Hire Employees In Taiwan: Overview On Requirements, Benefits, Taxes
Taiwan has always been an attractive economy for foreign companies. Technological companies and those businesses interested to set foot in Asia, should consider Taiwan as the next country where to expand.
Business expansion sooner or later requires companies to hire staff to manage the daily operation.
In this guide, we will give you an overview of the main requirements to hire employees in Taiwan.
- Company requirements
- Employment contracts
- Visa for expat employees
- Individual taxation
- Mandatory benefits
- Employment termination
If your business plans to break into the Taiwanese market, hiring quality employees in Taiwan might be the best option for you.
By hiring employees in Taiwan prior to setting up an entity there, you can test the market before fully committing to building your business there.
Keep reading as we break down the different aspects that are involved before, during, and after the hiring process.
Foreign companies are required to have a legal entity in Taiwan in order to hire employees from that country.
Employment Solutions or a PEO (Professional Employment Organization) provider, such as NNRoad, allow companies outside of the country to hire quality employees without setting up a new entity.
These employment solutions outsource employment responsibilities and allow you to focus on your employees, their tasks, and business growth in Taiwan. This gives you more time to manage your workforce to ensure a smooth entry.
In addition to making the entry process easier, employment solutions are a relatively cost-efficient way to enter the Taiwanese market. Since company formation procedures are not needed and all liabilities are taken by the PEO, legal risks are minimized.
Solutions for hiring employees in Taiwan include:
- A local compliant labor contract
- Payroll and tax compliance
- Mandatory benefits
- Visa processing (if required)
- Expenses claim administration
NNRoad is an expert provider that strives to make the market entry into foreign companies as seamless as possible by offering services for each stage of the entry. They provide services such as employment solutions, payroll, and tax and mandatory benefits contributions.
Taiwanese law requires a written contract between a company and the employee it wants to hire.
In Taiwan, there are two types of contracts:
- Fixed-term (temporary): seasonal, temporary, or short-term jobs
- Indefinite-term (permanent) contracts
Employment relationships will continue to be governed by Taiwanese labor laws even if an employer requests that their employee works overseas in a country other than Taiwan unless the original agreement has been terminated.
While there is no standard employment contract structure, we recommend the following terms always be included:
- Code of conduct
- Discipline at work
- Working time
- Leave and vacation
- Location of work
- Job duties
Contracts can be written in Chinese, English, or any other language upon mutual agreement. A Chinese translation of the agreement and supporting documents will be required by the government in the instance of a future legal dispute.
The process for obtaining a visa may vary from people of different nationalities due to Taiwan’s political status. If you want to obtain a worker’s visa, we recommend a longer-term option. However, U.S Passport holders are not required to have a visa for a short-term stay if their stay is less than 90 days.
The potential employer should apply for a work permit via the Council of Labor Affairs. This must be done before an employee is in Taiwan. If the employee is already in Taiwan, it is still possible for them to obtain a work permit.
Both the company and employee will collaborate to obtain the work permit. Afterward, the employee should take the work permit to a Taipei Economic and Cultural Office (TECO) in their home country and receive a work visa. The majority of countries (including the U.S), do not have embassy-level relationships with Taiwan, and TECO serves as an alternative.
It is recommended that foreign employees interested in staying in Taiwan for work obtain a resident visa. If you initially enter Taiwan with a visitor visa and want to convert it to a residence permit, you will have to change it outside of Taiwan. Most people go to Hong Kong for this purpose because of its proximity to Taiwan.
Before applying for a resident visa, employees should visit their local Republic of China overseas mission to start the required applications before they come. For those who have registered for the normal expansions visa, they can apply to convert it to a residence visa at the National Immigration Agency (NIA).
A foreigner is required to report to the nearest headquarters of the Foreign Affairs Police within ten days of arriving in Taiwan with the resident visa and apply for the Alien Resident Certificate (ARC). Resident visas must be renewed every year.
Foreign employees with a valid regular residence permit who are interested in staying in Taiwan long-term should consider applying for an Alien Residence Certificate (ARC).
If you want to become a permanent resident, an Alien Permanent Resident Certificate (APRC) is the best option. The difference with an APRC is that an employee can leave Taiwan for more than half a year and still maintain residency status and continue to enjoy other benefits meant for Taiwanese nationals.
This article gives more information on ARCs and APRCs.
Individual Taxation Of Employees
Taiwan’s taxation system is multilayered. Whether they are residents of Taiwan or temporary workers, it is important for you and your employees to have a correct understanding of tax laws.
Individual Income Tax (IIT) Rates
Both residents and aliens who are residents in Taiwan are subject to an IIT tax. The progressive tax rates for 2018 are:
IIT Formula: Tax payable = (Individual’s Income x tax rate % for their bracket) – Progressive Difference for their bracket
Conversion rate May 2020 approximately USD: TWD 1:30
Alternative Minimum Tax (AMT)
Together with the regular Income Tax, Taiwan imposes the AMT, which is a flat rate of 20% on residents of Taiwan, including expatriates who live in Taiwan for more than 183 days in a year. The AMT includes foreign-sourced income if:
- The alien is a tax resident in Taiwan
- Foreign income equals or exceeds TWD 1 million and basic income exceeds TWD 6.7 million
To see if you should pay the AMT, take your regular tax income and add items such as:
- qualified insurance benefits
- income from private security investment trust funds
- non-cash donations
- foreign-sourced income totaling TWD 1 million or more
Although foreign-sourced income increases the AMT burden, foreign taxes paid on foreign-sourced income may be credited against AMT payable, with some limitations.
If the AMT payable amount is greater than the regular income tax payable, the taxpayer must calculate and pay AMT based on this formula:
- Income subject to AMT = Regular taxable income + add-back items
- AMT = (Income subject to AMT – TWD 6.7 million) x 20%
The IIT and the AMT together govern taxation for Taiwanese residents, both foreign or native workers. For non-resident foreigners, the rules are different.
If an employee stays in Taiwan for less than 183 days, they are considered a non-resident and are subject to a flat rate of 18% of their gross salary earned at the Taiwanese company they work for.
This article provides more details on Taiwan’s tax rates for expats. Taiwan has double taxation agreements with 16 other countries, meaning that taxes paid in one country offset taxes paid in the other. A few of the countries included are the United Kingdom, Australia, and Singapore. It does not have one with the United States.
For more information, including a full list of deductions and exemptions, visit this Taiwanese Government article.
The Taiwanese system is unique when compared to other countries’ systems. To ensure your company is capable of helping employees through the taxation process, feel free to reach out to NNRoad. Our experts are more than happy to guide your company through the entire market-entry process in Taiwan.
Employers in Taiwan are required by law to provide employee benefits.
These benefits include:
- Social security
- Health insurance
- Employment insurance
- Labor insurance
Discussed below are the employee statutory benefits in Taiwan.
National Health Insurance (NHI)
National health insurance contributions are allocated among the employer (60%), employee (30%), and the government (10%).
Taiwanese Legal Entities with more than five employees must contribute to labor insurance. The labor insurance is shared by the employers (70%), employees (20%), and the government (10%). The maximum monthly insurance salary is TWD 45,800.
Companies with at least one employee in Taiwan must contribute to the insurer’s employment service insurance premium.
At least 6% of employees’ monthly wages shall be contributed to social security by employers in Taiwan.
Taiwan has a Hukou household registration system similar to mainland China. However, the system in Taiwan is not as strict and employees’ benefits are not closely tied to it.
Employers are required to give employees one regular day off and one rest day meaning employees have two days off. Historically, Taiwanese employees were accustomed to working seven days a week, but a five-day week is the new normal. Under these new laws, employers must pay a high amount of overtime work.
Employees can work 54 overtime hours every month, but no more than 138 hours within a three-month period. Employers may also provide extra leave as compensation for overtime work.
Female employees are entitled to eight weeks of maternity leave. If they’ve been working for the company for over six months, this leave is fully paid at the salary. However, if less than six months, it is paid at 50% of salary.
Annual Leave In Taiwan
Employees in Taiwan are entitled to have days off for public holidays. There are ten public holidays per year in Taiwan. They are:
- New Year’s Day
- Chinese New Year’s Eve
- Chinese New Year
- Peace Memorial Day
- Children’s Day
- Qingming Festival
- Labour Day
- Dragon Boat Festival
- Mid-Autumn Festival
- National Day of the Republic of China
In addition, employees are entitled to annual leave depending on the time they have worked for a company:
Employment relationship should always be terminated while complying with the Labor Standards Act’s terms and conditions, for example:
- Employers must provide advance notice and under special circumstances pay severance
- Employees who want to leave a position are not required to give a minimum number of days noticed to their employer. Therefore, it depends on the rules set forth in their labor contract. It is often required in the contract that they give one month’s notice.
Severance Pay Rules In Taiwan
The termination notice must be provided in advance. The amount of time depends on the duration of the employment:
- For employees who worked for more than three months and less than one year, the advance notice should be ten days.
- For employees who worked for more than one year but less than three years, the advance notice should be twenty days.
- For employees who worked for three years or more, the advance notice should be thirty days.
It is important to be well-informed about hiring policies if you are interested in entering the Taiwanese market.
The biggest takeaway is that in order to hire employees, there are two main options:
1) Set up a company in Taiwan and hire employees under your entity
2) Use a PEO service in Taiwan to outsource all employment procedures and requirements.
For companies testing the market and in need of hiring employees or once you’ve tested out the market and are ready to set up your own entity, we can help!
Thanks to our trusted partner, HROne, for the information provided in this article.