ARC and taxes ... if your progressive resident tax rate exceed 20%

Legal Taxes
1

Ladies and gents, a quick question for you knowledgeable folks on here. Firstly, a big of background on my situation can be found at this other Formusa thread here -> forumosa.com/taiwan/viewtopi … 6&t=123534

And, from the most recent progressive income tax brackets that I found for Taiwanese residents are as follows:

  1. If the annual total net consolidated income is less than or equal to NT$ 500,000, the tax rate shall be 5%.
  2. If the annual total net consolidated income is above NT$ 500,000 to NT$ 1,090,000, the income tax payable shall be NT$ 25,000 plus 12% for the portion of income more than NT$ 500,000.
  3. If the annual total net consolidated income is above NT$ 1,090,000 to NT$ 2,180,000, the income tax payable shall be NT$ 95,800 plus 20% for the portion of income more than NT$ 1,090,000.
  4. If the annual total net consolidated income is above NT$ 2,180,000 to NT$ 4,090,000, the income tax payable shall be NT$313,800 plus 30% for the portion of income more than NT$ 2,180,000.
  5. If the annual total net consolidated income is above NT$ 4,090,000, the income tax payable shall be NT$ 886,800 plus 40% for the portion of income more than NT$ 4,090,000.

Now, I’ve read most of the threads on here regarding non-resident tax rates when on an ARC. However, given most of the threads pertain to those teaching English in Taiwan, it would be more beneficial for them to switch over to the resident tax rates as it would be LOWER than 20%, which also means they would get a refund the following year when filing taxes. However, given my income would be in the top tier, my eventual resident tax rates would actually be HIGHER than 20%. Understanding this, does that mean my company would more than likely withhold only the 20% from my paychecks, and I will need to plan ahead to pay the rest once I go and file my taxes?

Thanks in advance!

2

I guess it’s up to your company but I think most companies would withhold the 18% (first six months) OR they would withhold whatever progressive tax bracket % that you fall into. They might not even have a choice.

Congrats on being in such a high tax bracket that you also might have to pay US taxes because you are over the foreign earned income exempt limit.

3

Thanks Abacus for the response. Sounds to me the best method is to just have the company withhold the proper amount based on the resident progressive tax bracket to begin with… no sense in dealing with the +/-'s afterwards.

And yes, my total comp will exceed the exclusion in the US, but from what I’ve read online (and somewhat confirmed after playing with TurboTax), you can still apply the housing credit as well as foreign tax credit on any amount not excluded. Is my understanding of this incorrect?