The highest governing body in charge of enforcing duty laws and directing the leveling and collection of taxes is the Ministry of Finance, which is a part of the Executive Yuan. Both the federal government and local governments levy taxes. The source principles govern the collection of personal income tax. In general, only revenue obtained from tasks performed in Taiwan, as well as other earnings from Taiwanese sources, is liable to levies. However, if a resident’s earnings from sources other than Taiwan reaches TWD1,000,000, that earning is subject to the Basic Tax, often known as the Alternative Minimum Tax (AMT). Net taxable income for residents is taxed at progressive rates ranging from 5% to 40%.
The tax rate is set at 18 percent on gross salary income and 20 percent on other income for non-resident foreigners. The Taiwan dollar is Taiwan’s official currency (TWD).
Law governing taxes
There isn’t a single legislation in this country that regulates taxation, in contrast to the Internal Revenue Code in the US. Instead, several rules and regulations, each about a certain form of tax, govern taxation. As the main legislative body, the Legislative Yuan has a significant influence on the creation and revision of laws about levies. The fundamental law governing individual income taxes and profit-seeking enterprise income taxes is the Income Tax Act. Any alien who receives earnings from sources in Taiwan must pay individual income tax on earnings by the Income Tax Act. Depending on how long they have been in the country, foreign taxpayers might be either Residents or Non-Residents. The various methods for filing income tax returns by aliens are given below:
Non-residents
The earnings generated from sources must be withheld by the withholding rate and paid at the respective sources for a person who stays for no more than 90 days during a tax year (January 1st through December 31). The taxpayer is not required to submit a tax return. However, if a person receives money from real estate deals, sporadic trading, mortgage interest, etc., he or she should declare and pay levies before leaving. Individual income tax must be declared and calculated per the withholding rate on an individual’s income derived from sources over there, including the compensation received from abroad for services rendered in Taiwan, if the individual spends more than 90 days but fewer than 183 days during a tax year.
Residents
Anyone who spends at least 183 days during a tax year is considered to be a resident. Remunerations received by such a person from Taiwan and overseas for services given there, as well as other types of revenue derived from Taiwan, must be declared and computed based on a progressive rate.
The annual gross consolidated shall be his or her net consolidated income (taxable income).
Income basic tax (IBT)
Individuals who are duty residents are subject to IBT, which is calculated at a fixed rate of 20%, in addition to standard income tax computations under the Income Tax Act (including expatriates who stay in Taiwan for 183 days or more in a tax year). If the following conditions are satisfied, foreign-sourced earnings will be taken into account when determining IBT:
- The person resides in Taiwan for duty purposes.
- Basic income is greater than TWD 6.7 million.
According to the IBT Act, a taxpayer must add back specific elements when determining the amount of IBT owing on earnings subject to IBT.
Lottery for uniform invoices
Details about the uniform invoice lottery are available at the uniform invoice lottery. The Taiwanese government initially devised a consistent invoicing system in the 1950s to promote truthful sales reporting and discourage business owners from underpaying taxes. The government established a lottery system for receipts as an incentive. Each receipt has an alphanumeric code, and every two months a lottery drawing is done. Depending on how many numbers match, the prize can be up to NT$10 million (about $335,000 as of February 2012). The Uniform Invoice Award Regulations apply to the lottery.
