Tax rates in Taiwan, China

Company Tax

Tax Rate For Foreign Companies

Taiwanese companies are taxed on their worldwide income whereas non-resident companies are only taxed on their Taiwanese-sourced income.
A non-resident company with a fixed place of business or business agent in Taiwan is taxed similarly to a resident company. A non-resident company having no fixed place of business or business agent in Taiwan is subject to withholding tax at source on its Taiwan-sourced income.

A non-resident company engaged in international transportation, construction contracting, technical services, or machinery and equipment leasing within Taiwan, where costs and expenses are difficult to calculate, can seek advance approval from the National Tax Administration (NTA) to use the deemed-profit method. This method determines taxable income as 10% or 15% of gross revenues, effectively reducing the withholding tax rate to 2% or 3% once approved.

Non-resident companies with income from business operations in Taiwan can also apply to the NTA to be taxed on net profit by claiming actual costs or using a deemed-profit ratio based on their industry.

For non-resident enterprises providing cross-border electronic services to Taiwanese buyers, the company can apply to the NTA to use a deemed-profit method tailored to its business model and industry.

A foreign motion picture branch in Taiwan can consider 45% of its revenue from leasing motion pictures as costs. However, if a foreign enterprise without a branch office in Taiwan leases motion pictures through agents, 50% of the revenues are deemed taxable income.

Capital Gains Taxation

Domestic companies' capital gains from the sale of Taiwan companies or securities are exempt from corporate income tax but incur Alternative Minimum Tax (AMT) at 12% (6% for holding periods exceeding three years).
Foreign investors' capital gains from the sale of Taiwan companies or securities are exempt from corporate income tax.
Profit-seeking enterprises' capital gains from land acquired before January 1, 2016, are subject to Land Value Incremental Tax (LVIT) ranging from 20% to 40%.
Resident companies face corporate income tax rates of 20% to 45% on real estate sales since January 1, 2016, while nonresidents connected to a Taiwan branch of a foreign company face 45% tax on real estate held up to two years, or 35% for over two years.
Transfers of shares representing over 50% interest in a company, where over 50% of the value or investment is real estate, trigger 20% to 45% corporate income tax. LVIT on the incremental net land value can be deducted from taxable capital gains.
Capital gains from properties other than securities and real estate are taxed at 20%.

Main Allowable Deductions and Tax Credits

All taxes, other than income tax, are generally deductible, unless where such taxes are related to tax-exempt income. Net operating losses may be carried forward up to 10 years. The carryback of losses is not allowed.

Start-up expenses during the start-up period can be deducted in the year incurred, the same as for interests on loans that are used for business purposes. However, for a loan from a non-financial institution, the interest rate shall not exceed 15.6%/year.

Deductions for losses on bad debts are permitted once specific legal procedures or time conditions have been fulfilled. In the case of such losses, they should initially be applied against the bad debt provision, which should not exceed either 1% of the total outstanding accounts receivable and notes receivable, or the average bad debt ratio from the previous three years.

Certain charitable contributions are not subject to any tax limit (national defence, morale of troops, contribution to government, etc.), while others are subject to various limits under the relevant regulations.
Fines and penalties are not tax-deductible.

The Statute for Industrial Innovation offers tax credits for R&D expenses to Taiwan-based enterprises and limited partnerships. Companies must secure approval from tax authorities for their R&D projects to benefit from these credits. Approved enterprises can choose between:
- A 15% credit on total R&D expenditure for the year, without carryforward.
- A 10% credit on R&D expenditure that can be used in the year incurred and carried forward for two years.
Both options have a cap of 30% of the corporate income tax payable for the year.

Additionally, certain enterprises investing in smart machines, 5G communication networks (from 1 January 2019 to 31 December 2024), or cybersecurity products/services (from 1 January 2022 to 31 December 2024) can receive:
- A 5% credit on the annual investment, or
- A 3% credit that can be used in the year incurred and carried forward for two years.
These credits also have a 30% cap on the corporate income tax payable, which can increase to 50% when combined with other tax credits, with no cap in the final year of credit usage.

From 1 January 2023 to 31 December 2029, key players in the global supply chain can credit up to 25% of R&D spending and 5% of advanced process equipment investments against their corporate income tax, with a 30% annual cap, potentially increasing to 50% when combined with other credits, with no final-year limit.

Small and medium-sized enterprises (SMEs) can deduct up to 130% of salaries for new hires, subject to specific conditions.

Biotech and pharmaceutical companies can claim a tax credit of up to 25% of qualifying R&D expenses, offsetting up to 50% of their corporate income tax annually for five years, with no limit in the final year. Additional incentives include shareholder investment credits and tax deferral programs for top executives and technology investors, along with credits for investments in new manufacturing machinery, equipment, or systems.

Other Corporate Taxes

Land value tax (LVT) is levied on a taxpayer’s total urban and rural land, based on the assigned land value in each municipality administered by the central government or county. LVT is applied at progressive rates from 1% to 5.5%, or at special rates based on the government's assessed land price, depending on land use (e.g., parks, museums, city planning areas). Additionally, land with an assigned value is subject to Land Value Increment Tax (LVIT), which is based on the total government-assessed land value increase when the land title is transferred. LVIT is imposed at progressive rates ranging from 20% to 40%.

Properties acquired after 1 January 2016 and sold after 1 July 2021 are taxed under Joint Property Tax System 2.0. This includes the sale of land, buildings, pre-sold buildings and underlying land, or majority shares (over 50%) in enterprises where over 50% of the value is in Taiwanese land and buildings, excluding listed or OTC stocks. The tax rate varies from 15% to 45%, based on the holding period. The taxable base is the market value minus related costs, expenses, and the increase in government-assessed land value for LVIT purposes. LVIT remains unchanged, and the land value increment is deducted from real estate transaction income to prevent double taxation.

Deed tax is imposed on the transfer of buildings, at rates ranging from 2% to 6% based on the deed price of the property as prescribed by the local real property assessment committee.

A tax is levied on securities transactions (with the exception of government bonds) at the rate of 0.3% on gross proceeds from the sale of domestic shares (reduced to 0.15% for day-trade transactions through 2024) and at varying rates between 0.0000125% and 0.6% on futures transactions.

Stamp tax applies to various documents at different rates: 0.4% on all cash receipts paid by the recipient (0.1% for bid bond deposits); NTD 12 per deed of sale of movable property; and 0.1% of the contract amount for job contracting agreements and contracts for the sale, exchange, donation, or division of real estate, paid by the contracting parties separately.

Capital duty does not exist officially; however, a lump-sum fee of NTD 1,000 or 1/4,000 of the capital (whichever is higher) is levied upon capital subscription.

A special commodity and service tax ("luxury tax") is imposed on the sale, manufacture, and import of certain high-end items: passenger vehicles, yachts, aircraft, helicopters, and light vehicles costing over NTD 3 million; furniture; and nonrefundable memberships costing over NTD 500,000. The tax rate is generally 10% or 15% of the total price, which includes necessary charges, commodity tax, VAT, and customs duty.

Factories, mines, and companies with 50 or more employees must establish employee welfare funds. When a company is founded, it must allocate 1% to 5% of its registered capital, 0.05% to 0.15% of monthly revenue, 0.5% of each employee's monthly wage and allowances, and 20% to 40% of proceeds from scrap sales to this fund.

Taiwan has two social security programs: Labor Insurance and National Health Insurance, with premiums based on an employee's monthly salary. For Labor Insurance, the total rate is 12%, with the employer contributing 70%, the employee 20%, and the government 10%. For National Health Insurance, the rate is 5.17%, with the employer covering 60%, the employee 30%, and the government 10%.
Additionally, a 2.11% supplemental premium applies to other income such as bonuses, professional practice income, dividends, interest, rental income, and part-time earnings. Employers must also contribute 6% of an employee’s monthly salary to their pension accounts at the Bureau of Labor Insurance, while employee contributions are voluntary.

Other Domestic Resources

Department of Taxation

Tax Rate

Allowable Deductions and Tax Credits

A taxpayer may select either the standard deduction or itemized deductions. The standard deduction for a single taxpayer is TWD 131,000 (TWD 262,000 for married couples filing a joint return).
Itemised deductions include charitable contributions; insurance premiums (maximum of TWD 24,000/person/year for group insurance premium and labour insurance premium); medical expenses; calamity losses; either interest paid on loans for the purchase of an owner-occupied house in Taiwan (maximum of TWD 300,000) or rental payment (maximum of TWD 120,000) for the lease of a self-use residence in Taiwan.

A resident alien is eligible for a personal exemption of TWD 97,000, plus TWD 97,000 for the spouse and each dependant (TWD 145,500 for dependants over 70 years of age). A non-resident alien is not eligible for any personal exemptions.

Further deductions are provided for: salaries or wages (capped at TWD 207,000/person), interest earned from bank deposits (up to TWD 270,000 per tax filing unit), disabled or handicapped individuals (TWD 207,000/person), dependent child tuition (TWD 25,000 per child), losses from property transactions, etc.

Special Expatriate Tax Regime

Individual income tax is levied on the Taiwan-source income of both resident and non-resident individuals.

A non-resident alien residing in Taiwan for less than 90 days in a calendar year is subject to an 18% withholding tax on salary remuneration received from a Taiwan-registered entity (remuneration received from an entity registered outside of Taiwan is tax exempted).
A non-resident alien residing in Taiwan for more than 90 days but less than 183 days in a calendar year is subject to tax at a flat rate of 18% on Taiwan's taxable salary income, even if the remuneration is paid abroad.

 A non-resident taxpayer is not entitled to personal exemptions and deductions. Click here to consult the scope of application for tax preferences provided to foreign professionals.