Taiwan has relatively low income tax and an easy efficient tax returns system, but non-residents can be caught out by the blanket 20% tax rate
In terms of individual taxation, Taiwan has two systems based on length of residency. Unlike residency according to visa status, to be a tax resident you only need to be in the country for 183 days or more in any given tax year. You do not need to have been an Alien Resident Card holder during that time. Simply put, non-residents pay a flat rate of 20% tax on everything they earn.
Foreign individuals with residential status (including ARC holders) are taxed in the same way as Taiwanese nationals, based on a sliding scale from a bottom rate of 5% up to 40%. Also, this rate is backdated to include time in the same tax year that you spent as a non-resident taxed at 18%, so you can claim the extra back.
Deductions are also made from salary for Labour Insurance and National Health Insurance. For a resident teacher making a typical salary of NT$60,000 per month, total deductions (tax and insurance) will be around NT$5,000 per month, varying a little depending on deductible items.
Less than 3 Months
Foreigners living in Taiwan as non-residents for less than 90 days at any time during the year will have a minimum of 18% of their gross income withheld by their employer, Taiwanese or foreign, though many companies deduct at 20%. Non-residents are not required to file a Taiwan income tax return. Income paid offshore for services rendered in Taiwan are not subject to Taiwanese tax. Income tax returns are due by May 31st of the following year. Foreign taxpayers who end their residence in Taiwan during the calendar year must file their returns at least one week prior to departure. Tax returns must be filed with the Tax Bureau in the city or county of residence.
Between 3 Months and 6 Months
Foreigners living in Taiwan as non-residents for more than 90 days but less than 183 days at any time during the year will have the same tax rate, a minimum of 18%, but it must be declared by the taxpayer. Holders of visas longer than 90 days require a certificate from the Tax Bureau that shows that all declared income has been reported, whether paid in or outside of Taiwan, for all employment held in the country.
More than 6 Months
Foreigners living in Taiwan as residents for more than 183 days within a tax year must pay a progressive rate income tax for income derived within Taiwan, whether actually paid in Taiwan or not. Income tax in Taiwan is taxed on net income, which can be reduced by claiming deductions such as housing, health care, dependents, and charitable donations. The residential tax rates for 2012 are calculated according to total net taxable income:
- Up to NT$500,000
- NT$500,001 to NT$1,130,000
12% – NT$35,000
- NT$1,130,001 to NT$2,260,000
20% – NT$125,400
- NT$2,260,001 to NT$4,230,000
30% – NT$351,400
- NT$4,230,001 and above
40% – NT$774,000
For more detailed information, visit the website of the Taipei bureau of the National Tax Administration.