Taiwan is quickly becoming a popular destination for foreign businesses and investors. One question that often comes up is what the payroll and tax requirements are in Taiwan. This article provides a comprehensive guide to the payroll process in Taiwan in 2022. It includes information on social security programs, income taxes, and payroll benefits. The article also provides information on policy changes happening in the near future from the Ministry of Finance as a way to cope economically with the after-effects of Covid-19. We hope this article will be helpful for anyone looking to set up payroll in Taiwan.
Taiwan is an island country off the coast of mainland China with a population of over 23 million people. The majority of Taiwan’s economy is based on manufacturing and technology, with computer hardware and electronics being the biggest exports. Taiwan is also home to a large number of scientific and research institutions, which have helped to spur innovation and economic growth.
The labor market in Taiwan, however, is experiencing a skills shortage, with over 60% of local companies reporting difficulties in recruiting employees. Due to its geographical location, Taiwan has a strategic position in East Asia and is an important hub for trade and commerce. Taiwan’s economy is expected to continue growing in the coming years, making it an attractive destination for foreign investment.
UPDATES FOR 2022
In the past two years, Taiwan’s labor laws have undergone numerous changes to stimulate the labor force and its economy. New changes to Taiwan’s Labor Standards Act took place in 2020, affecting working hours, paid leaves, and other regulations to ensure the safety of child and female workers. These will be detailed in the following sections. The minimum wage also went under changes as earlier this year it was increased to TWD$25,250 per month and TWD$168 per hour. These changes are significant for both employers and employees in Taiwan, and 2022 is shaping up to be an exciting year for payroll in Taiwan.
PAYROLL IN TAIWAN: THE ESSENTIALS
Taiwan’s payroll system and cycle are similar to those in other countries. Payroll systems may vary depending on the size of the company and the industry in which it operates. The most used cycle here is the monthly cycle, which is where employees are paid once per month. Taiwan’s payroll system and cycle are designed to ensure that employees are paid promptly and accurately, which is why employers are obligated to issue payslips along with wages.
Taiwan’s working hours for full-time workers are set to a maximum of 8 hours a day, 40 hours a week. The second is that Taiwan requires all employers to pay their employees overtime if they work more than 40 hours per week. Overtime cannot extend the working day past 12 hours and must not exceed 46 hours a month. Taiwan also has a minimum wage of TWD$25,250 per month for full-time workers and TWD$168 per hour. Lastly, Taiwan requires all employers to provide their employees with paid annual leave calculated based on their period of time working under the employer, going from 3 vacation days after six months to 30 days for workers of over 10 years.
In Taiwan, everyone who works is required to pay income tax, regardless of whether they are a Taiwanese citizen or a foreign worker. The tax year is just like a calendar year, starting on January 1st and running until December 31st. The amount of tax that you owe is based on your earned income, and it is typically deducted from your paycheck each month. Taiwan has five different income tax brackets, ranging from 5% to 40%. Taiwan’s income tax system is designed to be progressive, meaning that those who earn more money pay a higher percentage of their income in taxes. Those who are not Taiwan residents staying in Taiwan for 90 to 183 days are subject to paying a flat rate of 18% of their income as a withholding tax.
The following table describes the income tax brackets as of this year:
|Bracket||From (TWD)||To (TWD)||Rate (%)|
Taiwan also provides social security programs to which employers, employees, and the government must contribute to. The National Health Insurance is a universal healthcare funded by a monthly tax of 5.17% from employees’ wages. A Labor Insurance Program has recently been established to help employees in case of suffering an injury as a result of their work. This program is funded by a monthly contribution of 11.5% of all salaries, employers contribute 70%, employees 20%, and the government 10%. Lastly, a new Labor Pension Program has been installed for retirement funding and mandates employees to contribute a tax of 6% from their monthly wages. Further breakdown of personal taxes and contributions can be found on our website.
Taiwan has strict payroll compliance regulations that businesses must adhere to. Taiwan’s payroll regulations are designed to protect employees’ rights and ensure that they receive their correct wages. Businesses that fail to comply with Taiwan’s payroll regulations may be subject to penalties.
If a business needs to terminate an employee’s contract, the employer must provide the employee with written notice at least 30 days in advance. The company must also pay the employee any outstanding wages and compensation as well as any accrued but unused vacation days. Failure to comply with these requirements may result in penalties for the business.
To ensure compliance with Taiwan’s payroll regulations, businesses should work with a reputable payroll service. A payroll service can help businesses correctly calculate employees’ wages, deduct the appropriate taxes, and make the required social security contributions. Payroll services like ours at NNRoad can also help businesses to file the necessary paperwork with the Taiwan government to avoid legal troubles.
PAYROLL IN TAIWAN: BENEFITS
Taiwan’s social security system is funded by contributions from employers, employees, and the government. Employers are required to pay around 70% of the contribution, while employees pay an estimated 20%, the last 10% coming from government wages. The contribution is deducted from the employee’s salary every month. Social security contributions are used to fund a variety of benefits, including retirement pensions, disability pensions, and universal healthcare. Taiwan’s social security system is one of the most generous in Asia and provides a safety net for its citizens in case of hardship.
Taiwan offers its workers a number of different types of paid leave, including annual, sick days, and national holidays. Paid annual leave is calculated based on their period of time working under the employer, which has been amended to go from 3 vacation days after six months to 30 days for workers of over 10 years. Employees are also entitled to 30 days of paid sick leave and a number of national holidays appointed by the Ministry of the Interior and Central Competent Authority. Finally, Taiwan offers maternity leave for a period of 8 weeks and 7 days for fathers with pay in order to care for their new families.
COVID-19 MEASURES AFFECTING PAYROLL TAXES AND RELIEFS
Taiwan’s government has announced changes to taxes and regulations that will have a direct impact on payroll. The changes, which are still in full effect after 2022, are a result of Covid-19. Taiwan’s Ministry of Finance has stated that the country’s tax code will be amended to allow for payroll deductions to be made on a monthly basis, instead of the previous quarterly basis.
The ministry has also announced that the corporate income tax rate is expected to be lowered from 20% to 17%. These changes will have a direct impact on businesses in Taiwan, as they will be able to reduce their tax liability and increase their cash flow. In addition, the Ministry of Finance has indicated that it is working on additional measures to help businesses cope with the impacts of Covid-19. The ministry has not yet released details on these measures, but they are expected to be announced in the near future.
INVESTING IN TAIWAN
Taiwan is a country with a thriving economy and a well-developed industry. In recent years, they have been one of the fastest-growing economies in the world. Taiwan is also a major exporter of electronics and Information Technology products. They are home to many major global tech companies, such as Foxconn, Asus, and HTC. Taiwan is also known for its semiconductor industry, which accounts for around 60% of the world’s DRAM production.
Due to its strong economy and thriving tech industry, Taiwan is an attractive destination for foreign investment. In 2022, they are set to host the World Congress on Information Technology (WCIT). This event will bring together leaders from the tech industry and provide an opportunity to showcase Taiwan’s tech capabilities to the world. With its strong economy and thriving tech industry, Taiwan is an excellent place to invest in 2022.
WHERE TO FIND ADDITIONAL INFORMATION
For a detailed view of Taiwan’s Income Tax Act and Labor Standard Act, you may visit the government’s website Laws & Regulations Database of the Republic of China (Taiwan) at law.moj.gov.tw. To make sure your company remains compliant with government regulations, contact us to hear about our payroll solutions and how they can help your business grow.