Taiwan To Tax Overseas Income From 2010

by Mary Swire, Tax-News.com, Hong Kong

22 September 2009

Taiwan’s Ministry of Finance has announced that, from the beginning of 2010, Taiwan residents will pay tax on overseas income.

There will be a 20% tax rate applicable to those residents who have an overseas income of more than TWD1m (USD31,000). However, the new tax will not be payable if:

• an individual’s total income is less than TWD6m;
• an individual who would be subject to the tax already pays an effective income tax of more than 20%; or
• the tax paid abroad on their overseas income is greater than the tax that would be payable under this new regulation in Taiwan.

The amount of any tax paid abroad can be credited against the domestic tax that would be payable.

The tax will be calculated from January 1, 2010, to be declared in tax returns due the following year. It will not be applied retrospectively. The definition of overseas income in the new rules is wide, and includes employment income, pensions, interest, company profits, capital gains, fees, rent, and royalties.

While, for example, income received from Hong Kong would be subject to the tax, income from mainland China would be excluded from the tax. Under the existing regulations, income to Taiwan from mainland China is not considered “foreign”.

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