Taiwan Tax Analysis in 2022

Taiwan has one of the highest average tax rates, if not the highest in Asia. According to a study by KPMG, Taiwan’s average effective rate of taxation is as high as 45%. While this is a common knowledge to many Taiwanese citizens, what is less known is that there are actually different categories of taxes levied on Taiwanese citizens and businesses. The two most prevalent taxes are income tax and value-added tax (VAT).

Income Tax

Taiwanese income tax rates range from 5% for those earning between TWD 30,001 and TWD 60,000 to 45% for above TWD 1 million (USD 33,812) a year. There is, however, a minimum threshold known as the basic exemption. Any individual (or married couple) who earns below TWD 240,001 (USD 8,228) per year does not need to pay income tax.

This means that all Taiwanese citizens earning less than TWD 240,001 (USD 8,228), from either working or unemployed, are exempt from paying income tax. This is, of course excluding individuals (or married couples) earning dividend or interest income, which would be taxed at a rate of 5%.

Value-added Tax (VAT)

Taiwan’s VAT is calculated on the purchase price of most goods and services sold in Taiwan. There are five lower rates of 6%, 11%, 13%, 14%, and 15%. There is one higher rate of 20%. The five lower rates are for certain medical services, exports, books, foodstuffs, and printed matter. The only exception to business VAT is the wholesale purchase of gold bullion – in this case, there is no VAT imposed.

Taiwan’s VAT is currently levied at 6%, 11%, 13%, 14%, or 15%. While the Taiwanese income tax rate may be higher than in most other countries, this is offset by its average 23% corporate tax rate. The highest corporate tax rate in Asia is Japan’s 30.9%. The Taiwanese government also grants additional deductions to companies that invest in R&D.

These two taxes alone, however, are not enough to cover all of Taiwan’s government expenditure. The Taiwanese government collects a number of different types of taxes on its citizens and businesses to balance the budget. There is the property tax on both business and private properties; there is consumption tax such as sales tax and cigarette & alcohol tax; and business tax, automobile tax, and unemployment insurance.

Understanding the Best Places to Live

Where can a foreigner go in Taiwan to get the most benefits from their experience? Do you want to work in high-tech, or do you need a low cost of living? Do you want to speak Mandarin for your job, or should you settle somewhere nobody knows English at all? In this article, we will look at the best places that a foreigner can go in Taiwan to get the most out of their work and play.

Changhua

The first spot on our list is reserved for Changhua, a city known as ” The Heart of Taiwan,” which sounds more romantic than it really is. This is another city without great access to the sea, but it does have a central market area. If you want to work in high-tech, this isn’t your best bet.

Instead, you’ll probably be working on apparel manufacturing or food production, but if neither of those is your cup of tea, Changhua will do just fine for most foreigners. The downtown area is also where you’ll find the majority of foreigners in the city, and it’s a pretty safe area but if you want to be around even more expats, then head on over to Tongxiao.

You can get there by catching a train or bus from Changhua Station, and once you’re there, you’ll find that Tongxiao is teeming with foreigners. Just like the rest of Taiwan, it’s pretty easy to get around Changhua using public transport, so you can easily go out in the evening for some drinks or use taxis when you want to get your hair cut or buy new clothes.

Taipei

Next up is Taiwan’s capital city – Taipei, which has over 3 million people. This can be overwhelming at first, but there are plenty of expats out and about, so you won’t feel like a total foreigner. If you come here, you’ll be near the sea (but not right on the coast), which means that you can always escape for a day trip to Kenting, one of Taiwan’s most famous beach resorts.

Another reason why Taipei is great is that it’s the only place in Taiwan with an MRT system that reaches into the suburbs. You can go pretty much anywhere using this railway, and even though buses are easy to navigate, you’ll want to use public transport whenever possible because traffic is constantly bad. There are tons of different kinds of people living in Taipei, so if you’re looking for something specific (or someone), you’ll likely find it here.

Taipei is also very clean and modern, and while you won’t find a ton of foreigners out in the streets, there are lots of great international restaurants to choose from all over the city. Just make sure to get a local SIM card before arriving so you can get around more easily!

Taichung

The third spot on our list is reserved for another city full of Taiwanese charm – Taichung. You could probably name a million things that make this place one of the best places to live in Taiwan, but we’re going to highlight just a few. First of all, it’s easy to get around by MRT, bus, or even on your own two feet. So, if you’re committed to not having a car but still want to live in Taiwan, this is one of the best choices out there.

Taichung has an incredibly rich cultural history that will be right up until anyone’s alley, and the city is also home to Taiwan’s main university – National Taiwan University (NTU). You’ll find that pretty much all of your friends will be studying there if you move here, so it shouldn’t take long before you know someone.

There are lots of different international cuisines available in Taichung, too, including some fabulous Mexican and Indian restaurants. The city also doesn’t have as much traffic as other places in Taiwan, so it’s a great spot to come if you’re sick of sitting in cars for hours on end every day and would much rather ride a bike instead (just be careful because drivers aren’t used to cyclists here)

Kenting 

Although you can’t really call Kenting a city, it’s definitely one of the best places to live in Taiwan. It’s right on the southeast coast, which means that you get to sit by the sea all day if you want or hang out in some of the most beautiful national parks around.

Kenting is also great because it’s got a very laid-back, chilled-out vibe. There are lots of surfers in the area, so if you love being near the sea, this place is perfect. Everyone speaks really good English here, too, so don’t worry about struggling to communicate with people at all.

Kenting doesn’t have an MRT system or anything like that, but it’s not a big place, and once you’ve moved here, walking everywhere will be a breeze. One of the best things about Kenting is that it’s got a really nice mix of Taiwanese and Western culture – something that all expats would love, I’m sure!

Tainan

Coming in at number five on our list of the best places to live in Taiwan is Tainan, a city known as Taiwan’s cultural capital. It’s got a lot going for it when it comes to being a place where you can really enjoy living and working, but we’re going to highlight three reasons why this can be your new home.

The first thing about Tainan is that it’s very close to the sea, making it perfect for people who love seafood (like me!). You’ll find some amazing restaurants here full of every kind of fish you could ever dream of, and lots of them are actually cheap too.

Conclusion

Taxes are an unavoidable part of life. However, different countries tax their citizens in different ways. In Taiwan, the taxes are generally pretty low compared to other developed nations. Do you want to find out more about them! Ensure you visit this platform always for more updates.

Before introducing this article, if you are interested in our core services which are expat financial, insurance and mortgages, you can contact me here. 

The best time to consider your financial situation is when you are moving to a new country.

Introduction

Taiwan has a great tax system, and it is easy to pay your taxes on time. There is no need for massive income statements or complicated forms. All you have to do is fill out the documents provided by the government and mail them with your payment. They will automatically calculate how much money you owe, and send you a bill accordingly. The rules for filing taxes are very clear and easy to follow.

Income tax ranges from 5% to 45%, depending on your salary, so if you earn less than TWD 560,000 a year, you only have to pay a flat income tax of 5%. Capital gains are taxed at 10% or 20%, depending on whether it’s short term or long term. The dividend tax is 5%, and there are no taxes on gifts/donations, inheritance, or interest income.

Taiwan has a Value Added Tax (VAT) system in which the rate depends on the product’s category. There are 29 different categories in total, and most everyday goods fall under the ‘multiple items’ category, taxed at 5%. There are four different excise tax rates: 3%, 7%, 10%, and 25%.

If you work in Taiwan and you’re not a citizen or permanent resident, your income and taxes will be handled the same way as any other foreigner’s. Expats who come to Taiwan for business purposes can claim expenses such as plane tickets and transportation fees. The tax year begins on January 1st and ends on December 31st, so all tax returns should be postmarked by February 28th the following year.

However, we have compiled this article to explain the taxes in Taiwan. If you’re reading this, you’ve come to the right platform. And we’re here to serve you the things needed to know about taxes in this country and all that it takes. Would you love to check what we’ve unleashed for you? Read further!

Things to Know about Expat Taxes in Taiwan

Taiwan has a lot to offer expats when it comes to things like affordability, work-life balance, and natural beauty. The island has become an increasingly popular destination for digital nomads looking to kick back in cheap apartments in the sun after months or years of hustling in Europe or America.

But another thing Taiwan is becoming known for among Westerners is its attractive tax breaks for foreign workers. How many countries can claim they allow expats to work in their country without paying any taxes at all?

But this benefit of the doubt only goes so far, and there are still some crucial things you need to know before filing your first income report with the Taiwanese government. So, here are seven things about expat taxes in Taiwan you should know before filing your first return.

Taiwan Has a Progressive Tax System

Taiwan’s tax bracket is based on the amount of money you earn. There are twelve brackets ranging from 3-45%, and they apply to everyone from students, teachers, expats, citizens, etc. The more money you make, the higher your income will be taxed, meaning that if you’re an expat living in Taiwan and making a large amount of money, you could pay up to 45% in taxes.

Only Submit Your Form 16 Once A Year

Most expats assume that Taiwanese employers will be withholding the correct amount of taxes every paycheck and therefore only need to submit their Form 16 once a year. Unfortunately, this is incorrect because each tax bracket (3-45%) has its own corresponding rate.

Meanwhile, this will be applied to all twelve months. Since it takes twelve months, not six, to make enough money to reach the highest tax bracket of 45%, some expats can get stuck with higher taxes than they need to pay.

Saving Money on the Right Deductions

There are some tax deductions that expats can apply for in Taiwan to decrease their taxable income. This is because of how expensive living in Taiwan is, so these deductions help reduce the amount of money you would pay in taxes overall. These tax deductions include children’s education, donations to charities, medical expenses, and home loan repayment.

Getting Help from a Tax Accountant

As an expat living in Taiwan, it can be difficult to understand the intricacies of filing your own taxes. This is why many expats hire a Taiwanese accountant to file their taxes for them instead. They will ensure that you are paying the right amount of taxes for your income bracket, and you can avoid paying too much. Also, if it’s found that you were paying too much in taxes, you can get your money back.

Time to Go Back and File Your Taxes

If you’re an expat living in Taiwan who never submitted their Form 16, it’s time to get them back and submit them (plus the other forms required). If you were an English teacher, for example, it’s possible that your Taiwanese employer deducted taxes from each paycheck.

Moreover, they might not send them to the government. This means that you could be missing out on thousands of dollars (if not more) because you’re paying taxes at a higher rate than you need to.

Expats Living in Taiwan Should Use a Tax Agent

Taiwan has a good tax agency system, and it is free to file taxes with them. However, as an expat living in Taiwan, you might find filing taxes difficult because of all the complicated things involved. For example, there are different rules for residents and non-residents, different tax years, and various forms to complete.

To make things easier for expats, they can hire a local Taiwanese person or company to file their taxes on their behalf. This will save time and money in the long run because you won’t have any mistakes with your taxes.

There’s a Limit to Tax Deductions

There is a limit to how much you can claim as tax deductions, and this differs for each expat depending on their situation and what country they’re from. These limits are designed to resolve any potential suspicion of tax evasion, so expats need to understand that even though they might qualify for a deduction, there is often a limit that will stop them from getting too high of a refund.

Benefits of Paying Tax in Taiwan

There are many benefits of paying your taxes in Taiwan. For one, it is the law – not following laws could land you in prison or with a huge fine. Second, you benefit from paying your taxes by having access to quality public services. Last but not least, being a taxpayer makes you feel good! Here are seven reasons why.

1.    Access to Quality Public Services

Paying taxes in Taiwan entitles you to access good public services, including social welfare benefits, medical care, schools, and hospitals. Paying taxes also means contributing to important things – many people care about their healthcare, education, or retirement. These societal benefits can’t be taken for granted – there are many countries where people don’t have access to these benefits.

2.    Makes You Feel Part of Society

Paying taxes in Taiwan is also about feeling like you are part of Taiwanese society – it means that you want to contribute and participate in nation-building. This feeling can be empowering, especially when the country faces challenges such as a low fertility rate or environmental issues. In these challenging times, people might need all the help they can get, and when you pay taxes in Taiwan, you are part of a community working together.

3.    It Is the Law

Paying your taxes is a legal obligation – if you don’t do it, there could be significant legal consequences. You might also have to pay substantial fines or even go to prison if you don’t pay your taxes. Besides, not paying your taxes in Taiwan is unfair to everyone that does – because you all end up having to contribute more money for the same amount of public services!

4.    You Benefit From It Too

When you pay your taxes in Taiwan, it means that you also receive benefits in return: social welfare, healthcare, and other subsidies. In other words, you benefit from paying your taxes, too – it means that you get to share the burden with everyone else.

Moreover, not everyone has the same opportunities to pay their taxes in Taiwan – only people with a formal income have this obligation, so everyone must do. When you pay your taxes, you’re really helping strengthen Taiwan.

5.    You Feel Like a Responsible Citizen

Being responsible means caring about your community and taking part in it. When you pay your taxes, you demonstrate that you care about Taiwanese society – which is really important to feeling responsible (and good).

Plus, not everyone has the same opportunities to pay their taxes in Taiwan – only people with a formal income have this obligation. So if you don’t pay your taxes, you are really letting other people down.

6.    Enables You to Make Requests

Being a taxpayer also means that you are allowed to make requests for public services, which can be important if you find yourself in need of certain services such as medical care or education. If your request is denied, you have a right to appeal and can ask taxpayers associations or human rights groups for help.

7.    Laws Prevent Corruption

In Taiwan, the law is designed to prevent corruption – if you break the law, you run a risk. This means a deterrent against bribery or other forms of corrupt behavior, which help keep society fair and democratic. Corruption has long been a challenge in several countries – it can be hard to fight without well-enforced laws against it.