The corporate income tax (CIT) rate in Taiwan is 17%.
Resident companies in Taiwan are taxed on their worldwide income as follows:
|Taxable income (TWD)
|Up to 120,000
|120,001 and over
||17% of total taxable income
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 withholding tax (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 10% profit retention tax is imposed on any current earnings of a corporation that remain undistributed by the end of the following year. Taiwan branches of foreign companies are not subject to profit retention tax.
Imputation tax system
Taiwan operates an imputation tax system to eliminate double taxation on earnings of a corporation. The 17% CIT and 10% profit retention tax already paid by the corporation can be distributed to the resident individual shareholders as tax credits to offset against their individual income tax. However, the tax credits distributable to shareholders are subject to certain limitations. Currently, the imputation tax credit is reduced by one-half.
Non-resident shareholders may credit the 10% profit retention tax previously paid by the investee company against the dividend WHT where the dividends are distributed from retained earnings that have already been subject to the 10% profit retention tax. Please note that credit for profit retention tax from dividend WHT is calculated based on a prescribed formula and subject to a ceiling. The ceiling is one-half of the original amount. That is, the ceiling of 10% profit retention tax creditable against dividend WHT is computed as 'dividends distributed from retained earnings where 10% profit retention tax has already been levied' x 10% x 50%.
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.