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Taiwan Tax Rules Explained

Taxes and Rebates

The new initial withholding tax rate (the amount your school has to give to the government before paying you) is 18%. After you have spent 183 days of the same tax year (January1 to December31) in Taiwan, the rate drops to 6% (although some branch accountants might withhold more, you will get the difference back in your return). Source (in Chinese)

The Alien Individual Income Tax and the Period of Residence

For any alien having income from sources in the Republic of China, individual income tax shall be levied on the income derived from such sources in accordance with the Income Tax Act of the ROC. The alien taxpayers are divided into "Non-Residents of the ROC" and "Residents of the ROC" based on their length of stay. The following are the different ways for aliens to file income tax returns.

  1. "Non-Residents" of the Republic of China
    • For an individual who stays in the Republic of China not more than 90 days within a taxable year (Jan. 1 to Dec. 31), the income derived from sources in the Republic of China shall be withheld according to the withholding rate (see Article 15) and paid at the respective sources. The taxpayer need not file an income tax return.
    • For an individual who stays in the Republic of China over 90 days but less than 183 days within the same taxable year, individual income tax shall be declared and computed according to the withholding rate (see Article 15) on his remuneration derived within or outside the Republic of China for his services rendered in the ROC.
  2. "Residents" of the Republic of China
    • An individual who stays in the Republic of China for 183 days or more within a taxable year is regarded as a resident and the individual income tax shall be declared and assessed by a progressive rate (See Article 14) on the amount of his net consolidated income (taxable income) which shall be the annual gross consolidated income (including the various incomes derived within the ROC and the remuneration derived outside the ROC for service rendered in the ROC) minus the exemptions and deductions.

What is the definition of “taxable year?”

A full year from Jan. 1 through Dec. 31 is a Taxable Year.

The computation of the resident period of an alien in the ROC is based in the date stamped on his/her passport. If an alien enters and exits this country a number of times within a taxable year, the resident period shall be accumulated.

When do I have to file taxes by?

Any individual staying in the Republic of China for 183 days or more shall, before May 31 of the current year, file the annual income tax return for the preceding year. However, any individual who intends to leave the territory of the ROC in the interim of the year, and will not return within the same year, shall file his income tax return one week before his/her departure.

What documents do I need to file a tax return?

* A valid passport.

* Tax withholding and earnings statements (Your school or schools should provide these).

* Alien Resident Certificate (ARC).

* Supporting documents for exemptions/deductions.

Where to go to file the tax return?

You file your taxes at the tax office closest to where you live (NOT to where you work). Doing so in-person is quite simple and fast. Being polite and friendly will give you an extra push as well. Procedure:

  1. Please file your individual income tax return with the tax authority located in the district where you stay
  2. Individuals residing in Taipei City should file their returns at the Foreign Taxpayers Section, Taipei National Tax Administration, M.O.F. (No. 2, Sec.1, Jhonghua Road, Taipei 108, R.O.C.) TEL:(02)23113711 Ext.1116-1118
  3. Individuals residing in Kaohsiung City should file their returns at the Foreign Taxpayers Section, Kaohsiung National Tax Administration, M.O.F. (No. 148,Guangjhou 1st St., Kaohsiung, R.O.C.) TEL:(07)7256600 Ext.8102, 8210
  4. Other individuals residing in Taiwan should file their returns at the branch offices and service centers of the National Tax Administration. For a complete listing of offices, please refer to: http://english.etax.nat.gov.tw/wSite/ct?xItem=25335&ctNode=11614

What if I didn’t pay my taxes?

Not a good idea! Check out what happens:

  1. Late filing: Taxpayers shall be surcharged interest on the amount of tax payable. The interest shall be calculated on a daily basis at the interest rate quoted by the Post Office's one-year fixed deposit.
  2. Omission or misfiling: A penalty of a maximum of two times the amount of the tax underpaid.
  3. Failure to file: A penalty of a maximum of three times the amount of the tax underpaid.

How much do I get back?

There are automatic deductions for single earner, and for couples. The automatic deductions add up to NT$193,000 for a single earner. You can also claim additional itemized deductions, the most significant of these being rent. If you relinquish an automatic deduction, you can claim a rebate based on rent for this to work, so if you wish to make this deduction, check that your landlord is paying tax and agrees on this when you sign in lease.

When do I file a tax return?

Taxes for the previous year’s earnings must be filed before May 31 every year. You can file at any time after you have the necessary documentation. Most companies provide earnings statements to their employees in March.

If you leave Taiwan before tax filing time in May, or before the return arrives, you can arrange a friend to act as your proxy to file your taxes or collect your return for you. You can also file you taxes ”out of season” using a methods called “departure filing”. Forms for dealing with your taxes in this way are available at the tax offices.

What about refunds?

If you are owed a refund (and most get one), you can pick it up from the same tax office that you filed your taxes at. Many tax offices notify you by mail when your tax refund is ready, but you can also go and ask (usually around July/August). If you have a Taiwan bank account, you can also ask for the money to be directly deposited to that account at most tax offices.

There is an Internet tax filing service provide by the tax office, but foreigners can’t use this service to file taxes (unless you are filing as a couple with your Taiwanese spouse.)

Common Q&A’s

The basic issue: Foreigners living in Taiwan have their wages taxed at 18% until they have stayed more than 183 days during a tax year. After 183 days, they stop taking 18% and you go back to your regular rate. For most teachers, this means 18%. But, for 183 days, you paid 18%, 12% more than you should have. Since you have overpaid, you get back the difference when you file your taxes. Easy, right? During your first 183 days you pay more than you should, so you get it back. Now, for some special situations…

183 Days

Q: I have just gotten a job and an ARC, but I've been here four months already. Do those first months count toward my 183 days?

A: Yes. The 183-day total is calculated by the time you have been here, not by what you were doing. It goes by the dates in your passport, exclusive of the first day. If you came on January 1st, but didn't get an ARC until May 2nd, you would have to pay 18% tax for just two months. The 183 days are figured by your arrival date: you arrived 4 months ago, so, even though you are just getting your ARC and beginning to work, those first 4 months are included toward your 183 days.

* If you are in Taiwan LESS THAN 183 days in a tax year (Jan.1st to Dec.31st), there is NO REFUND. The government keeps it all. Even if you have arrived before July 2nd of a given year, if you are to on holidays, the time you are away from Taiwan works against you. Make sure you count the days away from Taiwan carefully. Also, be aware that the day you arrive in Taiwan (initially, or after an overseas trip) do not count as a day in the country.

Q: I finally made 183 days, but my school only lowered my tax rate to 10%! Why?!

A: The accountants tell the schools that, because your hours can vary, it's impossible to predict exactly how much you will earn in a year. Perhaps it is less than 370,000, or maybe it’s 888,000? After 183 days, should your school start taking 6%, or 13%? The accountants tell them to hedge and hit it in the middle: 10%. You settle the difference when you file in May of next year.

Q: If I was here initially for just 3 months (less than 183 days), worked, and paid my 18% income tax, but then later on came back, and all together I did stay for more than 183 days in the same taxable year, how should my income tax be computed for that year?

If you have initially been taxed at the flat rate for non-resident status, then returned in the same taxable year and continued to stay in Taiwan up to 183 days or more, the tax payable for that year should be reassessed at the progressive rate for resident status. Tax previously paid could be credited.

July 2nd, every year

If you arrive on or after July 2nd, there are less than 183 days left in the year. When you get your job and your ARC, your employer will take 18% until the end of the year. No refunds. Whether you earn 370,000 or 600,000, since for that year you'll have been here for less than 183 days, you have pay 18%. You will also disqualify for a refund.

Q: That blows! I was here 182 days, paid 18% and got no refund! So, does that mean I'll start over at zero days on January 1st?!

A: Unfortunately, yes. You will start over. For the first 183 days of the new year, your employer will again deduct 18%. But, once you pass day 183, you will drop to the regular rate.

Q: I am waiting to get to 183 days, but I have to leave the country, will that reset the count to zero?!

A: No. The counting is cumulative. If you stayed for 3 months, left for a month and came back, your first three months will still count toward your 183 days for that year.

Reported Hours Different from Actual Working Hours

Q: My school is reporting me as working 14hrs/wk (in order to sponsor my ARC), but I actually only work 10hrs/wk, how will that affect my tax?

Don’t worry; you will not have to pay the extra tax. The reporting of hours is mainly for work permit purpose; the withholding of tax is based on your total wage. Your school will report just the total amount of your earning, regardless of how many hours you worked.   

Refund Checks

The tax year runs from January to December. Your taxes for this year are filed during May of the next year. Refunds become available by late November.

Q: I got here in January, I'm leaving in December... how can I get my money if taxes are filed in May of NEXT year?

A: You need to find a friend who is a Taiwanese citizen. Ask your employer’s accountant to prepare your earnings statement for you (called 扣繳憑單). Go to your local tax office. Bring your passport, your ARC and the earnings statement from your job. When you go to the office they will ask you to fill out a form and you can calculate your refund on the spot based upon the earnings statement you've given them. Then, they will process it and send you a check. If you're in Taipei, the check will be available within one week. If you're outside of Taipei, it takes a little longer. They will send the check to your friend. Additionally, you friend's name will be attached to filing. Should you owe any other taxes, your friend would be responsible.

Scenarios:

John enters Taiwan in February and studies Chinese for 6 months, and has already been in the country more than 183 days when he gets hired as an English teacher. His withholding should be done at the lower resident rate, because his time studying Chinese counts towards the requirement.

Mary arrives in September to start teaching English. She's puzzled when she's passed 183 days and her withholding is still done at 18%. Unfortunately, the qualifying period must be within the same calendar year. Because she was here less than 183 days the first year, her qualifying period resets in January and she will need to wait until July to get the lower rate.

Your income from working in Taiwan is required to file income tax by laws. For income tax filing and tax related questions, please contact district offices of National Tax Administration. Toll free hotline: 0800-000-321. Official website in English: http://english.etax.nat.gov.tw/wSite/mp?mp=4

More FAQ's can be found on Taiwan's official Immigration Agency website as well. 

Big Note: Your income from working in Taiwan is required to file income tax by laws. For income tax filing and tax related questions, please contact district offices of National Tax Administration. Toll free hotline: 0800-000-321.