I am considering moving to Taiwan via the Gold Card program and have a question about how Taiwan calculates the income I would be taxed on.
Let’s say my US salary is $150,000 USD. I contribute $22,500 pre-tax to my employer sponsored 401(k). On my US W2, box 1 (wages, tips and other compensation) would be $127,500. The $22,500 I contributed to my 401(k) would be in box 12.
When I go to pay tax in Taiwan would the tax office ask me to pay tax on salary of $127,500 or $150,000? If they don’t count my pre-tax 401(k) contribution as part of my salary are there any other tax considerations I should know about for US 401(k) contributions in Taiwan?
Also, I read that Taiwan tax is territorial. If I was in Taiwan for 8 months out of the year, would my taxable income be prorated to account for the 4 months that I wasn’t in Taiwan so that I’m only paying Taiwan tax on 66% of my annual income?
The 401k is a US thing and does not exist in Taiwan taxation laws. Thus, it doesn’t matter how the US taxes your income and what tax-free or pre-tax contributions the US will recognize.
It would be quite unfair if all US citizens in Taiwan would enjoy an extra tax deduction because they pay into a 401k that no other tax payer could use (because they are unable to open a 401k as non-US persons).
In Taiwan, you‘ll have to pay tax on your gross income minus the deductions applicable in Taiwan.
Yes, that should be the case if you receive your salary from overseas. Be aware that also allowances will be prorated. And no prorating above 300 (?) days in Taiwan.
I’m not 100% sure (maybe 70% sure - it still seems weird to me), but my understanding based on the tax software and talking to a tax office clerk is that this would be the case.
Some recent discussion of this from this post onward:
There are >4000 posts in that thread dating back 6 years.
I read the whole thing before I first applied for a gold card and look at the new posts when they come up, but it’s not really a convenient resource for what are essentially a couple of quite specific taxation in Taiwan questions mostly unrelated to the gold card scheme. I’m not even sure that second question will be covered in there (but I’m not going through 4419 posts to find out).
I have searched for answers to this specific question and browsed that thread. I haven’t found a conclusive answer although I read a couple comments from people that the Taiwan tax office based their taxable wags on box 1 on the W2. That amount does not include pre tax 401(k) contributions.
This tax benefit above NT$3 million is well known to those of us who’ve paid any attention to the scheme, but it’s of no relevance at all to either of the two main questions asked (which aren’t really gold card related tbh - how Taiwan treats U.S. 401(k) contributions and tax residency when someone is here for part of a year).
So then Taiwan is not really territorial taxation?
I will have to travel for work and anticipate being out of Taiwan for 4 maybe 5 months a year. I could understand no proration for short absences but that’s weird that someone away for months could not actually be taxed territorially.