In 2020, I was in Taiwan fewer than 183 days. In 2021, I could choose 183 days or fewer than 183 days. Should I choose fewer? I am certainly leaving, but now I can choose the date for 182 or 183 days. I don’t think that I have any deductions. Income for the 2021 time in Taiwan < NT $600k. Please advise!
Also, I’ve read several threads and other websites, I’m sorry, it is still not clear to me how Americans in Taiwan avoid paying taxes to both Taiwan and USA, or how to receive a refund for one if both are paid. I have already filed my US income tax forms. All my income is from my American university. As a researcher, I don’t think that I am doing any work for a Taiwanese entity, and I don’t know that it makes any difference for taxes. US tax amount was reduced by payments into retirement plans. Is it true that for <183 days, Taiwan tax is 18% of total gross income, regardless of what my income statement calls “federal taxable gross”, a figure less than total gross due to things like retirement plan payments?
(By the way my stay in Taiwan for this particular time was planned long before Covid-19.)
Thanks, I plan to be back in the USA by then. Besides the questions about my particular case, I’m worried about how complicated is the on-line tax reporting described in several Forumosa threads.
I was in a somewhat similar situation. They’ll use your AGI (what’s in your W2 from work / on your 1040) to determine your income–so yes, it’s the amount after pre-tax deductions like 401k, health insurance, etc.
The TW tax office considers it taxable unless you can prove that the work was done while you were NOT in Taiwan. Otherwise, if you were physically located here, while doing the work and getting paid, it’s considered taxable. Fortunately, this will be prorated for the days you were physically in Taiwan (so if you were here 180 days, it’d be 180/365 * taxable amount less any deductions). They already know the number of days you were/are here.
As far as deciding between 182 and 183 days, I’d look into Taiwan’s progressive tax rates. Depending on your AGI / proration, it might be advantageous to go for the flat 18% (sub-183 days) or the progressive rates. You might want to consider whether you plan on pursuing an APRC in the future as well.
Thank you. It looks like I could complete (USA) IRS Form 1116 for Foreign Tax Credit (FTC) to get some or all of the double-tax back. I think I can claim this on 2021 US tax in April 2022. https://www.irs.gov/pub/irs-pdf/p514.pdf page 23
“If, because of the limit on the credit, you cannot
use the full amount of qualified foreign taxes
paid or accrued in the tax year, you are allowed
a 1-year carryback and then a 10-year carryover of the unused foreign taxes.
This means that you can treat the unused
foreign tax of a tax year as though the tax were
paid or accrued in your first preceding and 10
succeeding tax years up to the amount of any
excess limit in those years. A period of less
than 12 months for which you make a return is
considered a tax year.”
This is just general advice because specifics for everyone are different. But folks typically only look at the FTC in situations where the FEIE isn’t more beneficial.
If you can’t avail yourself of the FEIE, then yes, it seems like the FTC should work. The US doesn’t have a tax treaty with Taiwan, so my accountant told me it’s more common for folks to file their Taiwan taxes first, then go back and file their US returns (or you’d be forced to amend like me) for the same tax year. I haven’t come across the situation of using the FTC for taxes paid to another country in a previous year.
Thanks for pointing to FEIE. I would choose FTC because I don’t meet this FEIE qualification: “A U.S. citizen or a U.S. resident alien who is physically present in a foreign country or countries for at least 330 full days during any period of 12 consecutive months” Foreign Earned Income Exclusion | Internal Revenue Service
Sounds good. As a quick tip, the 12 months for FEIE do not need to be within a single calendar year. So if there’s a 12 month window you were outside the US (less the 30 days), you might be able to claim the FEIE across say 2020 and 2021. Again, everyone’s situation is different (and taxes are merely a hobby haha). Good luck!
Technically, they might be able to tax your business according to Taiwanese laws because it’s being managed from Taiwan (i.e. a controlling shareholder resides in Taiwan). Practically, they might not care.
A company is a resident of Taiwan for CIT purposes if it is incorporated in Taiwan. A non-resident company that has an FPOB or business agent in Taiwan is obligated to file a CIT return in Taiwan on its Taiwan-sourced income.
And:
A non-resident company is only taxed on its Taiwan-sourced income. Article 8 of the Income Tax Act and the related Guideline defines the types of income that should be regarded as sourced from Taiwan. For example, fees received by a non-resident company for service performed entirely outside of Taiwan are exempt from income tax assessment, subject to supporting evidentiary documents
The term “income from sources in the Republic of China” used in this Act refers to income of the following categories:
Dividends distributed by companies incorporated and registered in accordance with the Company Act of the Republic of China and by foreign companies authorized by the government of the Republic of China to operate within the territory of the Republic of China;
Profits distributed by profit-seeking enterprises organized in the form of a cooperative or a partnership within the territory of the Republic of China;
Remuneration for services rendered within the territory of the Republic of China, provided that this shall not apply to remuneration obtained from an employer without the territory of the Republic of China by an individual not residing in the Republic of China but staying in the Republic of China for a period of not more than ninety days during a taxable year;
Interest obtained from governments of various levels of the Republic of China, from juristic persons within the territory of the Republic of China and from individuals residing in the Republic of China;
Rental obtained from lease of property situated within the territory of the Republic of China;
Royalty obtained from patents, trademarks, copyrights, secret formulas and franchises by virtue of their being made available for use by other persons within the territory of the Republic of China;
Profits from the transaction of properties within the territory of the Republic of China;
Remuneration for services performed by personnel sent abroad by the government of the Republic of China on overseas missions and for services rendered abroad by employees in general;
Profits from operation of industry, commerce, agriculture, forestry, fishery, animal husbandry, mining, and metallurgy enterprises within the territory of the Republic of China;
Awards or grants obtained from participating in various skill contests, games, or lotteries, etc. within the territory of the Republic of China; and
Any other income obtained within the territory of the Republic of China.
Yes, rules like this make Taiwan a not-so-friendly tax haven.
When I talked with a TW tax agent, she mentioned that gains on investments in US brokerages were not taxable.
However, anything else based on their interpretation “Taiwan-sourced” seems taxable, like even sending an email on behalf of a company (or the company paying out distributions) when a person is in Taiwan. There’s a fine line with trying to hide anything too since Taiwan happens to be a signatory to FATCA, for US taxpayers at least.
I haven’t done taxes of this nature, so all anecdotal. Better to seek a TW-based accountant’s advice (can send a referral if anyone needs).
On the other hand, it seems to be common between tax advisors and locals to consider all income paid by foreign companies into foreign bank accounts as unrelated to Taiwan. Apparently that’s how most bankers in Taiwan are getting paid (bank account in Malaysia, Singapore, …) and they don’t seem to be paying taxes on that. At least that’s what I’ve been told by someone familiar with the matter.
And don’t even get started about the enforcement of tax laws - e.g. when it comes to rental income. So the risk of getting caught in an investigation because performing work for an overseas company from within Taiwan is probably not that high.
Be aware that it depends on the level of income, google AMT/IBT tax (it is different from personal income tax)
“< NT1000000” no need to declare (just talking about AMT here)
“> NT1000000” declaration needed
“> NT6700000” (unlikely, I know) there will be some tax to pay.
And even in that case, it seems to be common for locals to strike a deal with a bank to get a low interest loan and then stretch out the payment over some years (e.g. when they buy real estate using money earned overseas).
As we’ve all probably come across, there’s a lot of things TW citizens can get away with that we likely can’t. The calculus is different for everyone on what they’re willing to report (v. the risk of getting caught).
