Tax Base and Foreign Income
A profit-seeking enterprise with its head office in Taiwan is subject to income tax on its worldwide income. This is true even if the profit-seeking enterprise is a joint venture or a wholly-owned subsidiary of a foreign company. Enterprises with a tax base in Taiwan can claim foreign tax credit for taxes paid abroad on income derived outside Taiwan by branches or agents of a Taiwan-based enterprise. The credit may only be used to offset foreign tax paid in Taiwan and may not exceed the incremental tax liability that would result if the foreign-source income were added to the Taiwan taxable income and taxed at the applicable domestic rate.
Profit-seeking enterprises with head offices outside Taiwan, such as branches of foreign companies, are considered non-resident for tax purposes. Such enterprises are subject to income tax only on their Taiwan-source income.
Income Tax Rate
The general corporate tax rate for Taiwan companies is 20%. However, for companies with taxable income lower than NTD$ 500,000, the income tax rate is increased progressively from 2018 to 2020 (18% for 2018, 19% for 2019 and 20% for 2020 and going forward).
Undistributed retained earnings of a corporation are subject to a 5% surtax. This additional tax is partially deemed as paid by shareholders to offset against personal income tax.
Alternative Minimum Tax (AMT)
Exempted income (e.g. capital gain from securities or futures transactions) is not taxable for income tax but shall be subject to AMT calculation. The amount of AMT will be compare with normal income tax liability and the company is required to pay the higher amount of AMT or normal income tax.
A company or branch seeking to claim a loss and carry it forward must have its tax returns audited by a CPA for both the year reporting the loss and the year the loss is used.
Filing of Tax Returns
Interim corporate income tax filing is due prior to the end of the 9th month of the fiscal year, which for most companies the due date is 31st September. The company’s filing is assessed based on one half of the prior year’s tax liability. Year-end corporate income tax filing is due prior to the end of the 5th month after fiscal year-end, which for most companies the due date is 31st May of the following year.
Summary of Income Tax for Company and Branch
|Entity Type||Limited Company / Close Corporation / Company Limited by Shares||Branch|
|Income Tax Rate||20%||20%|
|Withholding Tax Rate on Distribution of Earnings||21%||0%|
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