Last modified: 24/01/2025 07:31

Corporate taxation

The corporate income tax (CIT) rate in Taiwan is 20%.

Resident companies in Taiwan are taxed on their worldwide income as follows:

Taxable income (TWD*)	Tax thereon
Up to 120,000	Exempt
120,001 and over	20% of total taxable income

* Taiwan dollars

A non-resident company is taxed on income derived from Taiwan sources. A non-resident company with a fixed place of business (FPOB) or business agent in Taiwan is taxed similarly to a resident company (i.e. subject to filing of an annual CIT return based on the same CIT rate provided above). A non-resident company having no FPOB or business agent in Taiwan is subject to withholding tax (WHT) at source on its Taiwan-sourced income. WHT rates on dividends, interest, and royalties may be reduced if the recipient is a tax resident of a tax treaty country and the relevant treaty provides for a reduced rate. 

All Taiwan resident companies, as well as non-resident companies with an FPOB or business agent in Taiwan, should calculate IBT if they earn certain income that is tax-exempt. The basic income of a company is the amount calculated in accordance with a formulae stipulated by the government, with a deduction of TWD 500,000. The IBT rate is 12%. If the IBT amount is greater than the regular CIT amount, taxpayers must pay income tax based on the regular CIT amount plus the difference between the IBT amount and the regular CIT amount. On the other hand, if the regular CIT amount is greater than the IBT amount, no special action is required.

 

Residence: The residence of a company for Taiwan tax purposes is determined in accordance with its place of incorporation or location of company seat. (head office)

Basis: A company incorporated in accordance with Company Law in Taiwan or situated its seat in Taiwan is considered a resident for Taiwan tax purposes. Taiwan resident company is taxed on its worldwide income.

Taxable income: Companies incorporated in Taiwan is viewed as tax resident for tax purpose and are subject to corporate income tax (CIT) on worldwide income. Taxable income for CIT is calculated by revenue minus costs, expenses, losses and taxes/donations. Income from all sources including business income, rent, interests, royalties and capital gain realized from property sales, etc. is subject to CIT except for certain exempt income items specified under Taiwan Income Tax Act (ITA).

Significant local taxes on income: The minimum taxable amount and rates for profit-seeking enterprise income tax are as follows: 1. If the total taxable income of a profit-seeking enterprise is NT$120,000 or less, the profit-seeking enterprise is exempt from tax. 2. If the total taxable income of a profit-seeking enterprise is more than NT$120,000, the income tax rate shall be 20%. However, the income tax payable shall not exceed one half of the portion of taxable income more than NT$120,000. 3. Where the total taxable income of a profit-seeking enterprise is more than NT$120,000 but not more than NT$500,000, the income tax rate shall be in accordance with the following provisions instead of the preceding Subparagraph. However, the income tax payable shall not exceed one half of the portion of taxable income more than NT$120,000. (1) The income tax rate for taxable year 2018 shall be 18%. (2) The income tax rate for taxable year 2019 shall be 19%. Beginning from the year 2018, A resident company’s earnings generated in a year and if there are any earnings of the current year not distributed by a resident company, an additional profit-seeking income tax shall be levied at the rate of 5 percent. In addition, resident and nonresident companies with a fixed place of business or a business agent in Taiwan are subject to alternative minimum tax (AMT).

Alternative minimum tax: Taiwan also imposes an AMT on resident or nonresident companies under the Income Basic Tax Act (IBTA). if the annual basic income (i.e. the sum of regular taxable income plus add-back items) is more than TWD 600,000, companies have to pay the higher of the regular income tax liability or the AMT payable. The Add-back items are including the followings: • Tax-exempt income under tax incentive schemes (such as income derived from participating in transportation or public constructions, M&A exempted income, and etc.) • Tax-exempt capital gains from qualified securities and future transaction • Tax-exempt income of offshore banking unit, offshore securities unit, and offshore insurance unit.

Taxation of dividends: The dividends allocated by the resident or nonresident companies to other profit-making enterprises in Taiwan are not included in the income tax. Taiwan company distributes dividends to foreign companies, and when the dividends are issued, Taiwan company is the withholding agent and must withhold the dividends at a withholding rate of 21%. An additional profit retention tax of 5% is imposed on any current earnings of a corporation that remain undistributed by the end of the following year. Taiwan branches of foreign companies are not subject to profit retention tax.

Capital gains: Tax-exempt capital gains from qualified securities and future transactions The income from securities(futures) transactions in the current year is included in the basic income (if called the minimum tax regime) for taxation. Half of the stocks held for more than 3 years will be included in the stock exchange of the current year. The assessed loss may be deducted from the income of each of the current year within 5 years from the year following the year in which it occurred.

Losses: In general, Taiwan’s tax law does not allow for previous years’ losses to be applied to profits/losses of a later year. An exception is made, however, either when a Taiwan company (or a Taiwan branch of a foreign company) maintains a complete set of accounting books and files a “blue return” (a tax form printed on blue paper and designed to encourage honest reporting of income) for the years the losses were incurred and the years the losses were declared, or where a CPA certifies the tax losses and declares within a prescribed time period that the losses may be carried forward for ten years. The carry-back of losses is not permitted under any circumstances.

Foreign tax relief: A profit-seeking enterprise with its head office in Taiwan is subject to income tax on its worldwide income. This is true even if the profit-seeking enterprise is a joint venture or a wholly-owned subsidiary of a foreign company. Enterprises with a tax base in Taiwan can claim foreign tax credit for taxes paid abroad on income derived outside Taiwan by branches or agents of a Taiwan-based enterprise.

The credit may only be used to offset foreign tax paid against the business’ income tax liability in Taiwan; it may not exceed the incremental tax liability that would result if the foreign-source income were added to the Taiwan taxable income and taxed at the applicable domestic rate.

Taxpayers seeking to claim foreign tax credit must present documentation issued by the other country’s tax authority certifying that the tax was paid. This documentation must be certified by the local embassy or other institution authorized by the Taiwan government. Profit-seeking enterprises with head offices outside Taiwan, such as branches of foreign companies, are considered non-resident for tax purposes. Such enterprises are subject to income tax only on their Taiwan-source income.

Any profit-seeking enterprise organized as a corporation must utilize the accrual basis of accounting. Enterprises organized according to any other structure may seek approval from the Taxation Bureau to utilize the cash-basis method. In the case of differences in revenue, cost, expense and loss recognition based on the applicable tax laws and accounting standards, the enterprise should make tax adjustments off the accounting books according to the applicable tax law. Filing of tax returns Interim corporate income tax filing is due prior to the end of the ninth month of the fiscal year, which for most companies is September.

The company’s filing is assessed based on one half of the prior year’s tax liability. Year-end corporate income tax filing is due prior to the end of the fifth month after fiscal year-end, which for most companies translates to May 31 of the following year.

Participation exemption: The minimum taxable amount and rates for profit-seeking enterprise income tax are as follows:

1. If the total taxable income of a profit-seeking enterprise is NT$120,000 or less, the profit-seeking enterprise is exempt from tax.

2. If the total taxable income of a profit-seeking enterprise is more than NT$120,000, the income tax rate shall be 20%. However, the income tax payable shall not exceed one half of the portion of taxable income more than NT$120,000.

3. Where the total taxable income of a profit-seeking enterprise is more than NT$120,000 but not more than NT$500,000, the income tax rate shall be in accordance with the following provisions instead of the preceding Subparagraph.

However, the income tax payable shall not exceed one half of the portion of taxable income more than NT$120,000.

(1) The income tax rate for taxable year 2018 shall be 18%.

(2) The income tax rate for taxable year 2019 shall be 19%. Beginning from the year 2018, A resident company’s earnings generated in a year and if there are any earnings of the current year not distributed by a resident company, an additional profit-seeking income tax shall be levied at the rate of 5 percent. 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 (AMT).

Holding-company regime: Taxable income for CIT is calculated by revenue minus costs, expenses, losses and taxes/donations. Income from all sources including business income, rent, interests, royalties and capital gain realized from property sales, etc. is subject to CIT except for certain exempt income items specified under Taiwan Income Tax Act (ITA).

Tax-based incentives: Taiwan offers a variety of tax and non-tax incentives to encourage investment. The main tax incentives are provided under the Statute for Industrial Innovation (SII), which is designed to attract and increase capital investment in Taiwan for R&D innovation and upgrading of Taiwan industries. The SII provides an income tax credit for innovation-related R&D expensesincurred by Taiwan-based enterprises at their Taiwan facilities.

The Legislative Yuan passed several amendments to the SII, with goals to enhance the competitive advantage of domestic industries. The amendment announced in 2019 extends the R&D tax credit through 31 December 2029, allowing a company to either credit up to 15% of qualified R&D expenditures against its CIT payable in the current year, capped at 30% of its tax payable for that year, or credit up to 10% of qualified R&D expenditures against its CIT payable in the current year, with unutilised R&D tax credits carried forward for two ensuing years if the 30% cap of the current CIT payable is exceeded. No changes are allowed once the election has been made. In addition, to facilitate the circulation and application of innovative R&D results, and to promote industrialisation of innovative technologies, where individuals/companies derive income from transfer or license of their selfdeveloped IP, the amendments also allow the individuals/companies to either deduct qualifying R&D expenses of up to 200% (capped at corresponding income received) within the current year or claim R&D tax credits against income tax payable.

Group relief/fiscal unity: Under Taiwan income tax rules, foreign companies should pay income tax on the TSI they derived. In the case that a company with its headquarter outside of Taiwan, but having a fixed place of business here in Taiwan (i.e. a branch of a foreign company), should foreign companies derived TSI, such TSI should be included in its Taiwan Branch’s CIT return and be subject to CIT at 20% under the force of attraction rule.However, for the foreign company without a fixed place of business nor business agent in Taiwan, it will be deemed as a non-resident company and is generally subject to Withholding Tax (WHT) on its TSI.

Small company/alternative tax regimes: Based on Article 25 of the ITA, a foreign company that engages in construction, provision of technical services or rental of machine and equipment in Taiwan and has difficulties to allocate its costs and expenses onshore/offshore, could apply with the tax authority to adopt a deemed profit ratio of 15% to calculate its taxable income. This treatment could reduce the effective WHT rate from 20% to 3% on the gross payment.Based on Article 25 of the ITA, a foreign company that engages in construction, provision of technical services or rental of machine and equipment in Taiwan and has difficulties to allocate its costs and expenses onshore/offshore, could apply with the tax authority to adopt a deemed profit ratio of 15% to calculate its taxable income. This treatment could reduce the effective WHT rate from 20% to 3% on the gross payment.

Corporate taxation: compliance

Tax year: The tax year in Taiwan runs from 1 January to 31 December. Businesses may request approval from the local collection authority to file CIT returns using a fiscal year-end other than 31 December. Tax returns are filed on a self-assessment basis. CIT returns are due no later than five months after the end of the tax year.

Consolidated returns: Group enterprises meeting certain criteria under the Financial Holding Company Act and Business Mergers & Acquisitions Act may file consolidated tax returns for the Taiwan parent and its first tier Taiwan subsidiaries. For other enterprises, group taxation is not permitted. The Taiwan parent is eligible to file consolidated tax returns if it continuously holds over 90% of the shares of the subsidiaries for 12 months in a tax year.

Filing and payment: Tax is paid on a self-assessment basis in two instalments. The first payment is based on 50% of the tax liability of the prior year’s tax return and is made in the ninth month of the enterprise’s fiscal year. However, if the taxpayer meets certain requirements, it may self-assess the provisional tax based on the taxable income of the first half of the current fiscal year and deduct income taxes paid overseas against the provisional income tax payable if corresponding income is consolidated in the provisional tax return. The second payment is made at the time of filing the annual tax return. The returns are subsequently reviewed by the tax authorities, and a final assessment is issued. Any overpaid tax as a result of the tax collection authority’s mistake shall be refunded to the taxpayer within two years of the tax authority’s acknowledgement of such mistake, and shall not be subject to the original five-year period for applying for refund where the taxpayer is responsible for the mistake.

Penalties: Taiwan does not have a fixed audit cycle. Tax audit can be carried out any time prior to the expiration of the statute of limitations. Companies may be selected for audit if certain criteria are met. The statute of limitations in Taiwan is five years from the tax return filing date if the return is filed on time. Where a taxpayer fails to file an annual tax return within the statutory deadline or evades tax by fraud or any other unrighteous means, the statute of limitations is extended to seven years.

Rulings: Corporate taxpayers may file an advance tax ruling application with the tax authorities, together with the relevant supporting documents, to clarify their tax position before initiating the specific transaction. The tax authorities are obligated to issue a response within six months after submitting the application.

Taxation of individuals

		2025
General		$97,000
Lineal ascendants above the age of 70		$145,500
Single		$131,000
Married		$262,000
Special deduction for salary/wages			$218,000
Deduction for disability			$218,000
5%		0 – 590,000
12% (progressive difference 37,800)		590,001 -1,330,000
20% (progressive difference 134,600)		1,330,001 – 2,660,000
30% (progressive difference (376,600)		2,660,001 – 4,980,000
40% (progressive difference (829,600)		4,980,001 or above
By Lump sum payment	Fully taxexempted	Termination payment  ($198,000 x N)
	50% taxable	($198,000 x N) < Termination payment £ ($398,000 x N)
	Fully taxable	($398,000 x N)  < Termination payment
By installments		Termination payment received in one fiscal year – $859,000
Remarks: N = Years of Service

Residence: An individual with a domicile in Taiwan and habitually residing in Taiwan is considered a resident unless one meets the 31-days rule mentioned below. A foreign individual who stays in Taiwan for 183 days or more in a calendar year is considered a resident. A foreign individual who resides in Taiwan for less than 183 days in a calendar year is considered a non-resident. A Taiwan national with household registration in Taiwan may be deemed as a non-resident if one has resided in Taiwan for less than 31 days and more than one day within a calendar year and one’s centre of vital interest (i.e. entitlement to Taiwan social security benefits, individual’s spouse or dependent child resides in Taiwan, or performs other economic/financial activities in Taiwan) is not in Taiwan.

Basis: Individuals are liable for income tax on all income generated in Taiwan. Taxable income includes earnings from dividends and partnerships; remuneration for services, interest, rent and royalties; gains from disposition of long-term assets; prizes and lump-sum retirement payments.

Taxable income: Personal Income Tax (PIT) is levied on a territorial basis and is determined by residence status. That is, resident and non-resident individuals are only liable to income tax on the TSI they derived unless exempt under the provisions of the ITA and other related laws.

Capital gains: Taiwan does not impose a separate capital gains tax (CGT), as all gains, unless specifically exempted by law, or as otherwise regulated, are assessed as ordinary income and subject to regular income tax assessment. CGT on securities has been abolished effective from 1 January 2016. Please note that capital gains derived from sales of Taiwan-based securities prior to 1 January 2016 are still subject to CGT if certain conditions are met.

Deductions and allowances: Starting from 1 January 2019 onwards, individuals may elect to use either (i) fixed salary deduction (currently TWD 207,000) or (ii) specific expense deduction to calculate taxable salary income, whichever is more beneficial.

Under the specific expense deduction regime, three prescribed expense categories can be deducted from salary income. The prescribed expense items shall be incurred directly in relation to the provision of services by the individual and should be actually borne by the income recipient. The specific expense deduction is limited to 3% of total salary income for each expense category per person per year.

Resident taxpayers have the option to claim either a standard deduction or itemised deductions for their income tax calculation purpose. For the 2023 IIT return filing, these deductions are as follows.

Note that non-resident aliens are not eligible for any deductions.

Standard deduction The deduction for a single taxpayer is TWD 131,000. A husband and wife filing a joint return are eligible for a standard deduction of TWD 262,000 Itemised deductions Itemised deductions include the following:

Charitable contributions.

Insurance premiums (maximum of TWD 24,000 per person per annum for group insurance premium and labour insurance premium).

Medical expenses.

Calamity losses.

Either interest paid on loans for the purchase of an owner-occupied house in Taiwan (maximum of TWD 300,000) or rental payment (maximum of TWD 180,000) for the lease of a self-use residence in Taiwan.

There is no ceiling on the aggregate of the itemised deductions.

Special deductions The following special deductions are also available:

Special deduction for losses from property transactions, which are limited to gains from such transactions (residual balance can be carried forward for three years). Special deduction for interest earned from bank deposits (limited to TWD 270,000/tax filing unit, or the total reported, whichever is lower). Special deduction for the disabled or handicapped (TWD 207,000/person). Special deduction for dependent child tuition (TWD 25,000 per dependent child if studying in an approved college or university). Special deduction for pre-school children who are less than or equal to five years of age (TWD 150,000 per child, TWD 225,000 second or more child.. Special deduction for salaries or wages may be elected to use either: (i) fixed salary deduction (limited to TWD 218,000/person or total salary income reported, whichever is lower) or (ii) specific expense deduction to calculate taxable salary income, whichever is more beneficial. Under the specific expense deduction regime, three prescribed expense categories can be deducted from salary income. The prescribed expense items shall be incurred directly in relation to the provision of services by the individual and should be actually borne by the income recipient. The specific expense deduction is limited to 3% of total salary income for each expense category per person per year. The three prescribed expense categories are listed as follows: Occupational clothing expense: Expenses incurred for special clothing items or performance dedicated clothing required for one’s occupation, including purchase cost, rental expense, cleaning fee, and maintenance expense. Training expense: Expenses incurred for participating in training courses covering specific skills or expertise delivered by qualified institutions associated with current occupation or work, or required by law. Occupational tool expense: Expenses incurred for purchasing books, periodicals, or other tools that are solely used for one’s occupation. If the useful life of the aforementioned items exceed two years, and the expense incurred exceeds a certain amount, the purchase amount shall be depreciated or amortised annually. Special deduction for long-term care (TWD 120,000 per person, which is only allowed for a taxpayer whose applicable regular income tax rate is less than 20% after deducting the said special deduction, or where the income subject to IBT is less than TWD 6.7 million). A non-resident alien is not eligible for any special deductions.

Personal exemptions A resident alien is eligible for a personal exemption of TWD 97,000. Additional exemptions of TWD 97,000 each are available for the spouse and each dependent. For dependents over 70 years of age, the exemption will be TWD 145,500. A non-resident alien is not eligible for any personal exemptions.

Foreign tax relief: Taiwan uses the credit method to avoid double taxation of income. Foreign taxes paid on foreign-sourced income may be credited against total Taiwan income tax liability. However, the credit is limited to the incremental taxes derived from the foreign-sourced income.

Taxation of individuals: compliance

Tax year: The tax year is the same as the calendar year, which runs from 1 January through 31 December.

Filing and payment: It should be filed each year between 01 May and 31 May. There is income tax withholding on locally paid salaries. Additional tax due must be paid at the time of filing before 31 May of the following year. In addition to regular income tax calculations under the Income Tax Act, Taiwan also imposes IBT, at a flat rate of 20%, on individuals who are tax residents in Taiwan (including expatriates who stay in Taiwan for 183 days or more in a tax year). Foreign-sourced income is included in the calculation of IBT if the following criteria are met: The individual is a tax resident of Taiwan. Foreign-sourced income is equal to or more than TWD 1 million with basic income exceeding TWD 7.5 million. Under the IBT Act, a taxpayer must calculate the amount of IBT due on income subject to IBT after adding back certain items and compare the result with the regular income tax payable. If the IBT payable is greater than the regular income tax payable, the taxpayer has to calculate and pay IBT based on the following formula: Income subject to IBT = Regular taxable income + add-back items IBT = (Income subject to IBT – TWD 7.5 million) x 20% The add-back items include qualified insurance benefits, income derived from transaction of beneficiary certificates of privately placed securities investment trust funds, non-cash charitable donations, and foreign-sourced income totalling TWD 1 million or more. Note that although the inclusion of foreign-sourced income increases the IBT burden, any foreign taxes paid on foreign-sourced income may be credited against IBT payable, with certain limitations.

Penalties: For late payment, interest will be imposed on the outstanding tax balance due on a daily basis from 1 June to the actual date of tax settlement.

Rulings: Individual income tax (IIT) is levied on Taiwan-sourced income of both resident and non-resident individuals, unless exempt under the provisions of the Income Tax Act and other law

Withholding taxes

Domestic companies are required to make withholding on payments that are within the scope of withholding tax. The applicable tax rate would differ depending on the status of the recipient (domestic or foreign, company or individuals) as well as the nature of the payments, including salary, interest (paid to nonfinancial institutions), rent, commission, royalty and professional fees, etc.

Based on Article 25 of the ITA, a foreign company that engages in construction, provision of technical services or rental of machine and equipment in Taiwan and has difficulties to allocate its costs and expenses onshore/offshore, could apply with the tax authority to adopt a deemed profit ratio of 15% to calculate its taxable income. This treatment could reduce the effective WHT rate from 20% to 3% on the gross payment.

Branch remittance tax: No such tax.

Anti-avoidance legislation

Transfer pricing: Taiwan’s transfer pricing regime adheres to the arm’s length principle for related-party transaction. The governing rules are set out in “Regulations Governing Assessment of Profit-Seeking Enterprise Income Tax on Non-Arm’s Length Transfer Pricing” (TP Assessment Rules), which are basically based on OECD transfer pricing and the U.S. Internal Revenue guidelines. The definition of related parties pursuant to TP Assessment Rules includes direct and indirect control, as well as control over a board of directors. And the types of transactions governed by TP Assessment Rules are transferred or use of tangible or intangible property, rendering of services, use of funds, and other types of transaction assessed by the MOF. In addition, Taiwan has adopted OECD’s three-tiered TP documentation structure as suggested in BEPS Action 13. This consists of a Local File or TP report, a Country-by-Country report (CbCR) and a Master File. Disclosure of related-party transaction in the CIT returns and preparation of TP documentation is required if certain reporting criteria below are met. If the total amount of the company’s annual net operating revenue and non-operating revenue is over TWD 30 million, it is required to disclose all controlled transaction in the CIT returns based on the format specified by the tax authority.

Interest restriction: Interest on the flow of funds between head office and branch offices of banking enterprises, revenue of investment trust enterprise derived from trust funds in the manner designated by the settler, provided the settler bears the risk of loss and enjoys the proceeds, and unredeemed items where the proceeds arising from their sale by pawnshops does not exceed the aggregate of principal and interest receivable.

Controlled foreign companies: CFC refers to a foreign companies registered in a low-tax country or region with a paid-up capital held by more than 50% of the paid-up capital of a Taiwanese tax resident individual and its related persons, or more than 50% directly or indirectly held by a Taiwanese legal entity and its affiliates. If the shareholding ratio is less than 50%, but the foreign companies is substantially controlled by a Taiwanese tax resident individual and its affiliates, or directly or indirectly controlled by a Taiwanese legal entity and its affiliates, the foreign companies shall also be deemed to be a CFC. A country or region with a low tax burden refers to any of the following:

1. The statutory tax rate of companies income tax or substantially similar tax in the country or region where the affiliated companies is located does not exceed 70% of the tax rate determined by the Taiwan Income Tax Law (i.e., 20%*70%=14%). Taiwan’s Ministry of Finance has published a list of countries that meet this criterion.

2. The country or region where the affiliated companies is located is only taxed on the income from domestic sources, and the income from overseas sources is not taxed or included in the tax at the time of actual repatriation.

Taiwan’s Ministry of Finance has published a list of countries that meet this criterion. If the CFC surplus in the current year is less than 7 million yuan, it is not necessary to declare. However, if the total surplus or loss of all CFCs controlled by the same company in Taiwan is positive and exceeds 7 million yuan, the surplus of individual CFCs for the current year shall still be recognized as investment income in accordance with the regulations.

Hybrid mismatches: The Taiwan authorities have implemented TP and CFC mechanical to prevent hybrid mismatches situation.

Disclosure requirements: The Income Tax Act include anti-tax avoidance rules in Article 43-3 (Controlled Foreign Company [CFC]) and Article 43-4 (Place of Effective Management [PEM]) of the Income Tax Act. In general, profits retained at the CFC level, which is located in a low tax rate jurisdiction and without commercial substance, will be taxed in advance at the Taiwan parent company level. In the past, taxation of foreign investment income was deferred until the Taiwan parent company received dividend income. Going forward, qualified investment income will be deemed distributed and taxable in Taiwan in advance. For PEM rules, under this new tax regime, if a foreign company meets all three criteria triggering the PEM definition, including (i) decision making location, (ii) record keeping and maintenance location, and (iii) actual operating location are all in Taiwan, the foreign enterprise will be deemed as having its head office in Taiwan and will be subject to tax assessment in accordance with the Taiwan Income Tax Act and other tax regulations.

Exit taxes: Though Taiwan does not have a codified general antitax avoidance rule, Taiwan has formalized the concept of substance-over-form under Article 12-1 of the Tax Collection Act, where the economic substance of the transaction shall be considered. The onus is on the tax authorities to ascertain the facts and substance of the transaction, as well as its tax effect. The taxpayer, on the other hand, is obligated to provide relevant assistance required by the tax authorities.

General anti-avoidance rule: The Income Tax Act include anti-tax avoidance rules in Article 43-3 (Controlled Foreign Company [CFC]) and Article 43-4 (Place of Effective Management [PEM]) of the Income Tax Act. In general, profits retained at the CFC level, which is located in a low tax rate jurisdiction and without commercial substance, will be taxed in advance at the Taiwan parent company level. In the past, taxation of foreign investment income was deferred until the Taiwan parent company received dividend income. Going forward, qualified investment income will be deemed distributed and taxable in Taiwan in advance. For PEM rules, under this new tax regime, if a foreign company meets all three criteria triggering the PEM definition, including (i) decision making location, (ii) record keeping and maintenance location, and (iii) actual operating location are all in Taiwan, the foreign enterprise will be deemed as having its head office in Taiwan and will be subject to tax assessment in accordance with the Taiwan Income Tax Act and other tax regulations.

Digital services tax and Other significant anti-avoidance legislation: No such tax and other anti-avoidance legislation.

Value-added tax/Goods and services tax

Type of tax: Business tax is an indirect tax that is imposed on the sale of goods and services supplied and/or utilized within Taiwan, as well as the importation of goods into Taiwan according to Taiwan Business Tax Act (BTA). There are 2 systems under Business Tax: (1) Gross Business Receipts Tax (GBRT) and (2) Value Added Tax (VAT). Following table is the summary of Taiwan.

Standard rate: 5%

Reduced rates: 0%

Registration: For companies that are not financial institutions or other special business entities specified in Business Tax Act. Taxable items: • Sale of goods • Services supplied and or/utilized in Taiwan and • Goods imported to Taiwan. GUIs should be issued by the seller of goods or services to the purchasers

Filing and payment: • Business tax returns should be filed on a bi-monthly basis before the 15th day of every odd month. • A company that qualifies for 0% rate VAT may apply to file its VAT returns monthly.

Social security contributions

There are compulsory social security programs that require contributions from employers and employees based on monthly insured salary, which is capped at various amounts for labour insurance, health insurance, and pensions. Taiwan social security programs include the following:

• Labour Insurance Program: Where a company hires five or more employees, it is obligated to insure all employees (including domestic and foreign employees) under the labour insurance program run by the government. Companies with less than five employees may also apply for labour insurance coverage for their employees. The premium rate for ordinary insurance is 10.5% on the employee’s monthly insured salary up to TWD 45,800, with an additional 1% levied for unemployment insurance. The employer is required to contribute 70% of this premium.
• National Health Insurance Program: The premium rate for each insured person is set at 5.17% of a domestic/foreign employee’s monthly insured salary, up to TWD 182,000. The employer is required to contribute 60% of this premium. Further, the employer bears the cost of both the employee itself and that of the average dependant, which amounts to 1.61 headcount per employee. Moreover, under the Second Generation National Health Insurance Program, the employer needs to bear a supplementary premium (at the rate of 2.11%) where the monthly pay (including both regular and non-regular pay) exceeds the monthly insured salary range, which is capped at TWD 182,000 for any individual.
• Labour Pension Program: An employer needs to make monthly contributions to a domestic employee’s individual pension account set up with the Labour Insurance Bureau. The monthly contribution rate borne by the employer should be at least 6% of the employee’s monthly insured salary up to TWD 150,000.

Self-employed

For any alien having income from sources in the Republic of China (R.O.C.), individual income tax shall be levied on the income derived from such sources in accordance with the Income Tax Act of the R.O.C. Alien taxpayers can be categorized as “Non-Residents of the R.O.C.” and “Residents of the R.O.C.” based on their length of stay. The different ways for aliens to file income tax returns are listed below.

(1) “Non-Residents” of the R.O.C.

A. For an individual who stays in the R.O.C. not more than 90 days within a taxable year (January 1st to December 31st), the income derived from sources in the R.O.C. shall be withheld according to the withholding rate (see Article 15) and paid at the respective sources. The taxpayer needs not file an income tax return. However, if an individual has income derived from property transaction, occasional trade, interest from mortgages, etc., he/she should declare and pay tax prior to departure.

B. For an individual who stays in the R.O.C. over 90 days but less than 183 days within a taxable year, individual income tax shall be declared and computed according to the withholding rate on his/her income derived from sources in the R.O.C., including the remunerations derived from abroad for his/her services rendered in the R.O.C.

(2) “Residents” of the R.O.C. An individual who stays in the R.O.C. for 183 days or longer 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/her net consolidated income (taxable income) which shall be the annual gross consolidated income (including the various incomes derived within the R.O.C. and the remunerations derived outside the R.O.C. for services rendered in the R.O.C.) minus the exemptions, deductions, and basic living expense difference.

For an alien who remains in the R.O.C. within one taxable year:

(1) Not more than 90 days: A. The income tax shall be withheld at the income sources or declared and taxed in accordance with the withholding rate. B. The income tax shall be exempted form income derived from employer(s) outside the R.O.C.

(2) More than 90 days: A. The income derived within the R.O.C. shall be filed in accordance with a withholding statement as declared by the taxpayer. B. Income paid by an employer outside the territory of the R.O.C. must also be reported by the taxpayer. The taxpayer will be required to submit a certificate of earnings notarized by the tax authorities concerned from the employer(s) outside the territory of the R.O.C. If a certificate from the tax authorities is not available, a notarized certificate issued by a notary public or certified public accountant (CPA) is acceptable. In the case where such a certificate is to be used, a photocopy of the license of the CPA, who issued the certificate, must also be submitted. If the taxpayer fails to submit a certificate of earnings issued by the tax authority or certified by a notary public or CPA, the tax office will assess the amount payable according to the standard amounts. Any income received in foreign currency should be exchanged into New Taiwan Dollars (NT$) on the basis of the official foreign exchange rates or prevailing transfer rates at the time the income is actually or constructively received.

Other taxes

Capital duty: Gains from the sale of Taiwanese securities are exempt from regular income tax assessment. However, companies resident in Taiwan who sell domestic marketable securities have to calculate an income basic tax amount and compare such tax amount with the regular income tax amount, then pay the higher of the two taxes calculated.

Immovable property taxes: Property taxes include: • Consolidated Land and Housing Sales Tax (part of the income tax system) • Land Value Tax • Land Value Incremental Tax • House Tax

Transfer tax: • Securities Transaction Tax • Futures Transaction Tax

Stamp duty: Stamp duty is levied on the documents and contracts executed within Taiwan, e.g. cash receipts, contractual agreement, or contracts for real property and movable properties.

Net wealth/worth tax: There are no net wealth/worth taxes in Taiwan.

Inheritance/gift taxes: Estate tax is based on all property transferred at death. Gift tax is based on all property transferred annually. Both are applicable to individuals only.

Other: • Commodity tax • Tobacco and alcohol tax • Specifically selected goods and services tax • Deed tax • Vehicle license tax

Tax treaties

As of 31 December 2024, Taiwan has concluded 35 effective double taxation agreements (DTAs) with countries around the world, which generally follow the Organisation for Economic Co-operation and Development (OECD) Model Tax Convention and cover corporate and individual income tax. Taiwan has also concluded 13 international transportation income tax agreements. Taiwan has also signed a treaty with China; however, this tax treaty has not yet come into effect.