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Ferfichkin
Joined: 07 Jul 2005
Posts: 140
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 Posted: Sun May 07, 2006 1:15 pm Post subject: Taiwan Taxes |
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Hey everybody,
I know this question has been asked before, I've read it myself, but I'll be damned if I could find it, I searched it with the search thing and everything.
I want to know abot the tax code. I am working in Taiwan now and being taxed at the 20% rate. I have two questions:
1) How does the tax rule work? When does it go down to 6%. Doesn't the time of the year when you came to Taiwan have some bearing?
2) If I stay in Taiwan for a second year, but go home for a one month vacation after my curret contract is up, will I have to start at 20% again? How does that work, I will be on a new ARC, but I've only been out of the country for a few weeks?
Any advice you could give me would be appreciated.
Fich |
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clark.w.griswald
Joined: 06 Dec 2004
Posts: 2056
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| Posted: Sun May 07, 2006 2:01 pm Post subject: Re: Taiwan Taxes |
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The tax calculations as far as length of stay in Taiwan are made directly from your passport and the exit and entry stamps to Taiwan within.
| Ferfichkin wrote: |
| 1) How does the tax rule work? When does it go down to 6%. Doesn't the time of the year when you came to Taiwan have some bearing? |
If you are in Taiwan for less than 183 days in your first tax year then you are considered a non-resident and are therefore taxed at a flat rate of 20% with no deductions and no returns.
If you are in Taiwan for more than 183 days in your first tax year then you are considered a resident for tax purposes and are therefore taxed at the rate for residents. For most foreign teachers in their first year you will find that your actual tax rate is 6% although high income earners may find themselves in the next tax bracket of 13%.
The way it works is like this:
1. The tax year in Taiwan runs from January through December. Therefore if you arrive before the end of June and spend next to no time out of the country prior to December then you will likely meet the 183 day cut off. Please note that any time out of the country is not counted.
2. Your school is required by law to make tax deductions of 20% for this first period of time.
3. If you are here for longer than 183 days before December 31st then in Feburary when you file your taxes you can claim a partial refund of what you paid and what you should have paid.
4. After December many schools will continue to take 10% tax as this is in the middle of the possible 6 or 13% deductions. Don't worry you can claim any overpayment back.
5. Always get receipts for tax deductions each month that clearly state your pay rate, the deduction rate, the deduction amount, and that it is for income tax.
6. At the end of the tax year your school is required to give you a 'Tax Withholding Statement' that shows the amount of taxes deducted from your wages.
| Ferfichkin wrote: |
| 2) If I stay in Taiwan for a second year, but go home for a one month vacation after my curret contract is up, will I have to start at 20% again? How does that work, I will be on a new ARC, but I've only been out of the country for a few weeks? |
This is a good question.
Every tax payer has a taxpayer number. In the case of foreigners this is based upon our ARC number. Therefore if you get a new ARC then you will need to get a new taxpayer number. There is unlikely to be any linkage to the old number and therefore you may find yourself having to start all over again. You may get around all of this though by being able to produce your tax receipt from your previous years filing, but I am not sure how the different tax payer numbers may effect things. |
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twinkletoes
Joined: 05 Jan 2005
Posts: 76
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| Posted: Sun May 07, 2006 2:32 pm Post subject: |
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| You just take all of your stuff to the tax office and someone who speaks English figures it all out for you. It's not a headache at all. |
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Northwood
Joined: 08 Nov 2005
Posts: 66
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| Posted: Sun May 07, 2006 2:51 pm Post subject: |
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Clark wrote:
| Quote: |
| If you are in Taiwan for less than 183 days in your first tax year then you are considered a non-resident and are therefore taxed at a flat rate of 20% with no deductions and no returns. |
Let�s cover more fully the implications of what happens if you don�t clear 183 days by the time your first Taiwanese Christmas comes around.
Example: If I arrived in Taiwan in mid July 2006 I would pay 20% tax for the duration of 2006. In 2007, the day count would start all over again and I would continue to pay 20% tax until I had stayed for 183 days during 2007.
This is correct, right?
Twinkletoes wrote:
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| You just take all of your stuff to the tax office and someone who speaks English figures it all out for you. It's not a headache at all. |
True, but it's heartache when you realise you didn't qualify for a rebate because you were in the country for only 182 days.  |
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SanChong
Joined: 22 Nov 2005
Posts: 335
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| Posted: Sun May 07, 2006 4:32 pm Post subject: |
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Northwood said:
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Example: If I arrived in Taiwan in mid July 2006 I would pay 20% tax for the duration of 2006. In 2007, the day count would start all over again and I would continue to pay 20% tax until I had stayed for 183 days during 2007.
This is correct, right?
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That's exactly right. The calculation is performed based on each calendar year.
Also, it's worth elaborating one point discussed here. If you arrive in late June, you can potentially be in Taiwan for 183 days and qualify for the lower tax rate. However, if you go on vacation/holiday for a week to Thailand, Hong Kong, etc. then it could bring you below the 183 days. You need to be physically in the country for 183 days in a calendar year in order to qualify for the lower tax rate. |
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twinkletoes
Joined: 05 Jan 2005
Posts: 76
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| Posted: Sun May 07, 2006 8:58 pm Post subject: |
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| Northwood wrote: |
Clark wrote:
| Quote: |
| If you are in Taiwan for less than 183 days in your first tax year then you are considered a non-resident and are therefore taxed at a flat rate of 20% with no deductions and no returns. |
Let�s cover more fully the implications of what happens if you don�t clear 183 days by the time your first Taiwanese Christmas comes around.
Example: If I arrived in Taiwan in mid July 2006 I would pay 20% tax for the duration of 2006. In 2007, the day count would start all over again and I would continue to pay 20% tax until I had stayed for 183 days during 2007.
This is correct, right?
Twinkletoes wrote:
| Quote: |
| You just take all of your stuff to the tax office and someone who speaks English figures it all out for you. It's not a headache at all. |
True, but it's heartache when you realise you didn't qualify for a rebate because you were in the country for only 182 days. |
Very true. I just meant to point out that spending days at home with a calculator beating your head against the wall trying to decipher TW tax info aren't necessary. You'll either get a rebate or you won't, but somebody else does the work. |
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sbettinson
Joined: 22 Jul 2004
Posts: 81
Location: Taichung
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| Posted: Mon May 08, 2006 4:08 am Post subject: |
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I was year for a year and then went home for 2 months and came back. I had to start paying 20% tax again because I received a new ARC.
I should think it would be the same anywhere unless you can take a month's vacation from your school at the end of you contract. |
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markholmes
Joined: 21 Jun 2004
Posts: 661
Location: Wengehua
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| Posted: Mon May 08, 2006 4:48 am Post subject: |
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| I'm not entirely sure what you mean Bettinson, but if you still spent more than 183 days in the country in the year you took that holiday you will get a refund of the difference between 20% and the resident rate. Also after 183 days of a calendar year your tax should drop immediately. This all should happen regardless of whether you changed your ARC or not. |
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Northwood
Joined: 08 Nov 2005
Posts: 66
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| Posted: Mon May 08, 2006 2:02 pm Post subject: |
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Clark wrote:
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| Every tax payer has a taxpayer number. In the case of foreigners this is based upon our ARC number. Therefore if you get a new ARC then you will need to get a new taxpayer number. There is unlikely to be any linkage to the old number and therefore you may find yourself having to start all over again. You may get around all of this though by being able to produce your tax receipt from your previous years filing, but I am not sure how the different tax payer numbers may effect things. |
Sbettison wrote:
| Quote: |
I was year for a year and then went home for 2 months and came back. I had to start paying 20% tax again because I received a new ARC.
I should think it would be the same anywhere unless you can take a month's vacation from your school at the end of you contract. |
markholmes wrote:
| Quote: |
| I'm not entirely sure what you mean Bettinson, but if you still spent more than 183 days in the country in the year you took that holiday you will get a refund of the difference between 20% and the resident rate. Also after 183 days of a calendar year your tax should drop immediately. This all should happen regardless of whether you changed your ARC or not. |
markholmes, it seems that Clark already preempted this one. It was news to me also, but Sbettison's experience only suggests it is true.
On another point, I've heard vague rumors that some people actually get their passport replaced (tell their consulate they lost it) when they realize that they have fallen short of the 183 day rule (because they spent too long on vacation outside the country). They then show the new passport to the tax official and don't record their trips outside of Taiwan on the tax form - thus claim they have been in Taiwan for 183+ days. Anyone heard of this scam actually working? |
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clark.w.griswald
Joined: 06 Dec 2004
Posts: 2056
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| Posted: Mon May 08, 2006 2:29 pm Post subject: |
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| Northwood wrote: |
| On another point, I've heard vague rumors that some people actually get their passport replaced (tell their consulate they lost it) when they realize that they have fallen short of the 183 day rule (because they spent too long on vacation outside the country). They then show the new passport to the tax official and don't record their trips outside of Taiwan on the tax form - thus claim they have been in Taiwan for 183+ days. Anyone heard of this scam actually working? |
Even if it worked I doubt that it would be worth the headache. Getting a replacement passport is no doubt an ordeal you only want to go through if you have to.
Theoretically though, I think that in this case you would probably be stuck paying the 20% as you can not prove that you have been here long enough. |
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dangerousapple
Joined: 18 Apr 2006
Posts: 292
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| Posted: Tue May 09, 2006 1:50 am Post subject: |
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| If you replace your passport, you need to bring the old one with you to the tax office to prove you were here long enough. I did it last year. The tax office doesn't really care about visa dates or ARC dates, only the entry and exit stamps in your passport(s). |
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sbettinson
Joined: 22 Jul 2004
Posts: 81
Location: Taichung
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| Posted: Wed May 10, 2006 3:45 am Post subject: |
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Just to clarify my point as I think I misread the original post and I didn't fully explain my position. My apologies for the miscommunication.
I worked in Taiwan from November 2004 to November 2005. I went home for about 3 months after my contract and my ARC was cancelled. I filed my taxes and received a refund in February this year.
During my contract I had a reduction in my tax after 183 days from 20% to 10%.
When I returned to Taiwan in February this year I had to go through the application process for my ARC again. I still have the same ARC number as I did last year but it is a new ARC and resident visa all the same. I am currently paying 20% tax again until I have been in country for more than 183 days. At the end of this year I can apply for another rebate.
An awful situation to have to pay that amount of tax again but there you go.
Hope this clarifies my previously unclear posting. |
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clark.w.griswald
Joined: 06 Dec 2004
Posts: 2056
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| Posted: Wed May 10, 2006 5:04 am Post subject: |
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| sbettinson wrote: |
| When I returned to Taiwan in February this year I had to go through the application process for my ARC again. I still have the same ARC number as I did last year but it is a new ARC and resident visa all the same. |
How did they know what your previous ARC number was if it had been cancelled? Was it on the system or did you show them your old ARC?
Don't get me wrong, I think that this is a good thing, I have just never heard of this before so thanks for bringing it to our attention.
As for your taxes, who told you that you need to start paying 20% again - your employer or the tax office? I would recommend that you take your documentation and make a visit to the tax office in person as it seems to me that if you have the same ARC number then you will have the same tax payer number and their records should confirm this.
Alternatively you could just see the 20% as a savings plan and enjoy the refund when it comes in. |
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