For any individual having income from sources in Taiwan, income tax is levied in accordance with the Income Tax Act.
An individual is considered non-resident in Taiwan if he/she is not domiciled in Taiwan and stays in Taiwan for less than 183 days in a taxable year. In general, income tax of non-residents is collected through withholding at source. However, non-residents who have income not subject to withholding tax should file an income tax return before their departure from Taiwan. No matter what income non-residents have, they are not entitled to any personal exemptions or deductions.
If an individual stays in Taiwan for less than 90 days in a taxable year, income received from a foreign employer is exempt from Taiwan income tax (if an individual's residence state has an applicable treaty with Taiwan, generally the criteria could be prolonged to 183 days).
The term "resident" as used in the Income Tax Act, refers to:
A resident individual must file an income tax return between May 1 and May 31 of the following taxable year and pay any tax due. The tax return must include income, as well as exemptions and deductions of the taxpayer's household members, including the taxpayer, his or her spouse, and dependents.
When a resident files an income tax return, he/she can deduct personal exemption per household member. Personal exemptions increase by 50% if the taxpayer, his/her spouse and lineal ascendants are 70 years of age or older. For the 2024 individual income tax return, the personal exemption is NT$97,000 for each household member, or NT$145,500 for each taxpayer, spouse, and lineal ascendant, who are 70 years old and above.
A taxpayer may select either the standard deduction or itemized deductions and may, in addition thereto, declare special deductions in their household. The amounts of the deductions allowed for the 2024 individual income tax returns are disclosed as follows (if the amount of total itemized deductions exceeds the amount of the standard deduction, an optimal selection is to claim the itemized deductions):
Standard deduction
NT$131,000 for a single taxpayer and NT$262,000 for married persons filing jointly in 2024.
Allowable itemized deductions
Special deductions
By abolishing the partial imputation tax system on dividends, a new dividend tax regime was put into practice in 2018. Such regime allows resident taxpayers be able to choose either to incorporate dividend income into their consolidated income to calculate their tax based on progressive income tax rates, with a tax credit of 8.5% of the total dividend amount, with the credit ceiling set at NT$80,000 per household; or to opt for the single tax rate of 28% on dividend income computed separately from their consolidated income.
According to Article 44-1 of the Business Mergers and Acquisitions Act, in cases where a company is dissolved due to the merger or division, the individual shareholders who acquire the shares of the surviving company or the newly incorporated company after the merger or division can choose to defer the dividend income tax. The individual shareholders’ dividend income tax calculated in accordance with the provisions of the Income Tax Act will be deferred for the first two years after the year of receiving dividend, but levied evenly afterwards for the next three years.
As of January 1, 2006, the AMT has been effective and is applicable to resident individuals. An individual need not report AMT if he/she is not deemed to be a Taiwan resident, or did not claim investment tax credit, or did not have any add-back items taken as tax reduction/exemption under the laws (e.g. Income Tax Act) in the same tax year, or the basic income amount is less than NTD7,500,000 (since tax year 2024). From January 1, 2021, income derived from transactions of stocks, certificates of entitlement to new shares, certificates of payment and documents of title to shares issued or private placed by companies not listed on the stock exchange or traded on over-the-counter markets (hereinafter referred to as “Securities not listed on SE or traded on OTC markets”) has been counted in the basic income amount, but those companies approved by the central authority in charge of relevant enterprises as high-risk innovative startups and incorporated for less than five years have been excluded.
AMT should be reported and calculated based on one tax filing household as follows:
Basic Income Amount ＝ Regular Net Taxable Income as Prescribed in the Income Tax Act ＋ Overseas Income ＋ Life and Annuity Insurance Payment Received by the Beneficiary Where The Beneficiary and the Proposer of the Insurance are Different (In The Case of Payment Made upon the Death of the Insured Person, the Part of Which Aggregate of Payment Made in Filing Unit is Equal to or Less Than NT$37,400,000 (since tax year 2024) May be Excluded from the Basic Income) ＋Income Derived from Transactions of Securities not listed on SE or traded on OTC markets and Beneficiary Certificates of Privately-Placed Securities Trust Funds ＋ Non-Cash Donation
The net taxable income of an individual is subject to the following progressive tax rates for year 2024:
| Net Taxable Income of year 2024 (NT$) | Tax Rate | Progressive Difference (NT$) |
|---|---|---|
| 0 - 590,000 | 5% | 0 |
| 590,001 - 1,330,000 | 12% | 41,300 |
| 1,330,001 - 2,660,000 | 20% | 147,700 |
| 2,660,001 - 4,980,000 | 30% | 413,700 |
| 4,980,001 and above | 40% | 911,700 |
From January 1, 2019, the means to calculate wage income from salaries/wages for residents is based on a lump-sum deduction or an itemized expense deduction, including occupational clothing expenses, upgrading training fees, and occupational tool expenditures, with an upper limit of 3% of the salaries/wages each. The taxpayer can choose the best option.
Illustration of Income Tax Computation
Assumptions (for year 2024):
Unit: NT$
| Item | Resident | Non-resident |
|---|---|---|
| Taiwan-source taxable income/total amount paid | $4,782,000 | $5,000,000 |
| Minus: | ||
| Personal exemption (NT$97,000 × 3) | 291,000 | (Not Applicable) |
| Standard deduction | 262,000 | (Not Applicable) |
| Special deduction for educational tuition (NT$25,000 × 1) | 25,000 | (Not Applicable) |
| Net taxable income | 4,204,000 | 5,000,000 |
| Tax rate | 30% | 18% |
| 1,261,200 | ||
| Less: Progressive difference | ( 413,700 ) | ( - ) |
| Tax liability | $847,500 | $900,000 |
Note: Withholding tax paid during a year may be used as a credit to offset the tax liability of resident taxpayers. Non-resident taxpayers are taxed by withholding at source.
If an individual resident has overseas income and its annual total amount in the filing household is equal to or more than NT$1,000,000, it shall be included in the basic income. The amount of basic income is the sum of the net taxable income, overseas income, and other added items. The balance after deducting NT$7,500,000 from the basic income is calculated as a basic tax at a tax rate of 20%. If the basic tax exceeds the regular income tax payable, the individual must pay the difference. The income tax which has been paid in accordance with the tax laws of the source jurisdiction of that overseas income may be credited against the basic tax within the limit.
| Example 1 | Example 2 | Example 3 | |
|---|---|---|---|
| Overseas income | 3,500,000 | 3,500,000 | 6,000,000 |
| Onshore income | |||
| Net taxable income | 2,000,000 | 5,500,000 | 5,500,000 |
| Particular insurance proceeds | 0 | 1,000,000 | 1,000,000 |
| Particular security transaction income | 0 | 1,500,000 | 1,500,000 |
| Non-cash donation | 0 | 500,000 | 500,000 |
| Basic income amount | 5,500,000 | 12,000,000 | 14,500,000 |
| Basic tax amount (B) (Basic income amount - NTD 7,500,000) × 20％ |
－ | 900,000 | 1,400,000 |
| Regular tax payable (D) (Income tax payable - Investment tax credit) |
260,000 | 1,136,000 | 1,136,000 |
| B≦D, No AMT. B＞D, (E) the difference between B and D |
－ | － | 264,000 |
| Creditable amount of foreign tax paid (C) | 176,000 | ||
| AMT payable(E)－(C) | 88,000 | ||
| Total tax payable (D)＋(E)－(C) | 260,000 | 1,136,000 | 1,224,000 |
| Assume tax paid overseas is NTD 300,000. The foreign tax credit ceiling = (1,400,000－1,136,000)×6,000,000÷9,000,000＝176,000 |
Individual Controlled Foreign Company Rule
For employee stock options issued by Taiwan companies, the spread (i.e. the fair market value of the stock on the exercise date over the exercise price) of the options is categorized as "other income" of an employee. This income should be reported in the employee's individual income tax return in the year of exercise.
According to Article 19-1 of the Statute for Industrial Innovation, where a company employee exercises employee stock options and acquires such shares, the employee may opt to defer the assessment of the income tax payable up to an annual total of NT$5 million worth of the acquired shares as calculated at the market price prevailing in the year of share acquisition or the year of share disposal until the year of transfer after the year he/she acquires the shares. Such employee who holds the shares and stays employed at the company for two years or more from the date he/she receives the shares may opt to include the entire transfer price or the aforementioned market price, whichever is lower, in their income for the year of transfer and declare their income tax.
For employee stock options issued by foreign companies to its expatriates providing services in Taiwan or to employees in the subsidiary, branch or representative office of the foreign companies, the spread (i.e. the fair market value of the stock on the exercise date over exercise price) of the foreign stock is categorized as "other income" of an employee and the taxable income should be calculated according to the following formula:
If an employee does not render services in Taiwan from the grant date to the vesting date, there is no Taiwan-source income accordingly.
The tax system of income tax on the consolidated income from house and land transactions was first introduced on January 1, 2016 and amended in 2021. Taking effect from July 1, 2021, the latest regulations of the amendment are briefly introduced as follows:
Income derived from transactions of the following:
Tax Base = the Revenue from the Transaction of House and Land－Costs－Expenses－the Total Increment Amounts of Land Value
An Individual shall fill out and file to the tax collection authority-in-charge the tax return within 30 days from the day as set forth below, attached with a photocopy of the contract and other relevant documents:
Residents
Non-Residents
Self-use Residence
Self-use Residence Repurchase
A taxpayer, who sells self-use house and land and repurchases another self-use one within 2 years, can apply for a refund proportional to the repurchase price over the sales price times the tax amount as calculated under Article 14-5 of the Income Tax Act. However, if the taxpayer changes the usage or transfers a self-use house or a piece of land within 5 years after claiming the above tax preference, the deducted/refunded tax amounts should be returned.
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