Hiring Employees in Taiwan: Visas for Expats & Individual Taxes
This is the second installment of a three-part series on hiring employees in Taiwan. Be sure to check back shortly for part one and part three.
- Part One: Hiring Employees in Taiwan – Company Requirements & Employee Contracts
- Part Two: Hiring Employees in Taiwan – Visas for Expats & Individual Taxes
- Part Three: Hiring Employees in Taiwan – Benefits, Time-Off, & Termination
If your business plans to break into the Taiwanese market, hiring quality employees in Taiwan might be the best option for you to test the market before fully committing to building your business there. Keep reading on as we break down the different aspects that are involved before, during, and after the hiring process.
Visas for Expatriate Employees in Taiwan
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 in Taiwan
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.
This is the second installment of our three-part “Hiring Employees in Taiwan” series. In part three, we will be covering employee benefits, time-off, and termination. You don’t want to miss out so stay tuned for more insight about hiring quality employees in Taiwan!
Thank you to our trusted partner, HROne, for the information in this article.