1. Corporate Income Tax (CIT)
Corporate Income Tax (CIT) in Taiwan applies to both resident and non-resident companies, with a tax rate of 20% on net profits. Non-resident companies are taxed on Taiwan-sourced income and only if they have a Permanent Establishment (PE) in Taiwan.
| Corporate Tax Rate | Rate (%) | Details |
|---|---|---|
| Standard CIT Rate | 20% | Applied to resident companies on all profits. |
| Non-Resident Companies | 20% | Only applicable to income sourced from Taiwan. |
Key CIT Compliance Factors:
- Resident Corporations: Taxed on worldwide income.
- Non-Resident Corporations: Taxed only on income sourced from Taiwan. If a company has a Permanent Establishment (PE) in Taiwan, income generated through the PE is subject to local tax.
Tax Deductions & Incentives:
- R&D Tax Incentives: Companies investing in R&D activities may qualify for deductions.
- High-Tech Industry Incentives: Reduced tax rates may apply for high-tech companies involved in innovation, especially in sectors like AI and biotechnology.
2. Individual Income Tax (PIT)
Taiwan’s Individual Income Tax is progressive, with tax rates ranging from 5% to 40%. Individuals are taxed based on their annual income, with deductions available for dependents, medical expenses, and more. Expatriates may also benefit from the Impatriate Tax Regime, offering tax reductions for up to five years.
| Income Range (NTD) | Tax Rate (%) | Details |
|---|---|---|
| Up to NTD 540,000 | 5% | Lowest income bracket. |
| NTD 540,001 – 1,210,000 | 12% | Moderate income range. |
| NTD 1,210,001 – 2,420,000 | 20% | Higher middle-income range. |
| NTD 2,420,001 – 4,530,000 | 30% | High income bracket. |
| Over NTD 4,530,000 | 40% | Highest income bracket. |
Key PIT Compliance:
- Tax Deductions: Deductions for dependents, healthcare, and mortgage interest.
- Impatriate Tax Regime: Foreign nationals may receive a 70% reduction on taxable income for up to five years if they meet specific criteria.
3. Value Added Tax (VAT)
Taiwan imposes a Value Added Tax (VAT) on most goods and services. The standard VAT rate is 5%, and some essential goods, including food and healthcare items, are exempt or subject to reduced rates.
| VAT Rate | Rate (%) | Applicable Goods/Services |
|---|---|---|
| Standard Rate | 5% | Most goods and services. |
| Reduced Rate | 2% | Basic goods like food and necessities. |
| Exempted Items | N/A | Medical, financial, and educational services. |
Key VAT Compliance:
- VAT Registration: Businesses with annual turnover exceeding NTD 480,000 must register for VAT.
- Filing: Businesses are required to file VAT quarterly unless their turnover is lower than the registration threshold, in which case annual filings may be allowed.
4. Withholding Tax
Taiwan requires withholding taxes on payments made to non-residents, including dividends, interest, and royalties. These rates may be reduced under bilateral tax treaties.
| Income Type | Withholding Tax Rate | Notes |
|---|---|---|
| Dividends | 21% | Reduced rates may apply via tax treaties. |
| Interest | 15% | Treaty reductions available. |
| Royalties | 20% | Treaty-dependent reductions may apply. |
5. Social Security Contributions
Social security in Taiwan includes contributions to various insurance programs, such as labor insurance, health insurance, and pension schemes. Both employers and employees make contributions.
| Contribution Type | Employer Contribution | Employee Contribution | Coverage |
|---|---|---|---|
| Labor Insurance | 7% | 1% | Pensions, unemployment, and disability benefits. |
| Health Insurance | 5.17% | 4.69% | Medical and health benefits. |
| Pension Contributions | Included in above | 9% (capped) | National pension fund. |
Filing and Payment Deadlines:
- Contributions are generally due monthly and must be reported with payroll filings.
6. Business Tax Incentives
Taiwan offers various incentives aimed at fostering business growth, particularly in high-tech industries.
| Incentive | Benefit | Details |
|---|---|---|
| R&D Tax Credits | Reduces tax liability for R&D investments. | Companies in tech and innovation sectors can claim deductions for R&D expenses. |
| Green Energy Incentives | Deductions and credits for renewable energy investments. | Encourages investment in sustainable energy sectors. |
| High-Tech Incentives | Tax reductions for high-tech companies. | Companies engaged in emerging technologies may qualify for lower tax rates. |
7. Additional Considerations
Tax Residency:
- Corporate Tax Residency: A company is considered a tax resident of Taiwan if it is incorporated in Taiwan or has its central management or business operations in the country.
- Individual Tax Residency: An individual is considered a tax resident of Taiwan if they stay in Taiwan for more than 183 days during a calendar year.
Filing Deadlines:
- Corporate Tax Returns: The filing deadline for corporate tax returns is typically May 31st of the following year.
- Individual Tax Returns: Tax returns for individuals are generally due by May 31st of the following year.
Penalties for Late Filing:
- Late Filing Penalty: Failure to file tax returns on time may incur penalties of up to 30% of the tax owed.
- Late Payment Penalty: Interest on late payments is calculated based on the European Central Bank (ECB) rates.
GlobainePEO – Your Partner in Taiwanese Tax Compliance
At GlobainePEO, we help businesses navigate Taiwan’s complex tax landscape, ensuring full compliance with corporate income tax, payroll taxes, VAT, and other key obligations. Our team of experts manages Taiwan’s regulatory intricacies, allowing you to focus on expanding your business in one of Asia’s most dynamic economies. With GlobainePEO as your trusted partner, you can seamlessly navigate Taiwan’s tax requirements and benefit from its favorable business environment.