Hello all, I have a quick question that I looked into and think I have this correct but wanted to make sure. So I will be paid an American salary, in the USA, from an American company, with money going to US banks, with typical IRS withholding, etc. Except I will actually work the majority of the year in Taiwan. I do not know how many days, but probably between 290 and 340. So I for sure will legally be on the hook for Taiwan taxes because I will exceed 90 days there. Now obviously I could just not report it and they would never know, but I want to do this on the up and up. So my question is how this works on the US side. Now if I manage to stay over 330 then I can claim foreign tax exclusion, but my salary is actually quite a bit above the 100k threshold and I would rather have a bit more flexibility in coming back to the states.
So I think I can use the foreign tax credit. So how this would work would be, after the year, first pay whatever I own Taiwan, which will be a mess to calculate, and get that settled (Taiwan doesnāt have any clue about my salary, so I would have to go to the tax office with my w2 Iām guessing and write a massive check to them). Then when I file my US taxes, use however much I paid as a full 1 to 1 credit against my federal income tax burden, which will lower that amount significantly. The result is that my total tax hit will be exactly as if I just lived and worked in the US the entire year, except with Taiwan taking a chunk, and the rest going to federal income, with my state and SS/Medicare no different. Being the case that my federal hit should be a lot lower, I should probably be able to toss a ton of exceptions so less gets withheld, right?
Okay so thatās what I think should happen - is there anything I am missing? Did I get this correct? I will see a tax professional for the fine details, but I want to make sure Iām on the right track first, rather than get floored if my entire plan is wrong. Thanks for any help!
Sounds like you need a tax lawyer. You can usually do without one if your situation is simple (e.g. US citizen living year round in Taiwan working as a local employee paid in TWD with normal TW withholding and under the $100k threshold), but your situation is not simple.
I am not even sure it is legal to be paid in USD when youāre outside the US most of the yearā¦ my company told me it was not. You definitely want to consult a lawyer for this situation, and probably even pay them to prepare your taxes for you.
You could be missing the housing portion of the exclusion. Check out form 2555 and you will see that you can add ~$30k to the 102k max. It is prorated if you are not there for a full year. Also, qualifying for the exclusions is not calendar year, but a rolling 12 months of being outside of the US. If you stayed into the first quarter before filing your taxes, you could qualify.
You can work it both ways and see which is to your best advantage when you prep your taxes.
Taiwan lawyer would definitely be the best routeā¦
But, I assume since you are not employed through a Taiwanese company, nor is any income going to a Taiwan bank account, you would not be liable for Taiwan tax collection.
If there is no work permit nor Taiwan labor insurance/deductions taken out, Iām guessing they will not bother you. Technically there shouldnāt be any record of you āworkingā thereā¦correct?
Nope, OP will be a resident for tax purposes, and the tax people have more information at their fingertips than their counterparts in certain countries.
Anyone working in Taiwan needs either a work permit or a work permit exemption. Presumably OP will have a work permit.
The tax owing in Taiwan may be less than you think, after all the deductions are calculated. A lawyer might be a good idea, but the people at the main tax office in Taipei are also (usually) quite helpful.
Out of curiosity, what if the OP is on a spouse visa? His/her spouse has the work permit along with ARC and working for a TW companyā¦complying with the TW tax and labor situation.
But if the OP is working for a US company, getting paid into a US account (and resides in TW legally from a spouse visa)ā¦I would think they barely exist in the eye of Taiwan.
Oh some clarification - first of all Iād be working for an American company and would officially āconsultā for a Taiwan partner company that is otherwise unrelated to the US company (two separate companies, just partnering up for some projects). I would fly back to the states once a month for meetings so the 90 day passport thing is all I need. I do not have a work permit but I could apply for a TARC as I hold an ROC passport (without household registration) and might even go this route so I can pick up my sheng fen zheng along the way (Iām an ABT and mom maintained her household registration). Not sure that matters much but I guess it means that if I needed a work permit, I shouldnāt have an issue. This situation is also for 2018, not the current year.
Itās true that Taiwan would have no idea about this. I could just fly in on 90 day passport and fly back and Taiwan would be none the wiser. But legally it looks this should be fine, since Iām not working for a Taiwan company, just doing consulting, but since Iāll be in Taiwan over 90 days, they will want to get paid since I will be doing work in Taiwan for that time (they donāt seem to care that it is a foreign company paying me in foreign accounts, the fact that Iām in Taiwan for that long and doing work means they will want to get paid, regardless of work permits or anything else). Yeah I could skirt this easily but Iād rather do it legit and also if I do go for the sheng fen zheng route, Iād want a record of being a good citizen.
Iāll definitely consult a Taiwan tax professional, this was more just making sure that this would be a viable plan from both sides (Taiwan and USA), as if this is actually completely incorrect, or itās actually illegal to do this with Taiwan (I donāt think it is though?) or that I canāt take the tax credit against my US taxes, then Iād need to think of a new plan for 2018. The actual amount of tax I pay to Taiwan is not that big of a concern to me since if I can take a 1 to 1 credit against US taxes, then itās all the same to me. I think Iāll just settle for foreign tax credit than exclusion because the latter has a lot more hoops but I might do both to see which one saves me more.
Anyway does anyone know if this is actually a viable / legal plan or did I totally miscalculate something? Thanks all for the replies so far!
Wait do I really? I thought it was only if you are working for a Taiwan company. I am not working for a Taiwan company, but an American one. If I were just living in Taiwan while working remotely, I wouldnāt need a work permit right? Taiwan would still want their tax cut but it doesnāt seem like anything else would be amiss. I would never exceed 90 days at a time in Taiwan, and would simply be living in Taiwan while working remotely, which is what this would somewhat be analogous to. Iām not even sure who I would get a work permit from.
And yeah my mom is in Taiwan and has household registration. I can do the whole get entry permit using my ROC passport, apply for TARC route if this would make things easier. I could likely get my sheng fen zheng in two years too since I do plan on being above 270 each year and Iām above the dang bing cutoff age.
The problem is Art. 43 of the Employment Service Act.
Unless otherwise specified in the Act, no foreign worker may engage in work within the Republic of China should his/her employer have not yet obtained a permit via application therefore.
The government keeps talking about attracting outstanding foreign talent and so on (search for recent threads about āoutstanding foreignersā), but itās very slow to act.
You may qualify under Art. 51 of the ESA, but Iām not familiar with the procedure for that.
If you donāt qualify, presumably you would need to be hired by the local company, which would probably be complicated if theyāre not actually going to pay you.
Gah yeah I see what you mean there, but obviously plenty of American companies (including my own) send people to Taiwan on business trips all the time, lasting even a few weeks, without any visa or other permits, and āconducting businessā is indeed allowed by the visa-free entry. There doesnāt seem to be any codified cutoff where this is not legal (only cutoffs for taxes, 90 days and then 183 days), as long as you are gone by 90 days. This probably is an odd grey area. Again, Taiwan would have no idea about my American employment if I do not say anything about it. Well maybe the easiest thing to do is just get my TARC and then a general work permit (since I can do one without having a company sponsor me).
Endy, this is an odd grey area. I was in your same exact situation for 5 yrs before formally getting my Hukou and TW passport again and now paying TW Taxes under the Foreign Treaty Exemption tax thingā¦ I would suggest talking to a specialist at Deliotte in Taipei they have a department especially for Americans in this situation who specialized in US Citizens overseas paying income tax State and Federal., Your situation is very specific to all the circumstances you listed so I wouldnāt necessarily take my crazy answer below for a fact eitherā¦But Iām thinking ur in the same boat as me.
Now for the good answerā¦ I could be wrong but You technically donāt have to pay taxes to either TW or the US due to your specific circumstances. I know it sounds absurd, crazy etc but Its true. You donāt work for a TW company and you leave every 90 days. Technically you donāt work in Taiwan youāre a consultant, like you said your company is not the same as the TW company you donāt have a residency here Hukou and you donāt have a Bank Acct here, you donāt receive any Social Benefits in TW. If youāre being paid in USD, I donāt believe you can pay TW Taxes.
Actually I was surprised to find out a lot of people are in a similar situation.
The 100k I believe only applies AFTER you start paying TW Taxes. I donāt know what happens from thereā¦I think you pay TW Tax for the first 100k and everything over is Taxed as the US Bracketā¦Which is actually lower at the high end than TW believe it or not. Unless you also pay a State Tax. Im not making this upā¦Im speaking from experience after seeing the IRS return 4 yrs of Federal Income tax to me, and CA state Board of Equilization return State income taxā¦I wouldnāt have believed it if it didnāt happen.
Whah? Iā¦ could end up not paying taxes to anyone? My total income will be higher than the foreign tax exclusion + housing whatever, so Iām sure Iāll end up paying at least the amount over that right? And Iām a resident of California (and so is my company) so theyāll get their massive cut it seems like no matter what. Argh this is so complicated, and yeah it seems like a lot of people would be in my situation but I cannot find anything online - it seems like everything is geared towards the English teacher in Taiwan situation, including probably many of the replies in this thread.
So the Deliotte specialist, how would I make an appointment and such and such? I mean do they service random individuals like myself? Always thought they were more geared towards companies. And where can I find others who are in the same boat that could provide guidance to me? I am really lost on what all this means/entails (Iām actually in Taiwan now, but will stay under 90 days total this year simply to avoid any tax complications, which means Iāll spend more time than I wanted in the US office).
Anyway thank you so much for giving me ideas specific to my situation. I donāt even think run of the mill accountants or whoever might even know, and almost nothing online addresses this exact circumstance. Even things like if I need a work permit or not isnāt settled, let alone taxes and anything else. Anyway if you have any other guidance or any other resources I can check, please let me know!! Thanks bluejasn!!
Exactly, a lot of people in your position and mine end up paying no taxes to anyone. Let me get back to you and see if I can dig up some info. You can wiki taiwan Income Tax bracket if ur curious. At the high end if your making 100k usd its actually Higher than US fed income tax. However you donāt pay the CA taxā¦so it evens out.
Well youāll soon see that like 85% of the foreigners you meet in Taiwan are English teachers, maybe 5% are Sales and 10% other so blogs advice tends to be geared towards English teachers.
In fact youāre the only other person I spoke to in 5 yrs in a similar situation,
The person at Deloitte is my friend Ill msg you her contact, sheās originally from CA also.
Thanks so much for the contact info! Yeah I guess that this situation isnāt commonā¦ but I just canāt imagine that there wouldnāt be a lot of other people who get sent by some US company to help take care of some stuff in Taiwan for long extended periods of timeā¦ I mean, all those expats who enroll their kids at TAS, at least a bunch of them are getting paid in USD from some US company I would think?
I was pretty careful about it. Use my 60 Day Multiple Entry working visa instead of the 90 day visitor visa . Otherwise they can technically kick you out of the country if caught
Do you have lineal relatives in Taiwan?