Overview of Taiwan Individual Income Tax for Non-Residents
Individuals not residing within the territory of the Republic of China (Taiwan) who derive Taiwan-source income are subject to Taiwan’s individual income tax regulations. These rules differ significantly from those applicable to residents and are primarily governed by the Income Tax Act, its enforcement rules, and the Standards for Withholding on Various Incomes.
In general, non-resident individuals are taxed through withholding at source, meaning that the payer (the withholding agent) deducts tax before making payment. In most cases, non-residents are not required to file an annual income tax return, unless the income falls outside the withholding system or special circumstances apply.
This article provides a comprehensive explanation of how non-resident individuals declare and pay individual income tax in Taiwan, including applicable withholding rates by income category.
Definition of a Non-Resident Individual in Taiwan
For Taiwan income tax purposes, a non-resident individual is a person who:
- Does not have a registered domicile in Taiwan, and
- Stays in Taiwan less than 183 days within a taxable year
Special tax rules apply to individuals who remain in Taiwan more than 90 days but fewer than 183 days, particularly regarding employment income earned from overseas employers.
General Taxation Principles for Taiwan Non-Resident Individuals
If a non-resident individual receives Taiwan-source income that is subject to withholding, the withholding agent must deduct tax at the applicable statutory rate. In such cases:
- The tax obligation is considered final
- The non-resident does not need to file a comprehensive income tax return
However, for income not subject to withholding, the non-resident individual must declare and pay tax directly to the tax authority at the prescribed rates.
Taiwan Employment Income from Overseas Employers
When a non-resident individual stays in Taiwan more than 90 days but less than 183 days in a taxable year and performs services in Taiwan for an overseas employer, the resulting compensation:
- Is considered Taiwan-source income
- Must be self-declared by the individual
- Is taxed at the applicable withholding rate
This rule is particularly relevant to foreign professionals, consultants, and remote employees temporarily working in Taiwan.
Taiwan Withholding Tax Rates by Income Category
Below are the major categories of income and the corresponding withholding rates applicable to non-resident individuals.
1. Dividends and Business Surplus
Income from company dividends, cooperative surplus distributions, partnership profit allocations, and sole proprietorship income is subject to a 21% withholding rate based on the gross amount distributed or allocated.
2. Salary and Wages
Employment income is generally withheld at 18% of the gross payment.
However, if the individual’s total monthly salary does not exceed 1.5 times the monthly basic wage approved by the Executive Yuan, a reduced withholding rate of 6% applies.
3. Commissions
Commission income is withheld at 20% of the payment amount.
4. Interest Income
Interest is generally withheld at 20%, but certain types qualify for a 15% reduced rate, including:
- Interest from government bonds, corporate bonds, and financial bonds
- Interest from securitized financial or real estate products
- Interest from conditional securities transactions
- Interest from short-term bills where redemption exceeds issue price
5. Rental Income
Rental income derived from property located in Taiwan is subject to 20% withholding.
6. Royalties
Royalties for intellectual property usage, including patents and copyrights, are withheld at 20%.
7. Prizes and Awards
Prizes from competitions, contests, or games of chance are subject to 20% withholding.
An exemption applies to government-issued lottery prizes where the prize amount per ticket does not exceed NTD 5,000.
8. Professional Service Fees
Remuneration for professional services is withheld at 20%.
Payments for manuscript fees, royalties, compositions, scripts, comics, or lecture hourly fees are exempt from withholding if each payment does not exceed NTD 5,000.
9. Structured Product Transactions
Income from structured product trading conducted through securities firms or banks is withheld at 15% of the net income.
10. Retirement Income
Retirement or severance payments are subject to 18% withholding on the taxable portion after deducting the statutory tax-exempt amount.
11. Whistleblower or Reporting Rewards
Rewards received for reporting or whistleblowing are withheld at 20%.
Taiwan Income Not Subject to Withholding
Certain types of income are excluded from the withholding system and must be declared and taxed directly by the non-resident individual:
- Property transaction income, including sales of patent rights, taxed at 20%
- Occasional trading profits, taxed at 21%
- Deferred stock transfer income, taxed at 18% or 21% based on income classification and par value
- Mortgage interest and other miscellaneous income, taxed at 20%
- Trust beneficiary income, where a non-resident beneficiary must declare tax at 20% on the value of trust interests upon establishment, amendment, or contribution
Legal Basis for Taiwan Non-Resident Income Tax Rules
These taxation rules are established under:
- Income Tax Act, Articles 2, 8, and 73
- Enforcement Rules of the Income Tax Act, Article 60
- Standards for Withholding on Various Incomes, Articles 3 and 11
Practical Compliance Considerations for Taiwan Non-Resident Taxpayers
While Taiwan’s withholding tax system simplifies compliance for most non-resident individuals, practical issues often arise in real-world situations. Common challenges include determining whether income constitutes Taiwan-source income, identifying the correct withholding agent, and confirming whether an income item falls within or outside the withholding framework. In cross-border arrangements, mismatches between Taiwan tax rules and foreign tax treatment may also lead to double taxation risks if not properly addressed.
Non-resident individuals should retain supporting documentation such as contracts, payment records, travel history, and proof of tax withheld, as these may be required during tax audits or foreign tax credit applications. In addition, tax treaty benefits—where applicable—may reduce withholding rates, but typically require advance application and proper documentation.
Given the complexity of Taiwan’s non-resident tax regulations, early planning and professional advice can help ensure compliance, manage tax exposure, and avoid unnecessary penalties.
Conclusion
Understanding Taiwan’s individual income tax rules for non-resident individuals is essential for foreign professionals, investors, and businesses operating across borders. Because most Taiwan-source income is taxed through withholding at source, compliance is generally straightforward. However, special attention must be paid to non-withholding income and cross-border employment arrangements, where self-declaration obligations may arise.
For complex cases, professional tax advice is strongly recommended to ensure full compliance with Taiwan tax law while minimizing unnecessary tax exposure.