The Tax laws in Taiwan is governed by the following Acts and regulation
- Income Tax Act Related Laws & Regulations
- Value-added and Non-value-added
- Business Tax Act Related Laws & Regulations
- Stamp Tax Act Related Laws & Regulations
- Futures Transaction Tax Act Related Laws & Regulations
- Securities Transaction Tax Act Related Laws & Regulations
- Commodity Tax Act Related Laws & Regulations
Tobacco and Alcohol Tax Act Related Laws & Regulations
Taiwan's tax laws contain different tax items reflecting changes in industry and the rapid development of industry and commerce. There are clear regulations governing income taxes, business taxes, customs tariffs, and other tax-related matters.
The ROC's current tax items include
- National taxes
Special municipality and county (city) taxes
Specific taxes include income tax, inheritance tax, gift tax, customs tariffs, excise tax, business tax, wine and tobacco tax, securities transaction tax, futures transaction tax, stamp tax, license plate tax, real estate tax, contract tax, entertainment tax, land value tax, and land value increment tax.
VARIOUS FORMS TAXES LEVIED IN TAIWAN
INDIVIDUAL INCOME TAX
All foreign residents with "ROC source income" shall pay consolidated income tax in accordance with law on the basis of their ROC source income. Foreign residents are classified as either individuals without residence within the ROC (non-residents) or individuals with residence within the ROC (residents) on the basis of their length of residence.
Individuals not residing in the ROC:
The person responsible for withholding shall withhold at the source taxes that may be withheld on the ROC source income in accordance with the designated withholding rate of individuals who have resided in the ROC for no more than 90 days within a single tax year (January 1 to December 31), and there is no need for that individual to file a final statement. Taxes not within the scope of withholding must be reported and paid before leaving ROC territory.
The person responsible for withholding shall withhold at the source taxes that may be withheld on the ROC source income of individuals who have resided in the ROC for less than 183 days but more than 90 days within a single tax year. The individual must report and pay taxes not within the scope of withholding (including taxes on labor compensation obtained from an overseas employer for labor performed in the ROC) in accordance with the designated withholding rate.
Individuals residing in the ROC:
- Those individuals who have resided in the ROC for 183 days or more in a single tax year are considered "individuals residing in the ROC." Such individuals must add the various types of income obtained in the ROC to labor compensation obtained from an overseas employer for labor performed in the ROC, and subtract tax-exempt and withheld amounts to obtain total net income. Consolidated income tax is reported and paid on a progressive scale of 6%, 13%, 21%, 30%, and 40%.
Those individuals considered "residents" during the previous year who continued to reside in the ROC until leaving during the current year, and who did not return to the ROC during the current year, must report and pay their taxes as "residents," regardless of whether their length of residence during the current year has reached 183 days.
Income tax is no longer assessed on securities transaction income and futures transaction income within the ROC.
Withholding rates for non-residents:
30% of net dividends or earnings shall be withheld from dividends distributed by companies and earnings distributed by cooperatives. However, 20% of net dividends or earnings shall be withheld from investors whose investment applications have been made and approved in accordance with the Statute for Investment by Overseas Chinese or Statute for Investment by Foreign Nationals, and investors who have obtained permits in accordance with the Regulations Governing Investment in Securities and Their Settlement by Overseas Chinese and Foreign Nationals.
Income from sale of property is subject to a 35% withholding rate.
Profit seeking enterprises with a general headquarters within ROC territory shall pay consolidated profit seeking enterprise income tax on the income of all profit seeking enterprises within and outside the ROC. Those profit seeking enterprises with a general headquarters outside the ROC shall pay tax on only their ROC source income.
To avoid double taxation and promote international investment and trade, the government is encouraging countries that have close trade relationships with the ROC to sign "tax evasion prevention and double taxation avoidance agreements."
Business tax is assessed in accordance with law whenever goods or services are sold or goods imported within the territory of the ROC.
The ROC began implementing a value added-type business tax in April 1, 1986. This tax system is generally identical with those in force in many European countries. Except when legally exempt from tax, business tax is assessed on each stage in the implementation of goods and services in which value is added. Business tax is calculated on imported goods according to the designated tax rate after adding import tariffs, excise tax, and wine and tobacco tax to the price duty paid of the goods.
Except in instances where a 0% rate is applicable, the business tax rate may not be lower than 5% and may not exceed 10%. The Executive Yuan shall set the tax rate; the current rate is 5%.
The business tax rate for export goods and services is 0%. Businesses may apply for the refund of business tax overpaid when purchasing goods.
Those businesses specializing in tax-exempt goods and services may not apply for the refund of tax paid on inputs.
Businesses shall take each two months as one tax period, regardless of whether they had any sales. However, those businesses subject to a 0% tax rate may apply for one-month tax periods. Businesses must submit a report for each period with relevant documents attached to the responsible tax agency by the 15 th day of the subsequent period, and must report sales, tax payable, and overpaid tax.
Business tax on imported goods shall uniformly be collected by customs when goods are imported.
SECURITIES TRANSACTION TAX
A securities transactions tax is assessed whenever negotiable securities are sold. However, in accordance with law, corporate bonds, financial bonds, and bonds issued by any level of government are exempt from securities transaction tax.
The current securities transaction tax rate is three one-thousandths in the case of stock issued by a trading company or certificates or receipts stating stock rights. The tax rate is one one-thousandth for other negotiable securities approved by the government.
Pursuant to Article 20 of the Statute for Upgrading Industries, all sale of corporate bonds and financial bonds is exempt from the securities transaction tax.
FUTURES TRANSACTION TAX
A futures transaction tax is assessed on all those who engage in stock price index future, stock price index future option, or stock price option transactions within the territory of the ROC.
- The futures transaction tax is collected from both buyers and sellers of futures. The futures dealer is responsible for collecting this tax according to the designated rate on the day of the transaction, and must fill out a payment form and submit it to the national treasury with payment on the day after collecting the tax.
- The tax rate on stock price index future contracts is based on the amount of each contract. The minimum rate may not be lower than 0.25 one-thousandths, and the maximum rate may not exceed 1.5 one-thousandths. The Executive Yuan shall set the tax rate; the current rate is 0.25 one-thousandths.
- The tax rate on stock price index future option contracts and stock price option contracts is based on the option money of each transaction. The minimum rate may not be lower than 1.25 one-thousandths, and the maximum rate may not exceed 7.5 one-thousandths. The Executive Yuan shall set the tax rate; the current rate is 1.25 one-thousandths.
A stamp tax is assessed on various taxable receipts and deeds within the territory of the ROC in accordance with the Basic Documentation Act.
- The stamp tax is assessed on: cash receipts, property sale deeds, contracting deeds, and real estate mortgage, acquisition, and subdivision deeds.
- The stamp tax rate or amount is as follows:
- Cash receipts: Four one-thousandths of the amount of each; the producer must affix a stamp. Bid requester bid bond receipts: One one-thousandth of the amount of each; the producer must affix a stamp.
- Contracting deeds: One one-thousandth of the amount of each; the producer or contracting party must affix a stamp.
- Real estate mortgage, acquisition, and subdivision deeds: One one-thousandth of the amount of each; the producer or contracting party must affix a stamp.
- Property sale deeds: NT$12 for each deed; the producer or contracting party must affix a stamp.
An excise tax is assessed on all taxable goods in accordance with the Excise Tax Statute, regardless of whether the goods were manufactured domestically or imported from overseas.
The Excise Tax Statute stipulates that the excise tax be assessed on taxable goods, regardless of whether made domestically or imported from overseas. Taxable goods currently include only those in the seven categories of rubber tires, concrete, beverages, plate glass, petroleum and gas, electrical equipment, and vehicles. Apart from concrete and petroleum/gas, which are taxed on the basis of volume, the other goods are taxed on the basis of Value.
WINE AND TOBACCO TAX
A wine and tobacco tax is assessed on all alcoholic beverages and tobacco in accordance with the Wine and Tobacco Tax Act, regardless of whether the items were produced domestically or imported from overseas.
The Wine and Tobacco Tax Act stipulates that the wine and tobacco tax be assessed on all tobacco and alcoholic beverages, regardless of whether made domestically or imported from overseas. Taxable tobacco product categories currently include cigarettes, tobacco, cigars, and other tobacco products; taxable alcoholic beverage categories include brewed alcoholic beverages, distilled spirits, refined alcoholic beverages, cooking wines, rice wine, other alcoholic beverages, and alcohol, all of which are taxed on the basis of volume.
A land value tax is assessed on all land designated as having value, unless subject to agricultural land tax.
Agricultural land tax: Agricultural land tax is assessed on farmland used for agricultural purposes on the basis of the amount of the harvested crops.
- Land value tax: A land value tax is assessed on all land designated as having value, unless subject to agricultural land tax. This tax is assessed on the basis of the total value of the land held by each landowner in the jurisdiction of each special municipality, city, or county.
- Agricultural land tax: Agricultural land tax is assessed on farmland used for agricultural purposes according to the amount of the harvested crops. However, to ease the tax burden on farmers, the Executive Yuan has announced that the agricultural land tax will no longer be assessed beginning from the second quarter of 1987.
- Land value increment tax: A land value increment tax based on the total increase in land value is assessed on land designated as having value when the land ownership changes. However, inherited land, publicly-owned land sold or donated in accordance with law by any level of government, and private land given as a gift are exempt from the land value increment tax. To promote economic development, the government has announced the reduction of the land value increment tax by 50% for a three-year period starting on February 1, 2002.
LAND VALUE INCREMENT TAX
A land value increment tax based on land's total increase in value is assessed on land designated as having value when the land ownership changes. However, inherited land, publicly-owned land sold or donated in accordance with law by any level of government, and private land given as a gift are exempt from the land value increment tax.
REAL ESTATE TAX
Real estate tax is assessed on houses and buildings on the basis of their value.
The real estate tax is assessed on houses and buildings on the basis of their value. In other words, this tax is assessed on homes attached to the land and relevant buildings that increase the utility of those homes. The existing real estate tax is based on the current value of buildings and has different rates depending on whether the buildings are used as residences, non-residences/non-places of business, or places of business.
Contract tax must be filed by the owner whenever real estate is sold, mortgaged, traded, donated, subdivided, or acquired by possession. However, land in areas subject to land value increment tax is exempt from contract tax.
- The contract tax must be paid by the owner whenever real estate is sold, mortgaged, traded, donated, subdivided, or acquired by occupancy. However, land in areas subject to the land value increment tax is exempt from the contract tax.
- The contract tax rate is as follows:
- The sales contract tax is 6% of contract value.
- The mortgage contract tax is 4% of contract value.
- The exchange contract tax is 2% of contract value.
- The donation contract tax is 6% of contract value.
- The subdivision contract tax is 2% of contract value.
- The possession contract tax is 6% of contract value.
Tariffs refer to import duties assessed on goods imported from overseas on the basis of either value or volume in accordance with the customs tariff code.
The consignee or holder of the bill of lading or goods is responsible for payment of tariffs. The customs tariff code classifies duty rates under the following three columns:
- Rates in the first column are applicable to goods imported from countries or regions that are World Trade Organization (WTO) members or have instituted reciprocal treatment with the ROC.
- Rates in the second column are applicable to designated goods imported from designated undeveloped and developing countries and areas, and to designated goods imported from countries and areas that have signed a free trade agreement with the ROC.
Rates in the third column are applicable to imported goods not subject to the rates in columns one and two.
The average duty rate by item in 2003 was 6.32%. Rates will be reviewed and revised at appropriate times in the future in light of international economic trends and domestic industrial development.
The price duty paid of imported goods for which tariffs are based on price shall be calculated based on the transaction price of those goods, where transaction prices refer to the prices actually paid or payable for goods imported from the exporting country to the ROC. Imported goods must be declared to customs within 15 days of the day after the conveyance for those goods enters the country, and may be declared in advance prior to import. Tariffs must be paid within 14 days from the day after the tariff payment certificate is delivered.
When the Ministry of Finance has approved re-export, raw materials imported for processing and export are tax-exempt for a period of one year from the day after the raw materials are released. A tax-exemption application must be made within six months from the day after the goods are exported. In addition, export goods that, within five years after release for export, are returned for good cause and for which application for re-import has been made are also exempt from finished product tariffs.
When raw materials are imported for use in export goods, tariffs paid by the manufacturer or guarantees provided by the manufacturer shall be shall be recorded. After the raw materials have been used to produce finished products, the manufacturer may attach verification of export and apply for a refund within one year and six months from the day after import release; late applications shall not be accepted.
Machinery and equipment, raw materials, goods, fuel, and semifinished products imported by companies in export processing zones and science-based industrial parks are exempt from import tariffs. In addition, raw materials imported by bonded factories for manufacturing or processing into export products are also exempt from tariffs. The foregoing companies and manufacturers may likewise uniformly import from the China Area raw materials, parts, and components not yet announced as permissible to indirectly import for processing into finished products for export.
Goods stored in bonded warehouses that are exported in original form due to return during the designated storage period are exempt from tariffs. Bonded warehouses used exclusively for reorganization and shipping center bonded warehouses may perform the reorganization of bonded goods and remain subject to the foregoing exemption. In addition, goods exported in original form after storage at a logistics center or exported after reorganization and simple processing are exempt from tariffs.