Taiwan’s individual income tax system is based on one’s residence status. The Taiwan government taxes the worldwide income of Taiwan tax residents, while it only taxes Taiwan-sourced income for foreigners.
An individual is considered a Taiwan tax resident if he/she stays in Taiwan for more than 183 days in a calendar year. Tax residency is determined on a day-count basis regardless of whether the stay is continuous or not. An employed foreign national who comes to Taiwan and has already stayed for more than 183 days or a student who has stayed for more than one year will be treated as a Taiwan tax resident.
The Taiwan individual income tax rate starts at 5% and goes up to 40%. A series of deductions are allowed before the imposition of income tax, which reduces an individual’s taxable income. For Taiwanese citizens and foreign nationals with Taiwan residency, the first NT$90,000 (approximately US$3,000) of their annual salary is not subject to taxation. In addition, various expenses such as housing rent, life insurance premiums, and medical expenses can be deducted from an individual’s taxable income.
For foreigners who are not Taiwan residents, salaries paid by Taiwan-sourced employers are subject to withholding tax at a rate of 20%. Withholding tax is final and no personal income tax return needs to be filed. However, a foreigner who derives other incomes from Taiwan, such as rental income or interest income from bank deposits, needs to file a personal income tax return in order to declare such Taiwanese-sourced incomes. The annual filing deadline is March 31 each year for incomes earned in the previous calendar year.
failure to comply with these regulations may result in penalties including surcharges and interest charges. Therefore, it is advisable for those affected to seek professional assistance to ensure compliance with Taiwan’s individual income tax system.
Taiwan Individual Income Tax Rates
Taiwan has a progressive income tax system, with tax rates ranging from 5% to 40%. Taxable income is divided into brackets, and each bracket is subject to a different tax rate. The first NT$540,000 of taxable income (approximately US$17,000) is taxed at 5%, while the next NT$670,000 (approximately US$21,000) is taxed at 12%. Income above NT$4,530,000 (approximately US$140,000) is subject to the highest tax rate of 40%. Taiwan also imposes a 3% tax on wages and salaries. This tax is withheld by employers and paid directly to the government. Taiwan’s income tax rates are relatively high when compared to other countries in the region. However, the country’s strong economy and high level of development make it possible for Taiwan to maintain a high standard of living despite these high taxes.
| Bracket | Tax Rate | Annual Taxable Income (NTD) | Quick Calculation (NTD) |
| 1 | 5% | Up to 540,000 | 27,000 |
| 2 | 12% | 540,001 to 1,210,000 | 80,400 |
| 3 | 20% | 1,210,001 to 2,420,000 | 242,000 |
| 4 | 30% | 2,420,001 to 4,530,000 | 633,000 |
| 5 | 40% | Over 4,530,000 | – |
Sample Calculation
Yearly income = 5 million NTD
Bracket 1: 5% x 540,000 = 27,000 NTD tax on the first 540,000 NTD
Bracket 2: 12% x 670,000 = 80,400 NTD tax on the next 670,000 NTD
Bracket 3: 20% x 1,210,000 = 242,000 NTD tax on the next 1,210,000 NTD
Bracket 4: 30% x 2,110,000 = 633,000 NTD tax on the next 2,110,000 NTD
Bracket 5: 40% x 470,000 = 188,000 NTD tax on the remaining 470,000 NTD
Total = 27k + 80.4k + 242k + 633k + 188k
= 1,170,400 NTD tax due on an annual salary of 5,000,000 NTD
Tax Residency in Taiwan
Individual income tax is levied on Taiwan-sourced taxable income derived by resid