With effect from 1 January 2018, the CIT rate in Taiwan is 20%. However, for profit-seeking entities with less than TWD 500,000 in taxable income, the CIT rate is 18% in 2018, 19% in 2019, and 20% in 2020 if taxable income exceeds TWD 120,000.
Resident companies in Taiwan are taxed on their worldwide income as follows:
|Taxable income (TWD)
|Up to 120,000
|120,001 and over
||20% of total taxable income*
* Note: If taxable income is less than TWD 500,000, the tax rate is 18% in 2018 and 19% in 2019.
A non-resident company is taxed on income derived from Taiwan sources. A non-resident company with a fixed place of business (FPOB) or business agent in Taiwan is taxed similarly to a resident company (i.e. subject to filing of an annual CIT return based on the same CIT rate provided above). A non-resident company having no FPOB or business agent in Taiwan is subject to WHT at source on its Taiwan-sourced income. WHT rates on dividends, interest, and royalties may be reduced if the recipient is a tax resident of a tax treaty country and the relevant treaty provides for a reduced rate. See the Withholding taxes section for more information.
Tonnage tax system
A qualifying enterprise having its head office in Taiwan engaged in maritime transportation may elect to be taxed under the tonnage tax system, where a lump sum tax is calculated on the net tonnage of their fleet. Once the application is approved, the enterprise must remain under the tonnage tax system and cannot switch to the regular tax system at its discretion for ten consecutive years. Furthermore, loss carryforwards and tax incentives are not eligible under the tonnage tax system.
Profit retention tax
An additional profit retention tax is imposed on any current earnings of a corporation that remain undistributed by the end of the following year. With effect from 1 January 2018, profit retention tax is 5% (previously 10%). Taiwan branches of foreign companies are not subject to profit retention tax.
Imputation tax system
Beginning 1 January 2018, Taiwan no longer operates an imputation system. Imputed tax credits can no longer be used by resident individuals or non-resident shareholders to offset their income tax liabilities or dividend WHT. However, an exception is granted for non-resident shareholders for 2018, whereby dividends distributed in 2018 can still utilise the profit retention tax credit. The profit retention tax credit is calculated based on a prescribed formula and subject to a ceiling, with only 50% of the credit from profit retention tax paid to be used to offset the dividend WHT.
Income basic tax (IBT)
All Taiwan resident companies, as well as non-resident companies with an FPOB or business agent in Taiwan, should calculate IBT if they earn certain income that is tax-exempt. The basic income of a company is the amount calculated in accordance with a formulae stipulated by the government, with a deduction of TWD 500,000. The IBT rate is 12%. If the IBT amount is greater than the regular CIT amount, taxpayers must pay income tax based on the regular CIT amount plus the difference between the IBT amount and the regular CIT amount. On the other hand, if the regular CIT amount is greater than the IBT amount, no special action is required.