Resident taxpayers have the option to claim either a standard deduction or itemised deductions for their income tax calculation purpose. For the 2019 IIT return filing, these deductions are as follows.
Note that non-resident aliens are not eligible for any deductions.
The deduction for a single taxpayer is TWD 120,000. A husband and wife filing a joint return are eligible for a standard deduction of TWD 240,000.
Itemised deductions include the following:
- Charitable contributions.
- Insurance premiums (maximum of TWD 24,000 per person per annum for group insurance premium and labour insurance premium).
- Medical expenses.
- Calamity losses.
- Either interest paid on loans for the purchase of an owner-occupied house in Taiwan (maximum of TWD 300,000) or rental payment (maximum of TWD 120,000) for the lease of a self-use residence in Taiwan.
There is no ceiling on the aggregate of the itemised deductions.
The following special deductions are also available:
- Special deduction for losses from property transactions, which are limited to gains from such transactions (residual balance can be carried forward for three years).
- Special deduction for interest earned from bank deposits (limited to TWD 270,000/tax filing unit, or the total reported, whichever is lower).
- Special deduction for the disabled or handicapped (TWD 200,000/person).
- Special deduction for dependent child tuition (TWD 25,000 per dependent child if studying in an approved college or university).
- Special deduction for pre-school children who are less than or equal to five years of age (TWD 120,000 per child, which is only allowed for a taxpayer whose applicable regular income tax rate is less than 20% after deducting the said special deduction, or where the income subject to IBT is less than TWD 6.7 million).
- Special deduction for salaries or wages may be elected to use either: (i) fixed salary deduction (limited to TWD 200,000/person or total salary income reported, whichever is lower) or (ii) specific expense deduction to calculate taxable salary income, whichever is more beneficial. Under the specific expense deduction regime, three prescribed expense categories can be deducted from salary income. The prescribed expense items shall be incurred directly in relation to the provision of services by the individual and should be actually borne by the income recipient. The specific expense deduction is limited to 3% of total salary income for each expense category per person per year. The three prescribed expense categories are listed as follows:
- Occupational clothing expense: Expenses incurred for special clothing items or performance dedicated clothing required for one’s occupation, including purchase cost, rental expense, cleaning fee, and maintenance expense.
- Training expense: Expenses incurred for participating in training courses covering specific skills or expertise delivered by qualified institutions associated with current occupation or work, or required by law.
- Occupational tool expense: Expenses incurred for purchasing books, periodicals, or other tools that are solely used for one’s occupation. If the useful life of the aforementioned items exceed two years, and the expense incurred exceeds a certain amount, the purchase amount shall be depreciated or amortised annually.
- Special deduction for long-term care (TWD 120,000 per person, which is only allowed for a taxpayer whose applicable regular income tax rate is less than 20% after deducting the said special deduction, or where the income subject to IBT is less than TWD 6.7 million).
A non-resident alien is not eligible for any special deductions.
A resident alien is eligible for a personal exemption of TWD 88,000. Additional exemptions of TWD 88,000 each are available for the spouse and each dependant. For dependants over 70 years of age, the exemption will be TWD 132,000.
A non-resident alien is not eligible for any personal exemptions.
Basic living expenses difference
The total basic living expense shall be calculated in accordance with the expenses of basic living for each person announced by the Ministry of Finance multiplied by the number of taxpayer, spouse, and dependants. If the amount of basic living expense is higher than the sum of personal exemption, standard deduction (or itemised deduction), and special deductions (not including deduction for salaries or wages), the difference can be used as an additional deduction from the gross consolidated income.
For tax year 2019, the basic living expenses was TWD 175,000 per person.