Income Taxes in Taiwan
The income tax rate for nonresident foreign nationals is 20 percent.
You may apply for resident tax status after you have resided in Taiwan for 183 days in one calendar year.
Instructors at nurseries, kindergartens, public primary and junior high schools, private primary and junior high schools, and government-sponsored colleges and universities may be exempt from paying taxes while in Taiwan.
The resident income (this applies to most English teachers) tax rate ranges from 6 to 40 percent, depending on income; therefore, it may be advantageous to arrive in Taiwan before there are 183 days left in the calendar year (approximately July 1). The tax table is as follows:
Because the resident income tax rate is reasonable, it’s best to work for one company that withholds your taxes.
As mentioned in the discussion of work permits, technically you may only work for the company specified on your work permit. Whatever you do, don’t tell the National Taxation Bureau you are working in any unauthorized capacity. As Kafkaesque as the Chinese bureaucracy can be, some government agencies recently discovered that they can cross-reference one another. If you admit some transgression to the Tax Bureau, the Department of Labor or the police could find out and use it against you.
If you should need to file for individual income tax, be sure to bring a valid passport, a withholding statement, certificate of residence, and your certificate of earnings within Taiwan.
You must get clearance from the National Taxation Bureau before leaving Taiwan, because they want to make sure you’ve been paying your taxes. If your taxes are being withheld, you should have the withholding statements to show the officer. Be aware that the Bureau has the right to presume that you are earning income. It is your duty to rebut that presumption, if you choose. If taxes are not being withheld from your income, the Bureau might impose a liability on you. If you claim you weren’t working, you will need to account for how you spent your days. Studying at an approved school should be acceptable to them, but even then the officer might ask how you support yourself.
Taiwanese tax laws may sound confusing initially, but anyone who has taught English in Taiwan should be able to advise you. It’s a good idea to go over the rules with a veteran so you’re sure to have your documentation straight before you go to the tax office.
As an American working abroad, you will be exempt from U.S. income taxes as long as you make less than US$96,000 annually. You should still file a tax return with the Internal Revenue Service. Even though you may not owe any money, not filing can result in huge hassles years down the line when you have long forgotten your failure to file. The burden will be yours to prove to the IRS that you were actually overseas at the time and that you didn’t make enough money to require any tax payment.
For complete information, the IRS publication “Tax Guide for U.S. Citizens Abroad,” is available through the IRS and the various embassies.