Avoiding 20% flat tax rate


#1

A lady friend of mine is offered a job with a Taiwanese company here in Taipei. Since she will start working on November 1st, her salary will be taxed on a flat rate (20%), which she well understood. However, the company advised her not to declare her income for the year 2002 (Nov and Dec) to avoid the 20% tax. Instead, everything will go normal starting from January 2003. The manager of the company explained that since she won’t have to go to the tax office next year, so everything will be ok. When she needs to go to the tax office (2004), the tax officer won’t care about the tax in year of 2002.

She is now applying for her ARC as the company has already issued the necessary documents.

Please advise if the above arrangement is legal, and if it is not, what are the legal consequences for both the employer and the employee?

Thanks a lot!


#2

I would worry about this. My first company (a law firm) withheld at 20% for the entire duration of my employment, although after 6 months of residency, I could have had my salary withheld at 10% (or at what ever rate the ROC citizens are withheld).

There is a big difference (at least under US tax law) between owing tax, and having to report. For example if you are living in a foreign country and earning wages you MAY not have a tax liability in the states, depending on the $$$ you make. BUT you are still required under US tax law to file a return.

I think, if I remember correctly, that your friend may not have a tax liability, she would get the full 20% back when she files her return, BUT it has to be withheld and she has to file. And I do not mean this as a racist statement by any means, but many Taiwanese are not known for being above board when it comes to taxes and tax evasion… I would not follow her boss


#3

You don’t get any tax back if you have been here for less than 183 days in a year (Jan1-Dec31). I would suggest just bite the bullet and pay the 20%; you’ll be on 10% for all of 2003 (I think) and you will be able to get a rebate for most of that 10%.

Sometimes employers screw around with taxes. I have heard of quite a few people who thought taxes had been calculated into their salary, but then found out that not only was there not going to be any rebate, but that they actually owed a lot of tax. Basically, the employer pocketed the money.


#4

However in Taiwan there is the law and then there is what people actually do. Two entirely different things, I am not approving of it but I am saying that it just happens to be that way.


#5

Bassman, I agree! But, as my mother used to say, if everyone jumped off the empire state building… would you do it too? :laughing:

I just am a good ole fashioned tax and spend liberal… and lets face it the tax rates here are so low… overall! Compared to say, Canada, many European Countries (like Sweden…) and the USA.


#6

I advised her to have her income taxed at 20% rate as she will be considered as non-resident who stays for not more than 90 days.

Article 1-1a
For an individual who stays in the Republic of China not more than 90 days within a taxable year (Jan. 1 to Dec. 31), the income derived from sources in the Republic of China shall be withheld according to the withholding rate (see Article 15) and paid at the respective sources. The taxpayer need not file an income tax return.

However, the company insists on putting her name on the paycheck list starting January next year.


#7

My friend decided to take her chances and has been with the company for about a week now. The agreement is that she will get her 2 months salary (November and December) to be paid in January next year.

She was just informed that the company hasn’t applied for the ARC for her and this worries her. Her visitor visa is good till end of this year.


#8

Actually the tax office aren’t interested if you have an ARC… they just want what you owe the government (your taxes) paid


#9

The company’s screwing her over. Tell her to look for another job. Since she’s working there illegally anyway, she can jump.


#10

Question – when I opened a bank account in the ROC they said something concerning tax, to the effect that I will be charged twice the rate as for ROC citizens … but later I can get the tax back or something?

I couldn’t quite understand … do I get back all the tax or just some? I don’t understand the tax thing at all. Also if I own house here the tax will be twice I know that but I think I can’t get it back? Can someone clear this up for me … the whole matter about taxes … Thanks a lot.


#11

This question is good, and involves an issue that comes up frequently. Additionally, and most importantly, it has been explained at length in previous threads in this Forum.

Hence, I suggest that we set up a fund for segue moderators and segue regulars. The poster should make a contribution to this fund (NT$ 666 minimum, that is a lucky number) and then the moderator or other segue personality will go back through the thread and ferret out the URL of the postings that provide the answer.

Is this reasonable? Comments anyone?