[Income Taxes] 183 day Rule

ROC taxes, overseas payment of taxes, withholding rates, general tax liability issues, and other tax-related matters
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[Income Taxes] 183 day Rule

Postby Taffy » 05 Dec 2005, 16:28

I entered Taiwan on Sept. 2, 2005, after having been away for a year. I get taxed at 20% at the moment (as I should) and it was my impression that once March 2006 arrives (the end of my 183 days of residence), I will taxed at the variable rate, same as anyone else.

However, the finance department at my company seem to think that the counter will be reset on Jan. 1, 2006, and so I will need to pay the 20% rate until July 3, 2006 (give or take a day) when my magic counter will reach 183 days of physical presence in Taiwan in that tax year (i.e. 2006) ............. So, who's right?

Thanks in advance for your time in answering this question!
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Postby scomargo » 05 Dec 2005, 16:51

This is probably the most commonly asked question I've seen in Taiwan. Hopefully this page will help.

http://www.tealit.com/taxes.htm
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Postby jlick » 14 Aug 2006, 12:58

To qualify for the lower resident withholding rate, you have to be physically present in Taiwan for at least 183 days in a calendar year. Until qualifying, your withholding will be done at 20%. If during your first calendar year in Taiwan you are not present for at least 183 days, then your qualifying period will start over again on January 1. For any year you are in the country for at least 183 days, you will also qualify for lower withholding the following year as well.

Days physically present in Taiwan does not depend on your visa status, work permit status, or whether you have a resident card. You can enter on any kind of visa and those days still count toward your 183 days requirement. You can arrive and depart as often as you want, and each qualifying day counts (i.e. your 183 days doesn't have to be consecutive).

The way qualifying days are counted:

1) Your first day arriving in Taiwan does not count (except in case 4 below).
2) Any full day in Taiwan counts as 1 day.
3) Your day of departure counts as 1 day.
4) If you arrive and depart in the same day, it counts as 1 day.

If you are not sure, you can ask the foreign affairs police office or foreign tax office to provide a tally of your days physically present.

Examples:

John enters Taiwan in February and studies Chinese for 6 months, and has already been in the country more than 183 days when he gets hired as an English teacher. His withholding should be done at the lower resident rate, because his time studying Chinese counts towards the requirement.

Mary arrives in September to start teaching English. She's puzzled when she's passed 183 days and her withholding is still done at 20%. Unfortunately, the qualifying period must be within the same calendar year. Because she was here less than 183 days the first year, her qualifying period resets in January and she wil need to wait until July to get the lower rate.

Martin has been in Taiwan for a couple of years and plans to go home in April. Since he will be here less than 183 days in his last year, what should the withholding be? Because he had been in the country more than 183 days the previous year, he still qualifies for the lower rate.

Edward has been in Taiwan for a couple of years. His work permit and ARC end in mid-June, slightly before the 183 days qualifying period. Unlike Martin, Edward plans to come back to work in Taiwan, but not until the following year. He's worried that when he comes back he'll be stuck at the higher withholding rate again. He is very close to the 183 days but he can't get an extension to stay long enough. On his last day he flies to Hong Kong and returns on a tourist visa and stays until mid-July. He now has stayed more than 183 days, and has requalified for the lower withholding rate. Being on a tourist visa still counts. When he returns in February of the following year, he will still qualify for withholding at the lower resident rate.

Please note that your withholding rate does not necessarily correspond to your actual tax rate. If you qualify for the lower resident tax rate within the calendar year, then all of your income will be taxed at the lower resident tax rate, even though the first 183 days of income was withheld at 20%.
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183 continous/accumulative

Postby brianjk » 12 Oct 2007, 23:11

So my work is under the impression that I need to be in Taiwan for 183 days continuously to get my tax return. I am seeing online that it is cumulative.

I arrived here on July 5, 2007, but I was here for two weeks in April, 2007.

So should I notify my work that the law is 183 cumulative, not continuously so they will tax me the right amount when I reach my 183 (I just barely make it at the end of the year)?
..... or will things end up right when I apply for my return in May 2008?
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Postby jlick » 13 Oct 2007, 00:23

What you tell your employer affects how they do withholding. It will have no impact on whether or not you qualify for resident or non-resident tax rates when you file your 2007 taxes next year (in May 2008). However you should still inform your employer of your total time present here so that they don't continue to withhold at the non-resident rates beginning in January 2008.

If they don't know about your time here in April 2007, they would have to still withhold at the non-resident rate until the end of next June 2008. This is because the 183 days present has to be in one calendar year and if you arrived July 5, 2007, you would not qualify for the non-resident rate in 2007 and would have to start counting over again in January 2008. However your time here in April 2007 should bump you over the top for 2007 as long as you don't take any trips out of the country before the end of the 2007 calendar year.

If your employer has any problems with this they should consult the withholding desk of their local tax office where someone should be able to set them straight.
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Re: [Income Taxes] 183 day Rule

Postby the bear » 12 Sep 2008, 12:48

ok heres a question....our HR has told us that from December, due to a tax office directive, we will switch to a 20% tax rate for the whole year. reason being the company is now liable for taxes owing for any foreigner not completing 183 days in Taiwan in any one tax year (ie the difference between the 6/13% rate and the 20% rate.

has anyone else heard of this recently?
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Re: [Income Taxes] 183 day Rule

Postby jlick » 12 Sep 2008, 16:06

Sounds like BS to me. The reason doesn't even make sense. If the reason is that they are liable for taxes if the worker doesn't complete 183 days, then why do they need to withhold for one year? They should be withholding at 20% for the first 183 days anyways, and that should have them covered. I would ask them to give you proof of the directive they supposedly received by giving you a copy.
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Re: [Income Taxes] 183 day Rule

Postby citizen k » 12 Sep 2008, 16:18

Yeah, that just sounds like an H-R c.y.a. (cover your ass) directive that will make things easier for them, but extremely inconvenient for you and any other foreign professional. There are many.

Having one fifth of your salary witheld for the better part of a year is not going to be attractive to any foreign professionals working here or thinking about coming here.
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Re: [Income Taxes] 183 day Rule

Postby Joesox » 10 Nov 2008, 22:17

the bear wrote:ok heres a question....our HR has told us that from December, due to a tax office directive, we will switch to a 20% tax rate for the whole year. reason being the company is now liable for taxes owing for any foreigner not completing 183 days in Taiwan in any one tax year (ie the difference between the 6/13% rate and the 20% rate.

has anyone else heard of this recently?

Bump. I'd like to know about this too. Surely if one can show a company that one has been here working continuously for nearly seven years, then one is exempt from this "new rule"? Or not? Anyone else experienced this when starting a new job recently? Or is it everybody that gets taxed at the 20% rate for the first six months of every year now?
In another thread, the bear wrote:as mentioned in the other thread by moi, my hr people insist that henceforth there is no permanent reversion to the low bracket....the counter resets every Dec. 1 or Jan. 1 so you are taxed 20% until the 183rd day of each year!.....however they haven't been able to give me documentary proof of this....
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Re: [Income Taxes] 183 day Rule

Postby Brendon » 10 Nov 2008, 23:59

In another thread, the bear wrote:as mentioned in the other thread by moi, my hr people insist that henceforth there is no permanent reversion to the low bracket....the counter resets every Dec. 1 or Jan. 1 so you are taxed 20% until the 183rd day of each year!.....however they haven't been able to give me documentary proof of this....


I've heard this one before in various places, but not recently or as a new rule. Just HR either not knowing the rules or trying to cover their asses against imaginary dangers.

I strongly suspect it's all crap, now as it was then. But hey, go ask the tax office! Last time I talked to them was in June or so, when I asked about freelance taxes, and at that time at least my residence for the last five years meant that my withholding would be 6% (not even 10%!) all year long.
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