all prop erty, wherever located. If the decedent was a foreign national or Taiwan national regularly domiciled outside Taiwan, tax is levied only on property located in Taiwan.

The basis for estate tax is the prevailing value of property at the time of death, less legal exclusions, exemptions and other deductions. Land and buildings are valued at an officially assessed value determined by the relevant government agencies.

In general, an exemption of TWD12 million is allowed for each decedent. The following are other allowable deductions from total taxable property (the first five items are not applicable for for eign nationals and Taiwan nationals regularly domiciled outside Taiwan):

• TWD4,930,000 for the decedent’s surviving spouse

• TWD1,230,000 for each of the decedent’s surviving parents, TWD500,000 for each dependent grandparent, dependent brothers and sisters, and lineal descendants, as well as an additional TWD500,000 for each year that each lineal descendant and dependent brother and sister is younger than 20 years of age

• An additional TWD6,180,000 for each qualified handicapped or mentally disturbed heir

• The value of agricultural land and the products on the land if the heirs continue to farm the land for at least five years after the death of the decedent

• 80%, 60%, 40% or 20% of the value of any estate property that was inherited by the decedent within 6, 7, 8 or 9 years before his or her death, respectively

• Taxes and penalties owed, and debts incurred, by the decedent before his or her death

• TWD1,230,000 for funeral expenses

• Direct and necessary expenses to execute the decedent’s will and administer the estate

Certain property is not subject to estate tax. The following exclu sions are among the more common:

• Proceeds from life insurance policies with designated benefi ciaries

• Furniture, household equipment and other daily necessities, up to TWD890,000

• Patents and literary or artistic works created by the decedent

• Donations to government agencies and enterprises and to pri vately incorporated educational, cultural, social welfare, charitable and religious organizations

• Tools used in the decedent’s profession, up to TWD500,000

• Property inherited by the decedent within five years before death that was subject to tax

• Land reserved for public facilities

Net taxable estate Tax rate Tax due Cumulative tax due TWD % TWD TWD

First 50,000,000 10 5,000,000 5,000,000

Next 50,000,000 15 7,500,000 12,500,000

Above 100,000,000 20 —

The following items may be adjusted if the accumulated con sumer price index has increased by at least 10% over the last adjustment:

• Exemptions

• Estate tax rate brackets

• Exclusion amount of furniture, household equipment and other daily necessities, and tools used in the decedent’s profession

• Deductions for the surviving spouse, lineal descendants, parents, siblings, and grandparents of the decedent, standard deduction for funeral expenses, and special deductions for handicapped heirs

The executor of an estate, or the heir in the absence of an executor, must file an estate tax return with the local tax bureau generally within six months after the death of the deceased. An extension of three months for the filing may be applied for up front. Payment of tax is due within two months after receipt of a tax assessment notice, and a two-month extension can be applied for if necessary. If the tax due exceeds TWD300,000, a taxpayer may, subject to prior approval, pay it in 18 installments at inter vals of no longer than two months or pay the tax in kind. A tax payer who is not satisfied with an assessment may seek relief through administrative and judicial reviews.

Gift tax. Gift tax is imposed on gifts made by a donor who is a national of Taiwan or who owns property (including movable property, immovable property, and all other rights and interests of monetary value) in Taiwan. If the donor is a Taiwan national regularly domiciled in Taiwan, the tax is levied on any donated property, wherever located. If the donor is a foreign national or Taiwan national regularly domiciled outside Taiwan, tax is levied only on donated property located in Taiwan.

Gifts are valued based on the prevailing value at the time of donation. Land and buildings are valued at officially assessed values determined by government agencies.

An annual exemption of TWD2,200,000 per donor is allowed for taxable gifts. The following items are excluded from total taxable gifts:

• Donations to government agencies and enterprises and to educational, cultural, religious, public welfare and charitable organizations

• Transfers between spouses

• Marriage gifts of up to TWD1 million given by each parent

• Agricultural land given to the donor’s heir, if the heir continuously uses the land for farming for at least five years after the transfer

Net taxable gift Tax rate Tax due Cumulative tax due TWD % TWD TWD

First 25,000,000 10 2,500,000 2,500,000

Next 25,000,000 15 3,750,000 6,250,000

Above 50,000,000 20

The annual exemption amount and gift tax rate brackets may be adjusted if the accumulated consumer price index has increased by at least 10% over the last adjustment.

A donor must file a gift tax return with the local tax bureau within 30 days after making a gift if the aggregate amount of total gifts during the calendar year, including the current gift, exceeds the TWD2,200,000 annual exemption. The local tax bureau must complete the tax assessment within two months after it receives the return. Payment is due within two months after the receipt of a tax assessment notice, and a two-month extension can be applied for if necessary. If the tax due exceeds TWD300,000, a taxpayer may, subject to prior approval, pay the tax in 18 installments at intervals of no more than two months or pay the tax in kind. A taxpayer who is not satisfied with an assessment may seek relief through administrative and judicial reviews.

C. Social security

No social security taxes are levied in Taiwan. However, nominal labor insurance premiums and national health insurance premiums are imposed at the following rates on each person employed by a Taiwan business entity.

Contributions Rate (%)

Labor insurance scheme, on monthly salary of up to TWD45,800; paid by

Employer 8.05 Employee 2.3 National health insurance scheme, on monthly salary of up to TWD182,000; paid by

Employer 4.9011 Employee 1.551

In addition to the above regular premiums, a supplementary pre mium for national health insurance at a rate of 2.11% is payable by the employer and employee if the conditions described below are met.

An employer must pay the supplementary premium for the excess portion if the total monthly salary expenses exceed the monthly insurance salary for all employees.

An employee must pay the supplementary premium for the excess portion if his or her total bonus or incentive payments in a calendar year exceed four times his or her monthly insurance salary.

Income derived from part-time jobs is subject to the supplementary premium if a single payment exceeds the minimum wage publicized by the central labor competent authority.

The following income not derived from employment is subject to the supplementary premium if a single payment is TWD20,000 or more, with cap of TWD10 million:

• Professional income from the performance of services rendered by the practitioner of a profession

Dividend income

Interest income

Rental income

D. Tax filing and payment procedures

The tax year in Taiwan is the calendar year. A taxpayer must file an annual income tax return between 1 May and 31 May following the close of the tax year. No extensions are allowed.

Married couples must file joint tax returns except for the first year of marriage and the year of divorce, when they may choose to file as single or as married. If filing jointly, spouses may choose to separately compute tax on their salary income or their total taxable income, whichever is more beneficial.

The following are the tax filing procedures for aliens, depending on the length of their residence in Taiwan:

• In general, a nonresident staying in Taiwan for 90 days or less is only subject to withholding tax on income received from a Taiwan entity and, accordingly, does not need to file an income tax return. For these individuals, income tax payable is withheld directly by the payer at the time of payment at various tax rates depending on the respective income classification (see Rates). However, capital gains derived from property transactions and other income that is not subject to withholding tax must be declared and any tax due must be paid on the filing of the tax return.

• An individual present in Taiwan for longer than 90 days must file an annual income tax return.

Taxpayers must submit supporting documents issued by their non resident employers stating the amount of foreign-paid compensa tion. The documents must be certified by the tax office that has jurisdiction over the employer or by a certified public accountant.

For taxpayers who file returns after 31 May following the end of the tax year, interest is charged on the net amount of tax payable at a specified interest rate set annually by Taiwan tax authorities.

If an item of income is omitted or if the return is improperly filed, the tax authorities may assess a penalty of up to two times the amount of the additional tax due. If the taxpayer fails to file a tax

return, the tax authorities may assess a penalty of up to three times the tax payable.

E. Tax treaties

Taiwan has entered into comprehensive tax treaties with the fol lowing jurisdictions.

Australia India

Paraguay

Austria Indonesia Poland

Belgium Israel Senegal

Canada Italy Singapore

Czech Republic Japan

Slovak Republic

Denmark Kiribati South Africa

Eswatini Luxembourg Sweden

France Malaysia Switzerland

Gambia Netherlands Thailand Germany New Zealand United Kingdom

Hungary North Macedonia Vietnam

F. Entry visas

Foreign passport holders must have valid visas when they enter Taiwan. However, to meet special needs, the Ministry of Foreign Affairs may grant exemptions from visa requirements to foreign nationals of certain jurisdictions (visa-exempt entry) or allow certain foreign nationals to apply for an eVisa, travel authorization certificate and/or landing visa if certain conditions are met. In addition, other than diplomatic and courtesy visas, two catego ries of visas, which are the visitor visa and the resident visa, are available for foreign nationals to enter the territory of Taiwan.

Visitor visas are issued to those who wish to visit Taiwan for short time periods (for example, for working less than six months, sightseeing, conducting business and other purposes).

Foreign nationals accepting employment in Taiwan must obtain the appropriate visas to enter Taiwan and the necessary employ ment authorization (work permits) to work in Taiwan. In addition, individuals looking for jobs in Taiwan may apply for an employment-seeking visa.

The Workforce Development Agency issues employment autho rizations. The Ministry of Foreign Affairs in Taiwan and consul ates abroad issue the appropriate visas based on employment authorizations. The National Immigration Agency supervises entry, departure and residence of foreign nationals working in Taiwan.

G. Resident visas

In general, resident visas are issued to foreign nationals who obtain employment authorizations issued by the Workforce Development Agency that are valid for longer than six months.

Foreign nationals entering Taiwan with resident visas must report to the National Immigration Agency to secure their residency and apply for Alien Resident Certificates (ARCs) within 15 days counting from the next day after their arrival. The ARC bears the foreign national’s personal information, reason for residence, residential address in Taiwan and the expiration date of the ARC.

Expatriates holding ARCs should report any changes of informa tion on the ARCs to the National Immigration Agency within 15 days after the change occurs.

H. Work permits and self-employment

Work permit for foreign professionals. Foreign nationals who intend to work in Taiwan must apply for employment authoriza tions (work permits). An expatriate’s entry, residence and depar ture are governed by the Ministry of Foreign Affairs and the National Immigration Agency.

An application for employment authorization must be filed by the employer in accordance with the Measures for Regulations on the Permission and Administration of the Employment of Foreign Workers (Employment Rules).

The Employment Rules apply to foreign nationals who wish to work in Taiwan. For most professional foreign expatriates, the three types of job categories are described below.

Type A. The Type A category includes specialized or technical workers.

To qualify as a specialized or technical worker, foreign employees must possess one of the following qualifications:

• A PhD or master’s degree in a related field.

• A bachelor’s degree in a related field with more than two years of work experience in a related field.

• Proof of employment in a related field for more than five years, and during this period, the completion of related training and the receipt of awards or recommendations from employers. Foreign employees must satisfy all three of these requirements.

• Employment with a multinational enterprise for more than one year and an assignment to work in Taiwan from the multina tional enterprise.

An employer must satisfy one of the following conditions to hire foreign specialized or technical workers in the manufacturing industry or the wholesale business:

• Sales volume of TWD10 million for the preceding year or an average of TWD10 million for the preceding three years

• Total import and export volume of USD1 million for the preceding year or an average of USD1 million for the preceding three years

• Total import and export commission revenue of USD400,000 for the preceding year or an average of USD400,000 for the preceding three years

• Company that has been incorporated for less than one year and has paid-in capital of TWD5 million

• Foreign branch that has been established for less than one year and has registered working capital of TWD5 million

• Foreign representative office that has been approved by the government authorities and has been operating in Taiwan

• Research and development center or business operational head quarters that has been approved by the government authorities

Type B. The Type B category includes branch managers for Taiwan branches of foreign companies, representatives for Taiwan representative offices of foreign companies and general managers of companies approved for foreign investment under

either the Statute for Investment by Overseas Chinese or the Statute for Investment by Foreign Nationals.

To qualify as a branch manager, representative or general man ager of a foreign-investment approved company, an employee must be registered with the government authorities and shown on the company registration card. An employer must satisfy one of the following conditions to hire these foreign nationals:

• Sales volume of TWD3 million for the preceding year or an average of TWD3 million for the previous three years

• Total import and export volume of USD500,000 for the preced ing year or an average of USD500,000 for the preceding three years

• Total import and export commission revenue of USD200,000 for the preceding year or an average of USD200,000 for the preceding three years

• Company has been incorporated for less than one year and has paid-in capital of TWD500,000

• Foreign branch has been established for less than one year and has registered working capital of TWD500,000

• Foreign representative office has been approved by the government authorities and has been operating in Taiwan

• Foreign representative office has been approved by the govern ment authorities and has been established for less than one year, in which case no such performance records are needed

For Type A and Type B jobs, employment authorization is based on the employment contract, with a maximum length of three years. Employment extensions can be granted. The wages for foreign employees who undertake these job assignments may not be lower than the amount recorded in the latest survey.

Type G. The Type G category includes contracting foreigners appointed by a foreign legal person to engage in works in order to perform contracts of construction, sale, technical cooperation and other necessities.

If a foreign corporation performing a contract needs to assign an expatriate to Taiwan to fulfill contractual obligations, the expatri ate can apply for a work permit. Normally, the duration of such work permit may not exceed one year, but it is possible to apply for a renewal. The entry visa held by such foreign employee is deemed to be a work permit for up to 30 days. The work permit for the foreign employee must be applied for within 30 days fol lowing the employee’s arrival in Taiwan if the employee wishes to work for more than 30 days. To qualify to file a work permit application for contracting foreigners, the company must be the Taiwanese branch of the contracted foreign entity (agent autho rized by a foreign legal person) or the contracted local entity in Taiwan. If neither is applicable, the contracted foreign entity may authorize a representative agency to file the work permit applica tion on behalf of the company.

Foreign nationals may not be self-employed in Taiwan.

Work permit for foreign special professionals. Effective from 8 February 2018, the Act for Recruitment and Employment of Foreign Professionals introduced a work permit for foreign special professionals with a maximum validity period of five years. To qualify for the foreign special professionals work

permit, foreign employees must satisfy the qualification for a Type A or Type B work permit, have earned an average monthly salary of at least TWD160,000 and have experience working in the designated field of industry. Depending on the field of industry, qualifications other than the income threshold may be considered.

Employment Gold Card. Foreign professionals who satisfy the requirements to obtain a work permit for foreign special profes sionals may also meet the qualification to apply for an Employment Gold Card. This is a four-in-one personal employ ment pass combining work permit, resident visa, ARC and reentry permit. The application may be filed by a foreign special professional who is not already employed by a local employer.

I. China Mainland nationals

China Mainland nationals must apply for a Taiwan entry permit in advance to enter Taiwan. The purpose of the entry and the planned activities must be approved by the competent authority. The two main categories of entry permits are Business and Professional. In most cases, the applicants fall into the Business category. Under the Business category, the following are the three commonly used entry purposes:

• Business meetings

• Training (to be trained)

• Intracompany transfer

J. Family and personal considerations

Family members. Resident visas are granted to the dependents of either a Taiwan citizen or an expatriate who obtains an ARC (see Section G). Copies of the marriage certificate and birth certifi cates, which are legalized by the Taiwan consulate located in the issuing jurisdiction must be provided to obtain resident visas for the spouse and children, respectively. Health certificates or immunization records may be required for dependents’ resident visa applications, depending on the local Taiwan consulate’s policy. The spouse and children may apply for their resident visas and ARCs together with the expatriate.

For dependents over six years old, the ARC application must be accompanied by a health certificate issued within the preceding three months. For dependents six years old or younger, the immu nization record must be provided with the ARC application. However, if both the dependents and expatriate are eligible for visa-exempt entry into Taiwan, the health certificate and immu nization record are not required.

A working spouse does not automatically receive work authoriza tion. If the spouse wishes to file for a work permit, he or she must do so independently. Effective from 28 July 2017, spouses of foreign professionals who hold a dependent ARC are eligible to apply for a Type A or Type B work permit to provide part-time services. The validity period of the spouse work permit may not exceed the validity period of the foreign professional’s work per mit. The spouse must meet the same conditions described in Section G for the corresponding types of work permits. The hourly wages for spouses who undertake these job assignments

may not be lower than TWD200, and the employer is not subject to meeting the criteria regarding the entity’s financial background with respect to the employer’s qualification for employ ment work authorizations.

Dependents of China Mainland nationals who also hold a China Mainland passport are subject to the same Taiwan entry permit application requirement (see Section I) if they want to join the expatriate in Taiwan.

Marital property regime. All married individuals in Taiwan are subject to a statutory property regime, unless the parties agree otherwise in writing and register the agreement in court before or during the marriage. The statutory property regime applies to all heterosexual and homosexual couples married in Taiwan.

Under the statutory property regime, the property of the husband and the wife is divided into property acquired before marriage and the property acquired during marriage.

If it cannot be determined whether property was acquired before marriage or during the marriage, it is presumed that the property was acquired during the marriage. If it cannot be determined whether the property is owned by the husband or the wife, it is presumed that the property is owned by the husband and the wife jointly.

The remains of fruits gained during the marriage from the prop erty acquired by the husband or the wife before marriage is deemed to be property acquired during the marriage.

If the husband and the wife enter into a contract regarding the holding of matrimonial property and subsequently adopt the statu tory regime, the property held before the adoption is deemed to be property acquired before marriage.

Under the statutory regime, on the termination of the marriage relationship, the balance of the property acquired by the husband or the wife in marriage, after deduction of debts incurred during the marriage, if any, is equally distributed to the husband and the wife, except for property acquired as a result of a succession or a gift or property acquired as a solatium (compensation for an injury or loss).

Forced heirship. Taiwan’s succession law provides for forced heirship rules. The law guarantees certain heirs a portion of the decedent’s estate.

The compulsory portion for an heir is determined in accordance with the following rules:

• For a lineal descendant by blood, the compulsory portion is one-half of his or her entitled portion.

• For a parent, the compulsory portion is one-half of his or her entitled portion.

• For a spouse, the compulsory portion is one-half of his or her entitled portion.

• For a brother or a sister, the compulsory portion is one-third of his or her entitled portion.

• For a grandparent, the compulsory portion is one-third of his or her entitled portion.

For purposes of the above rules, the entitled portion is the portion that the spouse and heirs in the same priority should receive, which is determined according to the following rules:

• If the spouse inherits concurrently with lineal descendants by blood, the decedent’s estate is equally divided among each party.

• If the spouse inherits concurrently with the parents of the dece dent or the brothers and/or sisters of the decedent, the spouse is entitled to one-half of the inheritance.

• If the spouse inherits concurrently with the grandparents of the decedent, the spouse is entitled to two-thirds of the inheritance.

• If there is no lineal descendant by blood, parents, or brothers or sisters of the decedent, the spouse is entitled to the entirety of the inheritance.

Driver’s permits. Foreign nationals may not drive legally in Taiwan with their home jurisdiction driver’s licenses. However, expatriates may drive legally with valid international driver’s licenses after applying for international driver’s license permits in Taiwan.

Foreign nationals with valid international driver’s licenses from reciprocating jurisdictions may drive legally in Taiwan for 30 days without applying for international driver’s license permits. However, if the stay in Taiwan is more than 30 days, foreign nationals must apply for international driver’s license permits.

Based on driver’s license reciprocity with the expatriate’s home jurisdiction, an expatriate who possesses an ARC (see Section G) with a validity period of more than six months may apply for a Taiwan license after taking a physical examination if his or her home jurisdiction license is valid and has been legalized by the Taiwan consulate in the issuing jurisdiction. However, exceptions may apply for each state or jurisdiction. For expatriates without a home jurisdiction license to take the written and driving tests, to obtain a Taiwan driver’s license, he or she must first undergo a physical examination and then apply for a learner license and maintain it for at least three months.