Taiwan, China flag Taiwan, China: Business Environment

Tax rates in Taiwan, China

Tax Rates

Consumption Taxes

Nature of the Tax
Business tax (BT) is imposed under two systems: the VAT system and the special BT system (gross business receipts tax - GBRT, which applies to financial institutions, SMEs and certain restaurants).
Tax Rate
The VAT is applied at a 5% flat rate.
Reduced Tax Rate

GBRT is levied at the following rates:

  • 0.1% for traders in the agricultural wholesale market and small businesses supplying agricultural products
  • 1% for small businesses and other business entities that are excluded by the MOF from reporting their transactions
  • 1% for reinsurance premiums of insurance enterprises (5% for operations other than authorized core businesses)
  • 2% or 5% on the sale of services by local financial institutions (for banking and insurance companies: generally, 5%, except for certain transaction types; for the other financial institutions: 2% on their core business revenue and 5% on their non-core business revenue)
  • 2% or 5% on the purchase of services from foreign financial institutions
  • 15% for nightclubs or restaurants providing entertainment
  • 25% for saloons or tearooms, coffee shops and bars offering companionship (in nightclubs, customers can ask wait staff to sit aside, serve drinks, chat and sing karaoke).
Other Consumption Taxes
Commodity tax (excise duty) is levied on certain commodities, as specified in the Commodity Tax Act (including rubber tyres, beverages, cement, plate glass, oil and gas, electrical appliances, and vehicles), at the time when such goods are dispatched from a factory or when imported. Tax rates vary from 8% to 30% and are applicable to different types of commodities based on the value of the goods or on the volume in specific circumstances.

A “luxury tax” is imposed on the sale, manufacture and import of certain goods and services (i.e. passenger vehicles, yachts, aircraft, helicopters and light vehicles that cost more than NTD 3 million; furniture; and non-refundable memberships that cost more than NTD 500,000) at a rate of 10% or 15% of the total price (including necessary charges, commodity tax, VAT and customs duty).

 
Find out more about Taxes and Accounting in Taiwan, China on GlobalTrade.net, the Directory for International Trade Service Providers.
 

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Corporate Taxes

Company Tax
Tax Rate For Foreign Companies
Taiwanese companies are taxed on their worldwide income whereas non-resident companies are only taxed on their Taiwanese-sourced income.
A non-resident company with a fixed place of business or business agent in Taiwan is taxed similarly to a resident company. A non-resident company having no fixed place of business or business agent in Taiwan is subject to withholding tax at source on its Taiwan-sourced income.
Capital Gains Taxation
Capital gains are treated as ordinary income and taxed at the standard corporate rate.
Since 1 January 2016, capital gains obtained by a for-profit corporation on the transfer of shares of a local company are subject to the alternative minimum tax (12%, or 6% where the holding period is greater than three years).
Under the tax regime that applies to the sale of real estate (including land and houses) acquired after 1 January 2016, resident companies are subject to corporate income tax (20%) on capital gains from the sale of real estate. Non-residents (both companies and individuals) are subject to a 45% income tax on capital gains from the sale of real estate that has been held for less than one year, or 35% if the property has been held for more than one year.
Capital losses may be deducted against capital gains and carried forward for five years.
Main Allowable Deductions and Tax Credits
All taxes, other than income tax, are generally deductible, unless where such taxes are related to tax-exempt income. Net operating losses may be carried forward up to 10 years. The carryback of losses is prohibited.

Start-up expenses during the start-up period can be deducted in the year incurred, same as for the interests on loans that are used for business purposes. However, for a loan from a non-financial institution, the interest rate shall not exceed 15.6%/year.

Losses on bad debts can be deducted when certain legal proceedings or time requirements have been satisfied. The loss should first be charged against the bad debt provision, which should not exceed either 1% of accounts receivable and notes receivable outstanding, or the actual average bad debt ratio for the past three years.

Certain charitable contributions are not subject to any tax limit (national defence, morale of troops, contribution to government, etc.), while others are subject to various limits under the relevant regulations.
Fines and penalties are not tax-deductible.

Taiwanese companies and branches of limited partnerships can claim a tax credit of 15% (capped at 30% of taxable income obtained in a tax year) for their R&D expenditure. A tax credit for smart machinery and 5G system implementation expenditures can apply.
Tax incentives are available for investors located in prescribed areas (science parks, export processing zones, free-trade zones, etc.) or active in certain sectors (like biotech).

Subsidies, allowances, incentives, or compensation provided by the government to entities affected by COVID-19 shall be exempt from income tax. Furthermore, a 200% deduction of salary expenses is given to businesses for paid leave given to employees due to COVID-19 related reasons.

Other Corporate Taxes
Land and buildings are annually assessed for tax based on their officially assessed values as determined by the government authorities at the applicable rate. The land value tax rate ranges from 1% to 5.5% of the assessed land value. The building tax rate for commercial properties is 3% to 5% of the assessed value, and the rate for non-commercial properties is 1.2% to 3.6% of the assessed value. A Land value increment tax (LVIT) payable by the seller is levied on the sale of land, based on the increase in the government-assessed value of the land during the ownership period, adjusted for inflation, at regular progressive rates ranging from 20% to 40% (a special rate of 10% may also apply).

A real property transfer tax applies to all properties acquired on or after 1 January 2016, at a rate of 20% on Taiwanese corporate taxpayers or 35% on profit-seeking enterprises with foreign head offices located outside of Taiwan (45% if the property is held for less than a year). The taxable base is the market value of the properties reduced by related costs, expenses, and the increase in government-assessed land value for LVIT purposes.

Transactions of immovable property involving sale, creation of Dien (property rights based on Chinese customs that allow the buyer to make full use of a real estate for a certain period of time after which the seller has the right to retake the property by paying the difference in price), exchange, bestowal, partition, or acquisition of ownership by virtue of possession are subject to deed tax. The deed tax rates range from 2% to 6%, depending on the types of transactions involved.

A tax is levied on securities transactions (with the exception of government bonds) at the rate of 0.3% on gross proceeds from the sale of domestic shares and at varying rates between 0.0000125% and 0.6% on futures transactions.

Stamp duties are imposed on certain documents, with rates between 0.1% and 0.4% of the taxable basis.

Capital duty does not exist officially; however, a lump-sum fee of NTD 1,000 or 1/4000 of the capital (whichever is higher) is levied upon capital subscription.

Although there is no social security tax in Taiwan, factories, mines and all companies with 50 or more employees must establish funds for employee welfare. There are two social security programs: Labor Insurance (10% on the employee's monthly insured salary up to TWD 45,800, with an additional 1% levied for unemployment insurance - the employer is required to contribute 70% of this premium); and National Health Insurance (4.69% of an employee's monthly insured salary, up to TWD 182,000 - 60% of such premium is borne by the employer). Furthermore, employers are required to contribute 6% of an employee’s monthly salary to employees’ pension accounts at the Bureau of Labor Insurance (monthly salary cap of TWD 150,000).

Other Domestic Resources
Department of Taxation
Consult Doing Business Website, to obtain a summary of the taxes and mandatory contributions.

Country Comparison For Corporate Taxation

  Taiwan, China East Asia & Pacific United States Germany
Number of Payments of Taxes per Year 11.0 22.9 10.6 9.0
Time Taken For Administrative Formalities (Hours) 221.0 198.0 175.0 218.0
Total Share of Taxes (% of Profit) 34.5 33.9 36.6 48.8

Latest available data.

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Individual Taxes

Tax Rate

Individuals income tax Progressive rate from 5% to 40%
From NTD 0 to 540,000 5%
From NTD 540,001 to 1,210,000 12%
From NTD 1,210,001 to 2,420,000 20%
From NTD 2,420,001 to 4,530,000 30%
Above NTD 4,530,000 40%
Alternative minimum tax (AMT) flat rate of 20%
taxpayers must calculate the amount of AMT due on income subject to AMT after adding back certain items and compare the result with the regular income tax payable: if the AMT payable is greater than the regular income tax payable, the taxpayer has to calculate and pay AMT based on a specific formula:
(income subject to AMD - NTD 6.7 million) x 20%
Allowable Deductions and Tax Credits
A taxpayer may select either the standard deduction or itemized deductions. The standard deduction for a single taxpayer is TWD 120,000 (TWD 240,000 for married couples filing a joint return).
Itemised deductions include: charitable contributions; insurance premiums (maximum of TWD 24,000/person/year for group insurance premium and labour insurance premium); medical expenses; calamity losses; either interest paid on loans for the purchase of an owner-occupied house in Taiwan (maximum of TWD 300,000) or rental payment (maximum of TWD 120,000) for the lease of a self-use residence in Taiwan.

A resident alien is eligible for a personal exemption of TWD 88,000, plus TWD 88,000 for the spouse and each dependant (TWD 132,000 for dependants over 70 years of age). A non-resident alien is not eligible for any personal exemptions.

Further deductions are provided for: salaries or wages (capped at TWD 200,000/person), interest earned from bank deposits (up to TWD 270,000 per tax filing unit), disabled or handicapped individuals (TWD 200,000/person), dependent child tuition (TWD 25,000 per child), losses from property transactions, etc.

Subsidies, allowances, incentives, or compensation provided by the government to individuals affected by COVID-19 shall be exempt from income tax.

Special Expatriate Tax Regime
Individual income tax is levied on the Taiwan-source income of both resident and non-resident individuals.

A non-resident alien residing in Taiwan for less than 90 days in a calendar year is subject to 18% withholding tax on salary remuneration received from a Taiwan-registered entity (remuneration received from an entity registered outside of Taiwan is tax exempted).
A non-resident alien residing in Taiwan for more than 90 days but less than 183 days in a calendar year is subject to tax at a flat rate of 18% on Taiwan taxable salary income, even if the remuneration is paid abroad.

 A non-resident taxpayer is not entitled to personal exemptions and deductions. Click here to consult the scope of application for tax preferences provided to foreign professionals.

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Double Taxation Treaties

Countries With Whom a Double Taxation Treaty Have Been Signed
Invest Taiwan
Withholding Taxes
Dividends: 0% (resident) / 21% (non-resident); Interest: 10% (resident) / 15% (non-resident on their interest income arising from qualifying transactions) / 20% (standard rate for non-resident companies); Royalties: 10% (resident) / 20% (non-resident).
Bilateral Agreement
The United Kingdom and Taiwan are bound by a double taxation treaty.

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Find out more about Taxes and Accounting in Taiwan, China on GlobalTrade.net, the Directory for International Trade Service Providers.

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Latest Update: June 2022

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