TW Income Tax

Categories of Income

| Category | Chinese | Description | |---|---|---| | Category 1 | 營利所得 | Business/profit income (sole proprietor, partnership) | | Category 2 | 執行業務所得 | Professional practice income (lawyers, doctors, accountants, freelancers) | | Category 3 | 薪資所得 | Salary/wage income | | Category 4 | 利息所得 | Interest income | | Category 5 | 租賃所得 | Rental income | | Category 6 | 權利金所得 | Royalty income | | Category 7 | 財產交易所得 | Property transaction income | | Category 8 | 競技、競賽及機會中獎之獎金 | Prizes and lottery winnings | | Category 9 | 退職所得 | Retirement income | | Category 10 | 其他所得 | Other income |

Computation methods

| Method | Computation | When to Use | |---|---|---| | Actual expense method | Revenue - documented expenses = net income | Better records; expenses >deemed rate | | Deemed expense rate (費用率) | Revenue × (1 - deemed rate) = net income | Simpler; no full records |

Common Deemed Expense Rates (費用率) by Profession

| Profession | Expense Rate | Net Income Rate | |---|---|---| | Lawyers (律師) | 30% | 70% | | CPAs / Accountants (會計師) | 30% | 70% | | Architects (建築師) | 35% | 65% | | Doctors / Dentists (醫師) | 78% (clinic) / 40% (other) | 22% / 60% | | Pharmacists (藥師) | 20% | 80% | | Engineers (技師) | 35% | 65% | | Writers / Authors (著作人) | 30% | 70% | | Performers / Artists (表演人) | 45% | 55% | | Software developers / IT consultants | 30% (general services) | 70% | | Insurance agents (保險經紀人) | 26% | 74% | | Other professional services | 30% (default) | 70% |

Business income computation and thresholds

Compute via bookkeeping (actual income - actual expenses) OR assessed by tax authority based on industry benchmarks. If annual revenue ≤NT$200,000: exempt from business tax. If annual revenue >NT$200,000 but ≤NT$2,000,000: simplified assessment by tax authority.

Worked Example -- Single Freelancer

| Item | Amount (NT$) | |---|---| | Professional practice revenue | 2,000,000 | | Deemed expense rate (30%) | (600,000) | | Net professional income | 1,400,000 | | Interest income | 30,000 | | Total gross income | 1,430,000 | | Less: Personal exemption | (97,000) | | Less: Standard deduction | (131,000) | | Less: Special deductions (none -- not wage earner) | 0 | | Net taxable income | 1,202,000 |

Worked Example -- Married with One Child

| Item | Amount (NT$) | |---|---| | Husband salary income | 1,800,000 | | Wife professional income (net after deemed) | 700,000 | | Total gross income | 2,500,000 | | Less: Exemptions (3 × $97,000) | (291,000) | | Less: Standard deduction (married) | (262,000) | | Less: Wage special deduction (husband only) | (218,000) | | Less: Pre-school child special deduction | (150,000) | | Net taxable income | 1,579,000 |

Filing Methods

| Method | Description | Notes | |---|---|---| | eFiling (網路申報) | Online via etax.nat.gov.tw | Most common; pre-filled data from withholding | | Tax filing software | Downloadable IRX software | Offline preparation, online submission | | Mobile filing | Via mobile app (手機報稅) | For simple returns | | Paper filing | Physical forms at NTB | Declining usage | | Tax agent filing | CPA files on behalf | Required for complex situations |

Filing Period and Deadlines

| Item | Date | |---|---| | Filing period | May 1 -- May 31 | | Extension (for overseas taxpayers) | Automatic extension to June 30 if notified | | Payment deadline | May 31 (same as filing deadline) | | Instalment option | 2 instalments if tax >NT$30,000 (first by May 31, second by July 31) | | Late filing penalty | Delinquent tax surcharge (滯納金): 1% per 2 days overdue, max 15% |

Withholding Tax

| Income Type | Withholding Rate (Resident) | |---|---| | Salary | Per withholding tables (progressive approximation) | | Professional practice fees | 10% | | Rent | 10% | | Interest (bank) | 10% (final for most; included in return if total >NT$270,000) | | Prizes | 10% (or 20% if non-resident) | | Dividends (domestic) | Included in consolidated income; 8.5% credit (cap NT$80,000) |

Authentication for eFiling

| Method | Description | |---|---| | Citizen Digital Certificate (自然人憑證) | IC card issued by MOICA | | Health IC card (健保卡) | NHI card + password | | Mobile phone verification | Via telecom-linked identity | | Financial certificate | Issued by banks | | TW FidO | Biometric mobile authentication |

Dividend Taxation Methods

| Method | Treatment | |---|---| | Method A: Include in consolidated income | Add to gross income; claim 8.5% credit (cap NT$80,000) | | Method B: Separate taxation | 28% flat rate on dividend income (no consolidation) |

Non-Resident Taxation

| Rule | Detail | |---|---| | Resident | Present ≥183 days in tax year → progressive rates (5%--40%) | | Non-resident (<183 days) | Flat withholding rates on Taiwan-source income | | Non-resident salary | 18% (if total annual salary ≤NT$1.5M) or 5%--40% progressive | | Non-resident professional fees | 20% | | Non-resident dividends | 21% |

Alternative Minimum Tax (AMT)

| Item | Detail | |---|---| | Legislation | Income Basic Tax Act (所得基本稅額條例) | | Threshold | NT$7,500,000 | | Rate | 20% on amount exceeding threshold | | Items added back | Overseas income, specific insurance payouts, tax-exempt gains | | Comparison | Pay the HIGHER of: regular income tax OR AMT |

Property Transaction Income rules

Gains from selling real property acquired after Jan 1, 2016: subject to house/land consolidated income tax (房地合一稅), filed separately. Holding ≤2 years: 45%. Holding 2--5 years: 35%. Holding 5--10 years: 20%. Holding >10 years: 15%. Self-use residence (after 6 years): NT$4,000,000 exempt, 10% on excess.

Overseas Income rules

Included in AMT calculation if total overseas income ≥NT$1,000,000 in the year. NOT included in regular consolidated income tax. If total basic income (regular taxable + overseas + other additions) >NT$7,500,000, AMT applies.

Married Filing

| Option | When | |---|---| | Mandatory joint filing | All married couples must file jointly (combined household) | | Separate calculation of tax | Salary/professional income may be calculated separately for each spouse | | Best method | System auto-optimises in eFiling (choose lowest total tax) |

Itemised Deductions

| Deduction | Limit | |---|---| | Insurance premiums (non-NHI) | NT$24,000 per person per year | | NHI premiums (健保費) | No limit (fully deductible) | | Medical expenses | No limit (net of insurance reimbursement) | | Disaster losses | No limit (documented and approved by authority) | | Charitable donations (general) | Up to 20% of gross income | | Charitable donations (to government/schools) | No limit (100% deductible) | | Rent paid for residence | NT$180,000 (cannot claim simultaneously with mortgage interest) | | Mortgage interest (自用住宅) | NT$300,000 (minus savings interest income) | | Political party donations | NT$200,000 per year | | Election candidate donations | NT$200,000 per election |

Business Tax Interaction

| Scenario | Treatment | |---|---| | Professional practice revenue ≤NT$200,000/month | Exempt from business tax (VAT) | | Professional practice revenue >NT$200,000/month | 5% business tax applies (VAT equivalent) | | Small-scale business (小規模營業人) | 1% assessed by tax authority (quarterly) | | VAT-registered business | 5% output tax - input tax; file bimonthly (odd months) |

Calendar of Key Dates

| Date | Event | |---|---| | January 1 | Start of tax year | | January 31 | Annual withholding statements issued by payers | | March 31 | Business tax annual reconciliation (for registered businesses) | | May 1--31 | Individual income tax filing and payment period | | July 31 | Second instalment due (if elected) | | September 30 | Estimated tax payment for current year (if no withholding) | | December 31 | End of tax year |

Reference Material

| Topic | Reference | |---|---| | Income Tax Act | 所得稅法 (Ministry of Finance) | | Progressive rate table | Income Tax Act Art. 5 | | Professional income deemed rates | MOF announcement (annually updated) | | Standard deduction | Income Tax Act Art. 5-1 | | Exemptions | Income Tax Act Art. 5 | | Special deductions | Income Tax Act Art. 17 | | Dividend taxation | Income Tax Act Art. 15 (2018 reform) | | Withholding | Income Tax Act Art. 88--92 | | AMT | Income Basic Tax Act (所得基本稅額條例) | | Property transaction tax | Income Tax Act Art. 14-4 to 14-8 (房地合一) | | NTB Taipei | ntbt.gov.tw | | eFiling portal | etax.nat.gov.tw | | MOF | mof.gov.tw |