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Taiwan Announces Income Tax Cuts

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

28 November 2012


The Ministry of Finance has announced that, because of the inflation linkage within Taiwan's tax code, individual income tax thresholds and brackets will be increased automatically next year, while the Legislative Yuan has passed amendments to modify dependent allowances.

As inflation has exceeded 3% since deductions and thresholds were last restructured, the government is expected to make changes that will entail a loss of up to TWD7.5bn (USD257m) in revenue, and help some 3.5m Taiwanese taxpayers with the income tax payable in 2014 on their 2013 earnings.

In particular, the personal tax exemption will rise by TWD3,000, from TWD82,000 to TWD85,000, with the tax exemption for those aged 70 or above rising by TWD4,500, from TWD123,000 to TWD127,500. In addition, the increase in the threshold for a couple will be the greatest, increasing by TWD6,000, from the present TWD152,000 to TWD158,000.

Taiwan's five tax brackets will also be moved upwards, with more of taxpayers' income thereby being taxed at lower rates. For example, the lowest 5% tax bracket will apply to taxable incomes up to TWD520,000, a rise from the current TWD500,000.

Similarly, the next 12% bracket will stretch from taxable incomes from TWD520,000 to TWD1.17m (up from TWD1.13m), while the highest 40% bracket would then cover annual incomes above TWD4.4m (up from TWD4.23m).

It was also announced that the Legislative Yuan has approved the removal of the current age restrictions on taxpayers' dependants following the decision of the Judicial Yuan, at the end of December 2011, that they are against the principles of fair taxation.

Under the existing system, when taxpayers support relatives or family members, they can only claim a tax exemption for dependants who are under 20 years of age or over 60, and who are incapable of earning a living.

It is expected that the new ruling, which will affect some 410,000 families, will provide a further TWD2bn in tax deductions.

TAGS: individuals | tax | Taiwan | tax thresholds | ministry of finance | tax breaks | individual income tax

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