In times of economic turmoil that includes an uncertain job market, every dollar counts. People who cannot save for rainy days ahead are advised to avoid waste and cut down on expenses. While people cannot avoid paying taxes, they can make sure they do not pay more than their fair share.
Foreigners who have income from sources in Taiwan must pay individual income tax according to the Income Tax Act (所得稅法). On Aug. 13 last year, the government adopted a new definition of classifying foreign workers as residents or non-residents depending on their length of stay.
Under the new definition, all foreign taxpayers are regarded as non-residents if they stay in Taiwan for less than 183 days of a calendar year and their salaries are subject to a 20-percent withholding tax rate upon remuneration, the Taipei National Administration Office’s English Web site states.
The income tax rate for non-residents is 30 percent for dividend income and 20 percent for other income, including salary, interest and property transaction earnings.
The foreigner’s division of the National Taxation Administration said the change could better embody the spirit of fairness in taxation, although the authorities have failed to address the issue.
Under the old definition, foreign taxpayers who qualified for resident status in the previous calendar year could continue to be treated as residents the following year whether or not they met the 183-day threshold.
As residents, foreign workers are subject to the same income tax rates as locals, ranging from 6 percent to 40 percent depending on income amount. Local employers are obligated to withhold 6 percent of their monthly income only if the tax exceeds NT$2,000 (US$59).
Non-residents who eventually stay in Taiwan for more than 183 days in the same year can file a return but may have to ask a friend residing in Taiwan to collect the return if they have to leave the country.
“It will take a certain amount of time for tax offices to process applications,” a staffer on duty at the Taipei office said on Friday. “There is no uniform standard for offices nationwide.”
For the Taipei office, if the foreign worker can secure a local guarantor, the process will take about a week, the tax worker said. Those without warrantors will have to ask their friends to pick up the tax return, the worker said.
The change of definition has caused few problems thus far, according to the tax worker, who wished to remain anonymous.
“The change has made little difference, as most foreign workers continue to retain their resident status as long as their working contracts state they will stay in Taiwan over 183 days in a year,” he said.
Those who cannot predict how long they will stay here will have 20 percent of their income withheld by their local employers whether they like it or not.
Also to make the tax system more reasonable, tax authorities on Friday lowered the income tax rate for nonresidents receiving low wages to 6 percent from the current 20 percent, the taxation administration said. The tax cut applies only to foreign workers who earn up to 1.5 times the minimum wage of NT$17,280 a month.
Their resident counterparts are spared from the income tax or the withholding rate like locals as the tax is less than NT$2,000.
People with questions can call the information hotline at (02) 2311-3711 ext. 1116 or visit www.ntat.gov.tw. English service is available both by phone and online.