Enterprise income tax
Enterprise tax residence
For any profit-seeking enterprise having its head office within the territory of the Taiwan, a profit-seeking-enterprise income tax shall be levied on its total profit-seeking-enterprise income derived within and without the territory of the Taiwan; provided that in case income tax has been paid on the income derived outside of the territory of the Taiwan in accordance with the tax law of the source country of that income, such tax paid may be deducted from amount of tax payable at the time of filing annual returns on the total profit-seeking-enterprise income, to the extent that such deduction shall not exceed the amount of tax which, computed at the applicable domestic tax rate, is increased in consequence of inclusion of its income derived from abroad.
For any profit-seeking-enterprise having its head office outside the territory of the Taiwan, the profit-seeking-enterprise income tax shall be levied only on income derived within the territory of the Taiwan. Compensation received by a foreign enterprise, institution, organization, or association for services rendered in the Taiwan directly from its Taiwan clients is considered Taiwan source income, subject to income tax.
Dividends are distributed from the after-tax surplus profits. If dividends are distributed by a profit-seeking-enterprise in the Taiwan, dividends received by a profit-seeking-enterprise are not included as taxable income. The amount of deductible tax contained in the aggregate of dividends so distributed shall be included in the balance of such profit-seeking- enterprise’s shareholder tax offsetting account.
Tax rate for Profit-Seeking-Enterprise Income Tax is 20% for taxable income above NT 200,000 as shown in table below
Profit retention tax
A surcharge of 5% is imposed to companies on current year after-tax profits that are not distributed in the following year.
All profit-seeking enterprises shall follow “The Rules Governing the Assessment of Income Tax for Profit-Seeking Enterprise on Non-Arm’s Length Transfer Pricing Issues” to issue Transfer Pricing Report or disclose related parties transactions.
Income Basic Tax
(Alternative Minimum Tax, AMT)
The income basic tax imposes a minimum tax on individuals and enterprises to all Taiwan resident enterprises and foreign entities with a fixed place of business or business agent in Taiwan if they earn certain income that is tax exempt or enjoy tax incentives. Income subject to AMT for an enterprise= Taxable income of a Profit-seeking-Enterprise + AMT add-back items
AMT=(Income subject to AMT for an enterprise – NT500,000) * 12%.
AMT represents floor of tax payable, if regular income tax is higher than AMT, no additional payment is required. If regular income tax is lower than AMT, then the taxpayer needs to pay additional tax for the difference between AMT and regular tax.
Taiwan sourced income of foreign enterprises or individuals is subject to withholding as below,
Double taxation relief
Taiwan has signed double taxation agreements (DTAs) with several countries as shown in the following table,
Capital gains from securities & futures transactions
There is no capital gains tax in Taiwan for profit-seeking enterprises. Enterprises having gains from sales of qualified securities are exempted from enterprise income tax but are subject to alternative minimum tax.