Expatriate tax ebook - Taiwan

Basis of taxation

Charge to tax
Residence
Income from employment
Source of employment
Benefits (in kind)
Expatriate concessions
Relief for foreign taxes
Deductions against income

Charge to tax
Taiwan levies income tax on employment income, namely salaries tax. For income tax purposes, the jurisdiction of Taiwan extends to the Island of Taiwan and its subordinate group of islands. Income tax is levied on income of a resident individual derived from sources within Taiwan.

Residence
The concept of residence is generally not relevant, as Taiwan imposes personal income tax on a territorial basis. A resident individual in Taiwan is someone who is:

• domiciled or ordinarily residing in Taiwan; or
• not domiciled but resides in Taiwan for 183 days or more in the taxable year
  

Income from employment
Taiwanese salaries tax is charged on an expatriate in respect of his or her income arising in or derived from Taiwan from any office or employment of profit, and from pensions.

Source of employment
Source of employment depends on a number of factors. For expatriates working in Taiwan, these factors include the number of days spent in Taiwan, whether the Taiwan company bears the salary expense, and whether there is a tax treaty in place.
Where an expatriate has a Taiwan source employment he/she is subject to salaries tax on all of his income from that employment. If an employee has been assigned to work outside of Taiwan on a permanent basis, his income would be deemed non-Taiwan source and it would not be subject to Taiwanese personal income tax.

Benefits (in kind)
Benefits in kind may or may not be taxable depending on the nature of the benefits. There are numerous tax interpretation notes covering this subject. For further details, please contact Jay Lo.

Expatriate concessions
There are specific concessions for expatriates if certain conditions are met. Expatriate may receive the following benefits free of tax, if certain conditions are met:

• Airfare for the expatriate and dependents for coming to Taiwan and returning to home country.
• Airfare for going back to home country for holiday after having work for a specified period
• Moving expenses incurred
• Water, electricity and gas expenses
• Cleaning expenses
• Telephone expenses
• Rent
• Household renovation
• Children’s education expenses.

 

Relief for foreign taxes
Taiwanese personal income tax is levied on a territorial basis. Where an employee performs services outside of Taiwan on a permanent basis, employment revenue is generally not taxed in Taiwan. Through this principle, Taiwan has, to a large extent, avoided the problem of double taxation of an individual’s income.

Deductions against income
In order for an expense to qualify as a deduction for income tax purposes it must be wholly, exclusively and necessarily incurred in the production of assessable income. In practice, the rigid nature of these tests mean that few deductions are available. There are instances where the tax office will accept deemed deductions against income, up to prescribed ratios.

Information about Taiwan:

• introduction
• facts and figures
• basis of taxation
• what taxes?
• tax planning opportunities