New Tax Rates for Foreigners effective January 1st, 2010!

[maoman]

Fresh off the press:

(I bolded in red the parts that will be of interest to us foreign residents.)

To establish a friendlier tax environment and to encourage foreigners and foreign entities to invest in Taiwan’s financial markets, the Ministry of Finance (MOF) has revised the Standards of Withholding Rates for Various Incomes and reduced a number of income tax rates. Pending approval by the Executive Yuan, the new rates will come into effect on Jan. 1, 2010.

According to these revisions, since Jan. 1, 2010 the withholding rate on the salaries of foreigners who have resided in Taiwan for less than 183 days within the same tax year will be reduced from 20% to 18%. The withholding rates for these foreigners for interest on commercial products such as short-term commercial papers and bonds will be reduced from 20% to 15%. Foreigners who have obtained an Alien Resident Certificate number and have resided in Taiwan for more than 183 days within the same tax year will continue to follow current regulations and be taxed as individual residents living in the R.O.C.

In addition, foreign residents who have stayed in Taiwan for more than 183 days within the same tax year will be subject to separate taxation at a uniform withholding rate of 10% on income from interest earned on short-term commercial papers, real estate, securitized products and transactions in structured products.

Finally, mainland Chinese citizens, juristic persons or entities staying in Taiwan for less than 183 days in a year will enjoy a reduced uniform tax rate of 20% on net dividends or net profits, regardless of whether their investment applications have been approved or not.

[Northcoast Surfer]

Guess I misread this. I thought that the highlighted part means that once we surpass the initial 183 days of residency that we will only be subject to 10% withholding for subsequent years that we reside here and that the rate won't bounce back to 20% withholding for the first six months of every year.

[Brendon]

So if I'm reading it right, foreigners still get extra withholding for the first six months of every year they're here, it's just down from 20% to 18%? Seems like that's still worse than it was a few years ago, when we went down to normal withholding except for our very first six months.

[headhonchoII]

There's not enough information there to figure out what they are talking about, do they withhold on the long term residents or not first..?

[sulavaca]

If your company sends the tax office contractual evidence confirming your employment extension intention beyond the initial one year contract assuming you arrive after the initial 183 days of a given tax year, then the following year's tax beginning on the first designated new tax year date, can be charged at the base rate.

[CraigTPE]

How is this different? It still reads "183 days in the same tax year" will follow the existing regulations, the key being "same tax year". Is there anything about it carrying over to subsequent tax years? Did I miss something?

[sulavaca]

Its a very slight tax reduction as far as I can read. There is still more reason to come in the first half of the year as one will suffer the higher tax after the first 183 days.

Does anyone have experience claiming tax back in the second year, before 183 days upon leaving the island? Is it a simple process and do they return close to 14 percent of one's tax?
My two sisters are perhaps thinking of coming over.

[jlick]

Yeah, the way I read it is that the new scheme of non-resident withholding for the first 6 months is still there, they just reduced the withholding rate to 18%. I think most of us would prefer the old scheme of only having non-resident withholding for the first year in Taiwan. As it is for most long-timers the rates went from 6% to 20% to 18%, so it's not much worth getting excited about.

There was also an announcement that uniform tax rates for interest, real estate and certain investment income was lowered from 20% to 10% for resident foreigners, also taking effect beginning of 2010.

[kjmillig]

Can someone try to clarify something for me. Since February I've been teaching in a county program at a public elementary school. I remember reading that elementary school teachers were exempt from paying taxes. At any rate, the county pays my salary and does not require me to pay taxes. I've been looking at some new jobs though, and one recruiter for a high school job told me that starting in January all foreigners will be required to pay taxes regardless of what type of school. Another recruiter for an elementary job told me it would be tax free. I don't know who to believe.

[ironfist]

side question if you didn't file tax and didn't pay tax, they will just mail you something to pay it up and along with some penalty? I am talking about not a big amount but pretty small amount of money. They won't just put you straight in jail will they, this friend was saying something about jail but it's pretty small amount of money. also penalty for not filing tax how bad is it? thanks guys