- Question 1: What do foreign and overseas Chinese investors need to know about paying profit-seeking-enterprise income taxes and consolidated income taxes?
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Answer:
- Profit-Seeking-Enterprise Income Tax
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Taiwan's profit-seeking-enterprise income taxes are levied as follows:
- For profit-seeking enterprises operating in the ROC, sales tax will be levied for all of income generated in the ROC. But income generated outside the ROC is subject to the income tax laws of the host country and will be deducted from its overall income tax. The amount deducted should not exceed the overseas income and the total tax amount is calculated in accordance with the applicable local tax rate.
- Companies whose headquarters are located outside the ROC, but generate income within the ROC must pay profit-seeking-enterprise income tax. Companies which have a fixed business operations center or business representative should directly file their taxes, and companies which do not have a fixed business operations or representative and have income generated in the ROC should have their taxes deducted at the income source. Companies whose income tax has not been deducted should report their tax based on the regulated withholding rate and do not fall under the regulations governing the reporting of tax at the time of remittance.
- The ROC profit-seeking-enterprise income tax rates follow:
- Businesses with taxable income below NT$50,000 are exempt from the Income tax.
- Businesses with a taxable income below NT$100,000 will be levied a 15% income tax on all taxable income. But its total tax amount should not exceed half of the total sales income tax in excess of NT$50,000.
- For incomes exceeding NT$100,000, a tax rate of 25% will be levied on the portion which is in excess (of the stipulated NT$50,000)
For other related information, please visit the website of the Taxation Agency, Ministry of Finance, and check "Announcements".
- Consolidated Income Tax
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The levying of the consolidated income tax in the ROC is a tax based upon taxpayers' income generated in the ROC; taxpayers are categorized as residents and non-residents, and levies are not calculated according to a taxpayer's nationality. Regulations with regards to residents and non-residents are as follows:
- Resident refers to those who have residence in the ROC, or those who do not have a residency in the ROC but have lived for one taxable year in the ROC, which is 183 days or more. Those who have an income generated in the ROC should file their tax applications in accordance with the Article 2, Item 1 and Article 71 of the ROC Income Tax Law.
- For those non-residents who earn an income within the ROC should, in accordance with the Article 2, Item 2, withhold tax at the source of the income.
For more related information on the integrated income tax for foreigners and overseas Chinese, please refer to Foreign Taxpayers service
at the Taipei National Tax Administration website, or the Kaohsiung National Tax Administration website.
- Question 2: How does the profit-seeking-enterprise income tax of the ROC compare with Asian, American, and European countries?
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Answer:
The ROC's business income tax rates are not considered high, with the highest tax rate currently at 25%, which is only higher than Hong Kong's 16% and close to Singapore's 24.5%. The following is a comparison of tax rates in Asia, America, and Europe.
Business Income Tax Rates of ROC and Asian, American, and European Countries
| Country |
Income Tax (%) |
Country |
Income Tax (%) |
| US |
35 |
Canada |
27 |
| Denmark |
30 |
Britain |
30 |
| France |
33.3 |
Germany |
25(1) |
| Korea |
27(2) |
Japan |
30 |
| Singapore |
24.5(3) |
Republic of China |
25 |
| Hong Kong |
16 |
Malaysia |
28 |
| Australia |
30 |
New Zealand |
33 |
Source: Corporate Taxes 2002-2003 Worldwide Summaries, Pricewaterhouse Coopers.
- Notes:
- Need to add 5.5% unified tax.
- Resident Companies are expected to pay a value-added tax of around 10%.
- Applicable for the taxes filed from 2002 onwards, with 2003 tax rate at 22%.
- Above information does not include local income tax.
- Question 3: Which countries hold double-taxation agreements with the ROC?
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Answer:
To avoid double taxation, tax evasion, and promote bilateral relations, the ROC has aggressively tried to promote ties with countries with which it has close trading ties by signing tax agreements. As of the end of May, 2006, Taiwan has signed full tax treaties or agreements with as many as 30 countries.
- The ROC has signed comprehensive income tax treaties with 16 countries, including Australia, Belgium, Denmark, Gambia, Indonesia, Macedonia, Malaysia, the Netherlands, New Zealand, Senegal, Singapore, South Africa, Swaziland, Sweden , Vietnam and UK.
- 14 international transportation income tax agreements are signed between the ROC and the countries and territories as Canada, the EU (European Union), Germany, Israel, Japan, South Korea, Luxembourg, Macau, the Netherlands (both shipping and air transport), Norway, Sweden, Thailand, and the United States.
For detailed information on the agreements, please refer to Tax Treaties
or List of ROC Double Taxation Agreements
at the website of the Taxation Agency, Ministry of Finance.
- Question 4: What are the differences with regards to the levying of income taxes when foreign companies come to Taiwan to set up representative offices, branches or subsidiaries?
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Answer:
When foreign companies come to invest in Taiwan to set up representative offices or branches, they should pay income tax on income generated within Taiwan. However, companies are exempt from income tax when they remit their after-tax surplus income back to their parent companies, because they are not considered dividends. As for the establishment of subsidiaries by foreigners, aside from levying income tax on all the consolidated income generated both inside and outside Taiwan, they should also pay income tax when the company issues after-tax dividends.
- Question 5: Are there any tax incentives for foreign companies investing in Taiwan?
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Answer:
- Withholding Tax on Stock Dividends
- Overseas Chinese and Foreign nationals who gain approval to invest in the ROC, will be levied a 20% tax on dividends; those which are not approved according to the Statutes for Overseas Chinese Investment and Statutes for Foreign Investment, will be levied a dividend tax of 30% and 25% respectively.
- Lower Inheritance Tax (Only Applicable for overseas Chinese)
- Overseas Chinese who are authorized to invest in Taiwan based on the Statutes for Overseas Chinese Investment are entitled to a 50% reduction in inheritance tax on the based on the appraised value of inheritance.
- Question 6: Are there any restrictions for foreign investors who remit their money back to their home countries?
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Answer:
Foreign investors investing in Taiwan in accordance with the Statutes for Foreign Investors are allowed to remit the interest earned on investments or dividends earned thereof.
- Question 7: What are the foreign exchange regulations of the ROC?
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Answer:
Foreign exchange in Taiwan is regulated according to the market, and capital flows enjoy a high degree of liberalization.
The following types of transactions have been fully liberalized:
- Foreign exchange capital flows that do not involve NT dollar transactions have been fully liberalized
- Foreign exchange capital flows (involving NT dollar exchange) related to commodities
- Foreign exchange service expenditures (involving NT dollar exchange)
- Capital transactions (involving NT dollar exchange) approved by the competent authority; includes direct investment and securities investment
Short-term fund flows fall under the following regulations:
- Foreign exchange amount for companies and individuals shall not exceed US$50 million and US$ 5 million. Transactions should be processed directly at a banking institution.
- Companies and individuals who wish to exchange an amount surpassing US$50 million and US$ 5 million, respectively, must first apply for permission from the Central Bank and process the transaction at a banking institution after receiving permission.
- Non-residents may not engage in foreign exchange transactions exceeding US$100,000, and must process their transaction directly with a banking institution.
- Question 8: How should foreign companies in Taiwan remit their funds?
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Answer:
Foreign and overseas Chinese investors should, in accordance with the Statutes for Overseas Chinese Investment and the Statutes for Foreign Investment respectively, fill their application forms (with investment plan and necessary certificates attached) and present it to the Competent Authority (the MOEA) for approval.
Overseas Chinese and Foreign investors, when remitting capital, or remitting outwards its investments, or interest earned on its investments or dividends, stake in the company approved to be sold, or money to be remitted as a result of increase or decrease in investment, should apply to the Competent Authority with related documents such as approval letters from the authorities and then proceed to the designated foreign exchange bank for remittance.
- Question 9: Can a foreign national or overseas Chinese engage in foreign exchange?
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Answer:
Foreign investors are allowed to exchange foreign currency as stipulated in the Statute.
- Interest earned on investments and dividends issued thereof.
- When an investor gains approval to transfer his/her shares, to withdraw or decrease his/her investment, he/she may apply for exchange settlement, and also to the capital gains realized from the investor's investment.
- The investor's application for exchange settlement against the payment of the principal and interest of his/her loan investment shall be governed by the agreed terms and conditions approved by the Competent Authority.
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