What do foreign and overseas Chinese investors need to know about paying profit-seeking-enterprise income tax and individual income tax?
Profit-Seeking-Enterprise Income Tax
Taiwan’s profit-seeking-enterprise (“PSE”) income tax is levied as follows:
- For a PSE with head office located in Taiwan, income tax should be levied based on the PSE’s worldwide income. However, income tax paid on offshore income in foreign countries jurisdictions can be credited against the PSE’s overall income tax liability. The amount of deductible foreign tax credit is limited to the increase in Taiwan income tax liability resulting from inclusion of foreign source income with calculated at applicable domestic tax rate.
- For a PSE with head office located outside Taiwan generating Taiwan source income, income tax should be levied based on the PSE’s Taiwan source income. A PSE with a fixed place of business or business agent within the territory of Taiwan should file the income tax return. A PSE without a fixed place of business or business agent within the territory of Taiwan but having Taiwan source income should have the tax withheld at source by the withholding tax agent; while the income tax is not withheld, the PSE should report the income and pay the underlying tax due based on the regulated withholding rate and in this case, the relevant regulations governing income tax filing do not apply.
- Starting fiscal year of 2010, the income tax brackets and tax rates for PSE in Taiwan follow:
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A PSE with taxable income of NT$120,000 or less is exempt from the Income tax.
- A PSE with taxable income exceeding NT$120,000 should be taxed at 17% on the total taxable income, but income tax liability may not exceed 50% of the portion of taxable income over NT$120,000.
For other related information, please visit the website of the Taxation Agency, Ministry of Finance, and check "Announcements."
Individual Income Tax
The individual income tax in Taiwan is taxed on the taxpayers’ Taiwan source income. Taxpayers are categorized as residents or non-residents, regardless of their nationalities. Regulations relating to residents and non-residents are as follows:
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A resident is defined as a person who has a domicile in Taiwan and habitually resides in Taiwan, or who does not have a domicile in Taiwan but stayed in Taiwan for 183 days or more cumulatively in a given tax year. Those who have Taiwan source income should file individual income tax returns and pay the tax in accordance with the Article 2, Paragraph 1 and Article 71 of the Taiwan Income Tax Act.
- Non-residents having Taiwan source income should pay the withholding tax at source in accordance with the Article 2, Paragraph 2 of the Taiwan Income Tax Act.
For more related information on the individual income tax for foreigners and overseas Chinese, please refer to Foreign Taxpayers service
at the Taipei National Tax Administration
website, or the Kaohsiung National Tax Administration website.
