Taiwan – Tax System
A. Corporate Income Tax :-
- Tax Rate :- The corporate income tax rate is 17 percent and the threshold for subjecting a company to corporate income tax is NTD 120,000. A resident company’s earnings generated in a year and remaining undistributed by the end of the following year are subject to 10 percent surtax. In addition, resident and non-resident companies with a fixed place of business or a business agent in Taiwan are subject to alternative minimum tax. The alternative minimum tax rate is between 12 percent and 15 percent.
- Residence :- The residence of a company for Taiwan tax purposes is determined in accordance with its place of incorporation or location of company seat (i.e. head office). A company which is incorporated in accordance with the Company Law in Taiwan or situates its seat in Taiwan is considered a resident for Taiwan tax purposes. It is expected that the tax authority will introduce a new rule regarding the tax residence of companies in the near future. This rule is expected to stipulate that companies registered outside Taiwan, but with management located in Taiwan, will be deemed to be headquartered in Taiwan, and consequently subject to Taiwan income tax.
- Compliance Requirement :- Taiwan has an ‘official assessment system’ for income tax return filing, which involves the tax authority reviewing income tax returns before issuing an official assessment. Tax returns are due on the following dates: Annual income tax returns:
- Due during the period 1 May until 31 May, for a company with an income tax year aligning with the calendar year
- Due five months after the year-end for companies with income tax years that do not align with the calendar year.
Provisional income tax returns:
- Due during the period 1 September until 30 September for a company with an income tax year aligning with the calendar year
- Due in the ninth month of the income tax year for companies with income tax years that do not align with the calendar year Provisional income tax return filing is not required by taxpayers meeting certain conditions.
- International Withholding Tax :- Dividends paid to non-residents are subject to withholding tax of 20 percent. This rate may be reduced by a tax treaty (generally to between 5 percent and 15 percent). Royalties paid to non-residents are subject to withholding tax of 20 percent. This rate may be reduced by a tax treaty (generally to between 5 percent and 15 percent). Interest payments to non-residents are subject to withholding tax of 15 percent or 20 percent. This rate may be reduced by a tax treaty (generally to between 7 percent and 15 percent). Salaries paid to non-residents are subject to withholding tax of 18 percent, with the exception of the following:
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