I’m trying to gather a list of benefits of ARPC over citizenship. For simplicity sake, I’m using the version of APRC that foreign working professionals get.
Tax residency
APRC: Non tax resident if staying less than 183 days in a year, worldwide taxation if >= 183
Citizen with HHR: Non tax resident if staying less than 30 days in a year, worldwide taxation if >= 30
Comments: This can be a double edged sword, but can work great for business owners, investors, or entrepreneurs who don’t have Taiwan sourced income and like to travel. You can stay for almost half the year while not having any legal tax obligations if all your income is sourced outside of Taiwan. This takes some creative structuring, for example you can’t pay yourself a salary while you are physically in Taiwan. All your foreign dividends, foreign interests, and foreign capital gains, even when paid while you are in Taiwan, are 100% tax free with no AMT limits (assuming the source country doesn’t tax them), similar to qualifying for permanent Gold Card tax benefits. So if you have accumulated $1m USD unrealized gains in foreign stocks, go ahead and sell it in a year where you’re not a tax resident. Just became rich due to stock options? Great, go take a vacation outside Taiwan for half the year. Best of all, you can decide to do this anytime in the year as long as you left enough buffer days to maintain non tax residency.
Maintaining residency
APRC: Enter Taiwan 1 day in 5 years
Citizen: Need to maintain HHR
Comments: Maintaining HHR isn’t as flexible as maintaining APRC since you need to visit government offices and actually keep HHR at a physical place (almost all landlords do not allow you to do so, so you probably need to buy your own home or use a relative’s if you have one). Once you lose HHR and become a NWOHR, it’s much more lengthy process to re-acquire HHR than an APRC holder who simply needs to step foot in Taiwan.
Comments: Unlicensed crypto exchanges like Binance (if their Taiwan AML license doesn’t get approved) may be banning Taiwanese citizens and not allowing them to open accounts.
Language
You have an excuse to speak English if your Chinese is bad, because you’re a foreigner. Perhaps this is a good way to make conversation at the bank and other places.
How beneficial do you think the current situation is for higher-earning APRC holders? Or I suppose a better way of phrasing it would be how many people do you think are affected by this?
It’s something that came up briefly during the Tax committee meeting at the ECCT yesterday, and I’m not sure about the answer.
I can see that the current interpretation might be beneficial for some high earners spending approximately 183 days in Taiwan anyway, i.e., situations where the non-resident rate of 18% is less than the person’s effective resident tax rate. I think this would be somewhere above an annual income of around NT$1.7 million depending on circumstances, but I haven’t calculated it accurately.
However, it seems to me that this should be quite a small group of people compared with the number of people affected by being considered not domiciled when they really are by any standard definition?
Since majority of foreigners are laborers (I think >85%), majority would be negatively impacted by the current tax domicile rules.
It would benefit foreign business owners and investors, so maybe a lot of Gold Card holders and high income foreigners are in this category since they can’t find similar wage jobs in Taiwan. They have 0% withholding and don’t need to pay the 18% if they don’t have any Taiwan sourced income. For example if some stock trader makes a lot of money in the middle of the year, they have the option to decide to maintain non tax residency for the remainder of the year, in order to get 0% taxation, since AMT does not apply if you are a non tax resident, and there is no fixed 18% withholding for foreign investments.
Actually Taiwan might be a paradise for foreign stock traders (non-US citizens). You can stay a resident, buy a home, do pretty much anything, and maintain non tax residency if you make a lot in stocks in a particular year.
So if you have an APRC but hold a job in Taiwan but manage to be outside of Taiwan for half the year + 1 day you have just 18% taxes, is my understanding correct?
Yeah it’s fixed withholding if you have any Taiwan sourced income, such as jobs, salary from Taiwan etc.
Though you could argue 18% is also a great deal if you are a very high income earner. It’s similar tax rate as HK and SG for high income earners. Much lower than tax resident bracket of 40% for the top bracket. It sucks if you are a middle or low income earner with Taiwan sourced income though, since a Taiwan tax resident would pay < 5% after deductions.
So another situation is if you are a foreigner exec at a Taiwan company, say earning 100m TWD per year. It would be in your best interest to stay less than half the year and take that 18% fixed withholding, than to stay more than half the year and get hit with close to 40% taxes. You as an APRC holder get this choice, whereas citizens do not (they would need to stay less than 1 month, which is much harder to do).
This is what I think too. I actually suspect it would be >85% even if migrant workers were excluded from the calculation (so just regular professionals living and working here, most of whom don’t have the luxury of staying outside Taiwan for >6 months each year).
I can see that some wealthy people holding A(P)RCs but not working locally and preferring to be non-resident might be worse off under a revised interpretation of domicile though. I wonder how many of those exist…
I think that’s broadly correct, yeah, though I’m not sure if working for a Taiwanese company (and being paid in Taiwan) would complicate things. And of course, most people working locally won’t be able to leave for >6 months per year.
I think it means less flexibility of tax reduction for high income earners but the majority of low and mid income earners would benefit. In the end I think they would collect more taxes if they changed tax domicile rules since I believe they collect more from high income earners. So maybe that’s another way to make the argument if you want to convince them to change domicile rules.
My accountant said some high earning Taiwan execs tried to maintain non tax residency due to their tax bracket of 40%. They need to maintain less than 1 month of tax residency. Being a foreigner, a big advantage is we only need to maintain less than 6 months of residency. You can still maintain a life in Taiwan with 6 months, not possible with 1 month.
You can actually list the HHR office as your physical address…
Also when you don’t maintain HHR the process for getting it again is painless and you still maintain your ID card and passport with the ID number in it so you can return freely
Imagine you are an investor staying in Taiwan full time. It’s June 30 and you just made 10 million USD in capital gains trading options. If you are an APRC holder, you can take a vacation out of Taiwan for the rest of the year and pay 0% tax. If you are a citizen, you are stuck with a high tax bill. This is just one of the many scenarios for high income earners.
P.S. This is assuming you are not an American since they have worldwide tax
I’m not saying APRC or citizenship is better, but merely showing you how APRC is best used to its fullest potential. Once you do that, you realize having one is a privilege over citizenship if you use it in a certain way. Having a APRC and maintaining no tax residency is similar to permanent gold card tax benefits, and even GC holders who qualify are limited to a few years.
You’ll also see that all the points I listed can work for and against you. I’m looking at each from a positive angle. I’d be happy if Taiwan got rid of all of these, similar to how green card holders and citizens in the US are treated equally, outside of a few areas like right to vote, right to land etc.
So as a non-US citizen, is it possible to have a full-time job without being a tax resident in Taiwan and other places? I wonder if, say a digital nomad could spend 182 days in Taiwan and work the rest of the time from other countries (Japan, Philippines, etc). I always assumed that you could owe taxes on your income in other countries if you stayed too long, or it might even be disallowed on a tourist visa. Idk, quite complicated
(Trying to figure out the options that say a full time high earning digital nomad could have)
Most country’s interpretation of whether tax is due and whether tax residency is required is different than Taiwan’s. For most countries, your principal place of residence is the country you have most ties to, such as having a home.
For example, for the US they care that you are not resident in the US, not a US person, and the income is not ECI (salary for work performed outside the US is not ECI): https://www.irs.gov/instructions/iw8ben
“If you do not have a tax residence in any country, your permanent residence is where you normally reside.”
Your tax rate depends on where your employer is located and the tax rules in their jurisdiction and the countries you visit. For example if the employer is in Taiwan, there’s a fixed 18% withholding for foreigners. If it is a US company and they let you fill in a W8-BEN, it is 0% tax withholding for salary if work is performed outside the US. But for any US salary received while you are in Taiwan, and assuming you’re over 90 days in Taiwan that year, it would be subject to 18% Taiwan tax. So it’s best to not take a salary while in Taiwan. Usually only your own company would give you that flexibility.
Maybe a structure like the following would completely eliminate taxes? Assuming it’s your own company and you stay in Taiwan less than 183 days but would like to stay more than 90 days:
You can visit other countries but don’t stay long enough to become tax resident to avoid tax complications with that country. Usually this is 30 or 90 days max
If staying > 90 days in TW: Only pay yourself a salary while physically outside of Taiwan
Declare your usual place of residence as Taiwan (see above note on W8-BEN)
For US stock investments you have many choices since you pay 0% capital gain taxes. I would avoid anything that pays dividends due to withholding tax. If you invest in SPY500, then SPXS.L or CSPX.L track it and have 0% withholding. Or buy Berkshire Hathaway stocks which have no dividends and perform like SPY500.
If you really need a legit tax residence place for peace of mind, Dubai can give you tax residency for only staying there 3 months per year, and that gets you 0% tax rate on everything plus they have double tax agreements with places like Canada.
Japan is quite tax friendly to non permanent residents. Your foreign income is exempt from tax. Only permanent residents and nationals have worldwide tax. So feel free to be a tourist for 365 days in a year. It’s also quite easy to get a 5 year work visa there and they don’t kick you out if you quit or get laid off early, and you can keep your 5 year visa. I went through the process of applying for a job there and employer sponsoring a 5 year work visa, but didn’t go through with it.
I don’t know the current situation, but it used to be like that in China too, around 2012-2014. When I first moved there, I tried asking my employer (a university) and the local tax office how to pay tax on freelance income paid overseas. The answer was that as a foreigner I didn’t need to until I’d been there five years (if I’m remembering correctly) so couldn’t declare it.
I remember it seemed odd at the time coming from Europe, but… fine by me.
I think in Japan, permanent residency and citizenship can be a burden to those with high foreign income, similar to how citizenship in Taiwan can be a burden for some with high foreign income. It puts an end to many legal tax structuring strategies.
Not sure you if you guys are aware of this, but supposedly for APRC you only need 183 days per year for 5 years on average rather than every year now. Seems to have been a change last year.
Yeah this is for other types of APRC such as through marriage. The one for foreign white collar professionals including those converting from gold card is 1 day in 5 years.
Depends on your case… reregistration is instant and I foresee them making it possible online in the coming years.
Also as you don’t have an active household registration the 30 days don’t apply…
Also with an APRC that can be taken away for any reason and the 1 day in 5 years rule may change in the future. There was already talks about having it change to 183 days average for APRC to maintain the health insurance cards (1 day in 5 years or not)
" G. Duration of Stay
Nationals without household registration entering the R.O.C.(Taiwan) with permits may stay for a period of up to 3 months from the day after entry."
I’m assuming for simplicity sake that the foreigner doesn’t have access to another citizenship, since they had to renounce it and was not able to resume, and so cannot apply for an ARC using a different passport. There’s many scenarios here.
I doubt the 1 day in 5 years rule to maintain APRC will change, though the health insurance change makes sense. This change seems mostly targeted at the previous class of APRC holders who had to stay 183 days every year or they’d lose their APRC (i.e. spouses), so the change is a big improvement for them but doesn’t affect the other type of APRC holders (white collar working professionals).
I haven’t seen them downgrading APRC benefits, and recently they are introducing some improvements like reducing APRC residency requirement time down to 3 years for white collar working professionals, allowing application at the end of 3 years without a renewal for GC holders, etc.
