Taxation in Taiwan
Taiwan’s taxation framework is a complex system that plays a fundamental role in the country’s economic strategy, balancing the need for revenue with encouragement for growth and investment. This system includes various types of taxes, each regulated by intricate rules and rates. It is crucial for businesses, investors, and individuals to have a thorough understanding of this environment to effectively manage their finances and ensure compliance.
Taxation system
Taiwan’s taxation system is structured to be in harmony with its domestic fiscal policies and international commitments, providing a flexible yet organized approach to taxation. It may include elements such as flat rates, progressive scales, and specific exemptions, demonstrating the nation’s economic goals and social aims. Grasping the complexities of these tax mechanisms is essential for maximizing financial results, maintaining compliance, and taking advantage of opportunities within the legal framework.
Capital gains tax
Taiwan does not have a distinct capital gains tax (CGT). Instead, all capital gains are classified as ordinary income and are liable to the standard income tax rates, which range from 5% to 40% for individuals and 20% for corporations. Certain transactions may qualify for specific exemptions, like gains from the sale of securities that occurred before January 1, 2016, provided certain conditions are met.
Corporate taxation
In Taiwan, corporate income is subject to a standard tax rate of 20%, along with a 5% surtax on earnings that are not distributed. Foreign company branches face the same 20% tax rate but do not incur the surtax on undistributed earnings. There are particular regulations that govern capital gains, alternative minimum tax, and incentives related to research and development.
Personal income taxation
Taiwan imposes taxes on resident individuals based on their income sourced from Taiwan, using progressive rates that range from 5% to 40%. For non-residents, taxation is at flat rates determined by the type of income. There are special rules, like the Alternative Minimum Tax (AMT), that could apply if foreign-source income surpasses TWD 1,000,000. Taiwan’s tax year aligns with the calendar year, and there are no payroll taxes.
Dividend taxation
Individuals residing in the area can either opt to add dividends to their taxable income and receive an 8.5% tax credit, which is limited to NTD 80,000, or they can select a fixed tax rate of 28%. Those who do not reside in the area face a 21% withholding tax on dividends. Furthermore, corporate dividends obtained by resident companies from other companies in Taiwan are not subject to corporate income tax.
Property tax
Taiwan’s property tax framework consists of multiple elements, including the Land Value Tax (LVT), Land Value Increment Tax (LVIT), and House Tax. The LVT is applied each year based on the government-determined value of land, utilizing progressive rates that vary between 1% and 5.5%. The LVIT is assessed on the appreciation of land upon its transfer, with rates escalating between 20% and 40%. The House Tax is charged annually on the assessed value of buildings, with rates between 1.2% and 3.6% for residential properties and 3% to 5% for commercial ones. This property tax system aims to ensure that all real estate in Taiwan is properly taxed according to its value and usage.
Inheritance taxation
Taiwan levies an inheritance tax on the global assets of individuals residing in Taiwan, with rates that progress from 10% to 20%. This tax is assessed based on the estate’s total value at the time of death. The purpose of the system is to guarantee the inclusion of all relevant assets, with the tax calculation based on the overall estate valuation. For individuals who are not residents, the tax is applicable only to assets situated in Taiwan. The regulations surrounding the inheritance tax are rigorously enforced, outlining precise instructions on the valuation and taxation of estates.
International taxation
Taiwan’s international tax framework mainly targets the taxation of corporate income, withholding taxes on dividends, interest, and royalties, as well as income earned in Taiwan by non-resident entities. The corporate income tax rate is established at 20%, while a withholding tax of 21% is imposed on dividends paid to non-residents. Interest and royalty payments made to non-residents face withholding taxes that vary between 15% and 20%, based on the specific category of income. These rates illustrate Taiwan’s strategy for taxing international business operations and cross-border dealings.
Cryptocurrency taxation
Taiwan’s cryptocurrency tax framework is developing, and at present, cryptocurrency transactions fall under standard tax regulations. Individual income from cryptocurrency trading could be taxed at progressive rates reaching 40%, whereas corporate entities face a 20% tax on net profits derived from crypto activities. Furthermore, businesses involved in cryptocurrency transactions might incur VAT if those transactions are classified as sales of goods or services. The system seeks to ensure that income and transactions related to cryptocurrencies are taxed correctly within the existing tax structures.
VAT system
Taiwan has a VAT system that covers the sale of goods, the provision of services, and imports. The main VAT rate is 5%, which applies to the majority of taxable transactions. Some goods and services may be eligible for lower rates of 0%, 1%, or 2%. Companies must impose VAT on their sales and can reclaim credits for VAT paid on their purchases. Financial institutions and certain small businesses follow a distinct VAT regime, and foreign businesses offering electronic services to individuals in Taiwan are also required to adhere to VAT regulations.
Our taxation solutions
In a tax landscape that is continuously changing, seeking expert advice is essential. Our company provides a range of specialized tax solutions customized to address the varied requirements of individuals, businesses, and investors in Taiwan. Our offerings aim to manage the intricacies of tax regulations, reduce liabilities, and guarantee complete compliance with all regulations.
- Personal tax advisory: Tailored advice to minimize tax exposure while ensuring legal compliance.
- Corporate tax strategy: Comprehensive planning to maximize tax efficiency and leverage incentives.
- Capital gains optimization: Expert guidance to manage and reduce taxes on capital gains.
- International tax planning: Advanced strategies for optimizing cross-border tax outcomes.
- Cryptocurrency advisory: Compliant tax strategies for both individual and corporate crypto activities.
- Inheritance and estate planning: Strategic planning for efficient wealth transfer and reduced inheritance taxes.
- VAT compliance: Full-service support for VAT registration, reporting, and optimization.
Book a consultation
Navigating the intricate realm of taxation often requires expert guidance. Reach out to us today to arrange a consultation with our tax specialists. We will collaborate with you to create a personalized tax strategy that meets your goals and guarantees adherence to the regulatory framework in Taiwan.
Disclaimer
Tax laws and regulations are continually evolving and can differ depending on personal situations. The information provided here serves as general guidance and may not represent the latest updates. It is strongly advised to seek the assistance of a qualified tax professional for detailed and current advice tailored to your circumstances.