Canada-Taiwan Tax Agreement (in effect 1 January 2017)

Legal Taxes
23

I am reviving this thread to draw attention to an excellent op-ed in today’s Taipei Times about one aspect that has not been addressed by the Canada-Taiwan tax agreement: the ongoing lack of a social security agreement.

I wonder if some of our better-connected Canadian forumosans might have any comment on this—and any sense of how this could eventually get fixed. @Marco @maoman @yyy plus anyone else with ideas?

Guy

3 Likes
24

Are there any countries Taiwan has a social security agreement with?

I know that there are quite a few taxation agreements - but the social security agreements are usually less frequent (at least when looking at other countries).

25

That is a good question.

The op-ed cited above mentions that Canada has perhaps 60 such agreements. I don’t have stats on the Taiwan side.

Guy

26

Disclaimer: This is not tax advice—just my personal understanding after reading lengthy government publications and researching online for about a week. I have never filed taxes in Taiwan, but I regularly file my own taxes in Canada.

For individuals like myself who work remotely in Taiwan while maintaining Canadian tax residency, here’s what I understand so far. However, I may be incorrect, and I still need to consult tax professionals in Taiwan.

Canada-Taiwan Arrangement for the Avoidance of Double Taxation (2016)

This arrangement functions similarly to a tax treaty, though it is not a formal treaty due to Taiwan’s unique international status. However, it primarily addresses income tax and does not cover payroll taxes or social security contributions.

For those of us who pay payroll taxes, this arrangement does not apply.

How the Canada-Taiwan Arrangement May Affect You

Since if you are working in Taiwan for a Canadian employer, here’s how the agreement might impact your tax obligations:

1. Income Taxation: Canada vs. Taiwan

  • Canadian Tax Residency:
    • If you remain a Canadian tax resident, Canada will tax your worldwide income, including your salary earned in Taiwan.
    • You may be eligible to claim a foreign tax credit (FTC) on your Canadian tax return for any Taiwan income taxes paid, helping to prevent double taxation.
  • Taiwan Tax Residency (183-Day Rule):
    • If you stay in Taiwan for more than 183 days in a tax year, you become a Taiwan tax resident and must pay Taiwan income tax on Taiwan-sourced income.
    • The arrangement ensures that Taiwan does not tax your Canada-sourced income (e.g., Canadian investment income).

2. Payroll Taxes & Employer Obligations

  • No Social Security Agreement:
    • The Canada-Taiwan arrangement does not cover payroll taxes such as Canada Pension Plan (CPP) or Taiwan Labor Insurance.
    • Your Canadian employer may still be required to deduct CPP and Employment Insurance (EI), even if you are working abroad.
  • Personal Tax Filing Obligations:
    • As an individual, you are responsible for filing and paying Taiwan income tax on your own, similar to how you file with the Canada Revenue Agency (CRA).
    • Since no payroll tax treaty exists between Canada and Taiwan, you are effectively treated as a tax resident in both jurisdictions if you live in Taiwan for more than 183 days while working for a Canadian employer.

Given these complexities, I plan to seek professional tax advice in Taiwan to ensure compliance with both Canadian and Taiwanese tax laws.

27

You’ll start having Taiwan tax obligations after 90 days.

1 Like
28

Do you still keep a home in Canada and stay there frequently throughout the year?

Those tax treaties usually are based on your “center of interest” or “habitual abode”. If you move that one to Taiwan, you might not be liable for taxes in Canada anymore which would simplify things.

Also do note that once you stay over 183 days in Taiwan, you have to pay income tax to Taiwan rather to Canada according to the agreement - it’s not like you can simply choose where to pay to my understanding:

Notwithstanding the provisions of paragraph 1, remuneration derived by a resident of a territory in respect of an employment exercised in the other territory will be taxable only in the first-mentioned territory if:

  • (a) the recipient is present in the other territory for a period or periods not exceeding in the aggregate 183 days in any twelve month period commencing or ending in the fiscal year concerned; and
  • (b) the remuneration is paid by, or on behalf of, an employer who is not a resident of the other territory; and
  • (c) the remuneration is not borne by a permanent establishment or a fixed base which the employer has in the other territory.

So yes, if you truly want to be a tax resident of Taiwan and Canada, then better talk to a professional.

1 Like
29

Let’s hope this gets converted into a US - Taiwan tax treaty once Canada becomes the 51st state.

3 Likes