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Taiwan-Limited Company

Basic taxes (briefly)

Personal tax 5-40%
Corporate tax (in detail) Income tax is paid at the rate of 20%. Additional tax on profits not distributed by the end of the next fiscal year is levied at the rate of 5%
Capital gains tax. Details Profits from the sale of assets, in general, are included in the general taxable base, however, special taxes are provided for transactions with real estate
VAT. Details The VAT rate is 5%. This tax generally applies to transactions in various sectors of the economy. GBRT applies in special cases, in particular to financial institutions, small businesses. GBRT rate is 5% for banks and insurance companies
Other taxes Social Contributions, Property Tax, Land Gains Tax, land value increment tax, Real Estate Transaction Tax, Securities Transactions Tax, Inheritance and Gift Tax
Government fee There is no annual fee in Taiwan, but instead there are various registration fees at the stage of incorporation of company.
Stamp duty 0,1-0.4%

International tax agreement

   


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TAXES

Individual Income Tax

Individual Income Tax is levied upon any individuals who have income from sources in Taiwan, including non-residents who stay in Taiwan for more than 183 days, otherwise non-resident just pay a withholding tax.
Tax Return for previous year should be submitted within the period from May, 1-31. If an individual leasves Taiwan in the middle of the year, tax return must be submitted before leave.
Individual Income Tax is levied at a progressive tax rate:
Taxable Income (NT$, 2013) Tax Rate
0 - 520,000 5%
520,001 - 1,170,000 12%
1,170,001 - 2,350,000 20%
2,250,001 - 4,400,000 30%
4,400,001 and above 40%

The government prescribes the allowable personal exemptions on an annual basis. Personal exemptions increase by 50% if the taxpayer, his/her spouse and linear ancestors dependent are 70 years of age or older.
Taxpayers are allowed tax rate deductions in case of contributions and donations to educational, cultural, public welfare or charitable organizations or associations; insurance premiums; medical and childbirth expenses; rent for housing, etc.

Corporate Tax

Taxpayers of corporate tax are all profit-seeking enterprises that have their head office in Taiwan, including subsidiaries of foreign companies. If income was gained outside Taiwan, and tax was paid in another country, taxpayer should present the tax certificate to avoid double taxation.
Corporate Tax rate is progressive:
Taxable Income (NT$, 2010) Tax Rate
500,000 or less 18%
Over 500,000 20%, but income tax liability may not exceed 50% of the portion of taxable income over $120,000

Some categories of income are exempt form profit-seeking enterprise tax: income derived from the sale of land or the sale of property; income on gains derived from securities transactions; business income derived from the operation in Taiwan of a foreign enterprise engaging in international transportation; royalty paid to a foreign enterprise for the use of its patent rights, etc.

Imputed Tax Credit

When a Taiwan company distributes its after-tax profits as dividends to resident individual shareholders, the distributing company also allocates the profit-seeking enterprise income tax paid on the dividends to the shareholders as an imputed tax credit. The individual shareholders can then use the imputed credit to offset their individual income tax liability. Consequently, the profit-seeking enterprise income tax paid by a Taiwan company becomes an advance tax payment for its shareholders, and the highest marginal rate of individual income tax is 40%, which is the highest tax rate applicable to an individual taxpayer. For Taiwan corporate shareholders, the dividends received are not taxable, but the imputed tax credits from the distribution should be recorded in the company's "shareholder-imputed credit account (ICA)" and will be imputed to the shareholders in future dividend distributions.
When a Taiwan company distributes dividend to a non-resident individual shareholder or a profit-seeking enterprise shareholder with its head office located outside Taiwan, a tax on the dividend should be withheld according to the prescribed withholding rates.
A profit-seeking enterprise must use the following formula to compute the tax credit granted to its shareholders along with distributed dividends:
amount of net dividends x imputed tax credit ratio, where tax credit ratio depends on balance of imputed credit account on the date of distribution.

Alternative Minimum Tax

AMT is a taxation system which requires companies that earns certain types of tax exempt income or that enjoys certain tax incentives to pay a minimum amount of tax. Basic tax amount" is calculated by taking the exemption from the "basic income amount" and then multiplying the tax rate 10%.

Capital Gains Tax

Capital Gains Tax is levied only on individuals. Tax rate is 15% for residents and 20%for non-residents.

VAT

Minimum rate of Value Added Tax is 5%, maximum rate is 10%. There are also some types of business that are exempt form VAT, some pay VAT at a reduced rate. For example, for banks, insurance and broker companies the rate is only 1%.

Withholding Tax

Withholding tax rate depends on income category and taxpayer status:
Income Category Resident Non-resident
Dividends Individual and profit-seeking enterprise with its head office located in Taiwan: not applicable: 0%; Profit-seeking enterprise with its head office located outside Taiwan: 20% 20%
Salary 5% 18%
Interests 10% 20%
Rental Income 10% 20%
Royalty 10% 20%

Other Taxes

Commodity Tax a single-stage excise tax levied on specific commodities manufactured domestically or imported from abroad, including vehicles, tiyres, non-alcoholic drinks, electrical appliances, cement, oil and gas. Tax rate is 8-30%.
Individual Estate and Gift Tax 10% from fair market value of taxable assets .
Securities Transaction Tax based on the sale transaction amount with a tax rate at 0.1 to 0.3% depending on type of securities.
Futures Transaction Tax tax rate is 0.0000125 to 0.1% depending on type of transaction.
Tobacco and Alcohol Tax depends on volume of tobacco and alcohol produced in Taiwan or imported from abroad.
Land Value Tax levied on land owners and individuals farming land. Tax rate is from 1.5 to 5.5% depending on land value.
Land Increment Tax levied on land title transfer at rate 20-40%.
House Tax levied at rate 1.2-3% on building owners to support buildings in good condition.
Deed Tax 2-6% depending on type of transaction (exchange, purchase)
Vehicle License Tax depends on type of vehicle.
Amusement Tax levied on entry tickets to entertainment halls and all kinds of services sold inside (20-100%).

Social Insurance Contribution

All Taiwanese companies are bounded to pay 20% salary tax for their employees, make regular contributions into pension fund and other social insurance funds.

Tax Benefits

Companies which are registered in special science and industrial parks and invest in development of high technologies enjoy the right to get a lot of tax. Such parks include the following:
  • Hsinchu Science Park
  • Central Taiwan Science Park
  • Southern Taiwan Science Park
  • Export Processing Zone
  • Agricultural Biotechnology Park
  • The Environmental Science and Technology Parks in Taiwan
  • Free Trade Zone.

Stamp Duty

Documents, which are signed in Taiwan, including documents in which only one of the signing parties is in Taiwan, are subject to Stamp Duty. Such documents include receipts for monetary payments, deed for sale of movables, contracting agreements, contracts for the sale, transfer and partition of real estate.
Stamp Duty rate is as follows:
Document Type Rate
Contracting Agreement 0.1% of the contract value
Receipt for monetary payments 0.4% of the amount received
Contracts for sale of movables 12 NT$ per document
Contract for the sale, transfer and partition of real estate 0.1% of the contract value

Contracts or deeds executed by all levels of government agencies, monetary receipts executed by public or private schools, receipts identifying payment of salaries or wages, etc. are exempted from the levy of stamp tax.

Exchange Control

Foreign exchange capital flows that do not involve New Taiwan dollar transactions have been fully liberalized. At present there is no limit on genuine trade related remittances (involving NT$ exchange) whether inward or outward. For non trade related remittances, business entities can remit into or out of Taiwan up to US$50 million (or the equivalent) each year without advance approval of Central Bank of China. The limit for individuals remains unchanged at US$5 million per year, each remittance in excess of US$1,000,000 for a corporate or US$500,000 for an individual, respectively, requires supporting documents.

Annual Fee

There is no annual fee in Taiwan, but instead there are various registration fees at the stage of incorporation of company:
Pre-check of the company name and the scope of business fee NT$300 or NT$150 if application is filed online
Incorporation registration fee NT$1 for every NT$4,000 in its capital stock as specified in its Articles of Incorporation, but not less than NT$1 000
Foreign company recognition registration fee NT$1 for every NT$4,000 in its capital stock as specified in its Articles of Incorporation, but not less than NT$1 000
Registration of capital fee NT$1 for every NT$4,000 in its capital stock as specified in its Articles of Incorporation, but not less than NT$1 000
Foreign branch registration fee NT$1 000 for one branch
Registerd information inspection fee NT$400 for one company for 2 hours, an additional NT$100 for each additional hour
Issuance of a certificate fee NT$200

ACCOUNTS

Annual Return

Generally speaking, Annual Return is a short review on the current state of the company, which is prepared by the company secretary annually. As a rule it includes the following information:
  • Incorporation information (registration date, registered address);
  • Information about directors and their resignation;
  • Information about secretaries and their resignation;
  • Information about registered capital, nominal value of shares and amount of issued shares;
  • Information about shareholders and share transfer.

As for Taiwan, Annual Return is not required unless the company should require special permission of the government in accordance with the law or an order is given by a competent authority duly authorized by the law.

Audit

All companies in Taiwan should keep accounting reports and file annual returns. At the end of financial year directors of a company submit an annual report on company's business and a proposal on surplus income distribution and loss compensation to the shareholders for approval. If there is no any objection on report within a month, it is considered to be approved by all shareholders.
Besides, competent authorities can come for inspection at any time and request to prepare accounting books in a short period. In case of violation a fine not less than NT$10 000, but not more than 50 000 is imposed. If a company refuses to go through inspection and file the said documents, it is obliged to pay a fine 20 000 - 100 000 NT$. If needed, competent authorities may appoint a CPA, lawyer or other professional stuff to assist inspection. In the meantime, the authorities are bound to keep confidentiality and return all the documents to the company within 15 days after receipt.

Tax returns

A registered profit-seeking enterprise must file tax return which includes:
  • Provisional tax return: must be filed on a prescribed form along with the payment receipt in the ninth month of each fiscal year. The provisional tax is equivalent to one-half of the tax payable as shown in the previous year's annual tax return, and should be paid by the company voluntarily, and the company should file a provisional tax return with the receipt of payment to local tax collection office. Companies can fill in the return by themselves or hire a CPA.
  • Annual Tax Return: must be filed between May 1 and May 31 reporting the income and income tax payable of the preceding tax (calendar) year. An enterprise must attach to the annual tax return its balance sheet, statement of changes in the imputed tax credit account and the return of undistributed earnings.
  • Undistributed earnings from the previous tax year: reported by companies with its head office located inside Taiwan, retained earning tax is 10%.

    Taxes of Taiwan

    Min. rate for corporate tax 20%
    Capital gains tax Regular rate
    VAT 5%
    Withholding tax 21%/20%/15%
    Exchange control There are some foreign exchange controls
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