Income tax guide for foreign taxpayers

As May approaches, not only Taiwanese citizens but also foreigners working in Taiwan are obligated to pay taxes. What should foreigners be aware of when it comes to filing their taxes?
Foreigners with any further questions may directly contact the tax authority nearest to their domicile.

Q1: Are foreigners subject to different income tax rates based on their period of residence in Taiwan?

A1: Foreigners are subject to different tax levies based on their length of stay.
(a) For foreign individuals who stay in Taiwan for no more than 90 days within a taxable year, taxes on income derived from sources in Taiwan should be withheld according to the withholding rate and paid by the respective sources. In addition, nonwithheld incomes should be declared prior to departure from Taiwan, or during the tax-filing month if the taxpayer is still in Taiwan then.
(b) For foreign individuals who stay in Taiwan over 90 days but less than 183 days within a taxable year, taxes on income derived from sources in Taiwan should be withheld according to the withholding rate and paid by the respective sources. In addition, non-withheld incomes as well as other remunerations derived outside the Republic of China for a foreign taxpayer’s services rendered in the ROC should be declared prior to departure from Taiwan, or during the taxfiling month if the taxpayer is still in Taiwan then.
(c) For foreign individuals who stay in Taiwan for 183 days or more within a taxable year, individual income tax should be levied by a progressive rate based on the amount of the taxpayer’s consolidated income. Foreign individuals should file an income tax return before May 31 of the next year at the tax authority nearest to their domicile. Foreigners who leave Taiwan in the interim period should file their taxes before departure.

Q2: Where should foreigners file their tax returns?

A2: Foreign taxpayers should file their tax returns at the tax administration with jurisdiction over the address listed on their Alien Residence Certificate. For example, foreigners living in Taipei or Kaohsiung city should respectively file their tax returns at the Foreign Taxpayers Section of the Taipei National Tax Administration, or Kaohsiung National Tax Administration. Foreigners living in other cities should go to their local national tax administration branch, revenue service office or other related service offices.

Q3: If a Taiwanese citizen is married to a foreigner, how should they file their income tax returns?

A3: If a Taiwanese citizen is married to a foreigner, and the couple chooses the Taiwanese citizen to be the taxpayer when filing a tax return, they can file their income tax returns with the national tax authorities or revenue service offices located in the district where they live. If the foreigner is the designated taxpayer, they may file at the National Tax Administration’s foreign taxpayers’ office. Those residing in Taipei City should file taxes at the Foreign Taxpayers
Section, Taipei National Tax Administration. In addition, no matter where a couple files their taxes, they should only jointly file one tax return.

Q4: Should a couple file their income tax returns jointly? If a couple gets married or divorced during the interim of the taxpaying year, how should they file their taxes?

A4: The tax due on the salary of a foreigner’s spouse may be calculated separately. Yet the income taxes of a foreigner and their spouse should still be filed jointly. In a situation where a couple marries or divorces during the interim of a taxpaying year, they may choose to file income tax returns jointly or individually for that period. A marriage certificate must be presented if they choose to file jointly. Furthermore, the divorced couple may determine which party may claim any related exemption(s) for their dependents. Otherwise, the National Tax Administration will determine that such exemptions should be claimed by the former spouse who actually provides financial support for the dependents.

Q5: What exemptions and deductions can aliens residing in the ROC territory claim when calculating their income tax?

A5: The individual income tax for an alien resident of the ROC shall be computed by a progressive rate on the amount of his or her net consolidated income which shall be the annual gross consolidated income minus the exemptions and deductions. The exemptions and deductions for the fiscal year of 2008 are stated as follow:
1. Exemptions: There is an NT$77,000 exemption for each taxpayer, his or her spouse and dependents. In case the taxpayer, his or her spouse and their lineal ascendants have attained seventy years of age, the exemption is NT$115,500.
2. Deductions: Aliens can claim either standard deduction or itemized deductions. Besides, they
still can claim special deductions.
(1) Standard deduction: There is a NT$73,000 deduction for a single person and NT$146,000
deduction for a married couple filing a joint income tax return.
(2) Itemized deductions (original receipts or documents should be attached according to the tax law). There are 6 items included:
a. Donation: The deduction shall not exceed 20 percent of the taxpayer’s consolidated gross income. However, donations made to national defense, military or to the government and ancients are fully deductible.
b. Personal insurance premiums: National Health Insurance payments can be claimed in full amount, other deductions shall not exceed NT$24,000 for each person per year.
c. Medical and maternity expenses: Deductions can be claimed following the law or regulations.
d. Losses from disasters: Deductions can be claimed following the law or regulations.
e. Mortgage interest paid on a loan for an owner-occupied dwelling: Under the conditions that the residential house entitled for the deduction is to be located within the territory of the R.O.C., and that the deduction shall not exceed NT$300,000 for one house each year. However, in the case that the taxpayer also claims a special deduction for savings and investment, such special deduction shall be subtracted from the abovementioned interest.
f. Rental expense: Rents paid for houses in the R.O.C. in which the taxpayer, his or her spouse and lineal dependent not personally live in rather than used by business for profit but self-lived are deductible. The maximum deduction for rental expense is NT$120,000 for each annual tax return. There is no deduction for individuals who have file “Mortgage interest paid on a loan for an owner-occupied dwelling”.
(3) Special deductions:
a. Losses from property transactions: Deductions shall not exceed the gains from property transaction filed for the same year.
b. Special deduction for salary or wages: Each person receiving a salary may claim a deduction for his or her salary only up to a maximum of NT$100,000.
c. Special deductions for savings and investments: Deduction for each household shall not exceed NT$270,000 per year.
d. Special deduction for disability: Deductions for each disabled person is NT$100,000 per year.
e. Special deduction for tuition: For each annual return, the maximum deduction for tuition fee
is NT$25,000 for each children attending college or university.
In the case that an alien resident of the ROC departed and did not return during a taxable year, the amounts for exemptions and standard deduction shall be calculated in proportion according to the total number of days for which he or she stayed in the ROC during that year.

Q6: How do aliens, who stay in the ROC over 90 days in a taxable year, file their income tax returns for income derived from employers outside the ROC for services rendered during their stay in the ROC?

A6: Taxpayers must file income tax returns for remuneration paid by their employers outside the ROC for services rendered in the ROC during their stay. Taxpayers must also submit a notarized certificate of earnings issued by tax authorities, a CPA, or a notary public. However, a photocopy of the license of the CPA or the notary public who issues the certificate must also be submitted to the tax authorities for review. Aliens’ service remunerations, derived from employers outside the ROC, should be calculated at the average foreign currency exchange rate for the year.

Q7: What would happen if an alien did not file their income taxes?

A7: If an alien is delinquent in the payment of taxes, such taxes will be charged with a penalty rate of a maximum of three times the amount of the tax payable. Tax authorities will also inform the Bureau of Immigration to examine the taxpayer ’s tax certificate when they depart from Taiwan, and they will not be allowed to leave the country without presenting a valid tax certificate receipt issued by the tax authorities.

Source: Taiwan What's Up