If I have an ARC and work in Taiwan remotely for an American company, does my company have to deduct Taiwan income taxes from my salary? Or can my company deduct as if I were in the US and then I can take my W2 forms to the local tax office in Taiwan and pay Taiwanese taxes there?
Is there any other legal hurdles I should be aware of?
If you’re American, the company should deduct as if you were in the US, and you’ll only pay US taxes (and state) on that, AFAIK. Taiwan doesn’t care about what you don’t earn here (or, for practical purposes, about what’s not reported automatically through the system to the Taiwan government). One time (as a test) at the tax office I mentioned that someone had paid me privately to edit a document, and asked if I should report that. The clerk said they only care about what is already documented in their system. YMMV. If you had been earning money reported here, and then you SWITCH to earning abroad such that your reported income here drops markedly, though, you may be asked to explain it and even write down and sign your explanation.
I read elsewhere that overseas income for work performed physically in Taiwan is perfectly taxable, especially if you’re on an ARC and not working under the table as a 90 day tourist
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IANAL (and if you’re concerned about it I’d go down to the tax office, from what I’ve heard they are very friendly and willing to help), but my impression is that you legally should be paying taxes on any work that you physically do in Taiwan if you’ve lived here for over 180 days of the year – even if it’s for a foreign employer.
From personal experience, “a friend” had a similar arrangement of working for a US company while living in Taiwan (first doing visa runs on a 90-day tourist visa, and now on a marriage ARC). They paid US taxes on their regular W2 as if they were living in state, and then at the end of the year were able to claim the Foreign-Earned-Income-Exclusion tax credit to essentially only pay SS and Medicare tax to the Feds on the US-earned W2 income. They never reported said income to Taiwan and thus were never taxed in Taiwan.
My impression is that if they were to ever get a job in Taiwan and had to enter into Taiwan’s tax system that they’d have to explain how they were living the past several years, and probably have to pay back taxes on it. But as long as they stay out of Taiwan’s tax system it’s unlikely to cause any issues (unless they intend to eventually apply for an ARPC, which they’d probably be denied since they haven’t paid taxes / had any reported income). YMMV
I don’t think I can convince my employer to let me work from Taiwan if I’m going to be breaking tax laws. I’m just hoping theres a way such that my employer won’t have to do anything extra for me if I were go to Taiwan (deduct tax as if I were in the US), and allow me to sort out all the Taiwan related tax issues myself. If my employer has to do anything extra for me to work in Taiwan, or if I’m breaking any laws, then it’s extremely likely HR would reject my request to work there.
Can you ask to get paid as a contractor on a 1099? Maybe just charge a flat rate by the week to make things easy? I’d think that’d be by far the easiest from your companies point of view and might actually be cheaper for the company even if you raise your rate (and actually kind of makes more sense – you wont need US healthcare / benefits / unemployment insurance).
Note that if you do this, you’d want to factor in an extra 7.5% of taxes you have to pay for the employer’s side of the SS/Medicare tax, add whatever you’d get paid for for vacation, and then also probably some more % for the above mentioned benefits.
“My friend” actually switched to an LLC / 1099 earlier this year since it made more sense (they started contracting for other companies as well in addition to their original W2 employer).
I think if you want to keep everything above board as an employee, you’d need for your company to setup a branch office here and for them to enter into the tax system here which I’m guessing is not on in the cards.
Do American companies withhold foreign income tax for their remote workers abroad, under tax treaties?
You become responsible to the government here for tax on your worldwide income simply by spending X days here per calendar year. If your company doesn’t withhold anything, you still have a legal obligation to report the income and pay the tax yourself.
If you can legally avoid paying some or all of the tax through the relevant tax treaty, great. But that doesn’t seem to be what people have been saying so far in this thread.
They can care about it if they want to.
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We all know about chabuduoism. That doesn’t make it legal.
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A brief gig on the side can in many cases fall under the 稿費 exemption and thus be tax free anyway.
Friendly reminder to everyone:
This is not the place for “how to cheat on your taxes” type advice, so don’t go there. 
Thank you for your cooperation.
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That would still be taxable.
I’ll emphasize this again: I’m NOT here to cheat taxes or anything. I’m perfectly willing to pay any income tax to Taiwan. What I don’t want happening is having my employer do extra work to withhold foreign income tax, since HR at my company would almost certainly reject my request.
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Taiwan very much does care about what you don’t earn here if you are here long enough to fall into the Taiwan tax net. A colleague some years ago found out the hard way after having taken many preparation/business trips to Taiwan in the year before he moved here. When he filed taxes after his first full resident year the tax office noted his frequent trips two years previously where his total length of stay exceeded 90 days and therefore he had to pay tax on his US income even though he was neither resident nor employed in Taiwan during that business trip year.
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I’m not suggesting cheating. The best source of information will be the tax office itself. Good luck!
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I am planning to do the same thing but was not planning to ask my company deduct taxes. Instead, I would keep getting payroll deductions as usual in the US and report my income to Taiwan at tax time. I need to talk to CPA about whether I will be double taxed, and am also trying to figure out how to handle state taxes. I have heard that it is hard to relinquish California residency, and I want to retain residency for a couple years anyway in case my kids wants to go.to a CSU or UC. After that I would move residence to a state without income taxes, I guess.
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This is what I’m hoping for as well. I just hope that me remote working in Taiwan won’t drag my employer into any uncharted legal territory. If I deal with the Taiwan tax office on my own, and pay the tax out of my own paycheck, then hopefully it shouldn’t have any effect on my employer.
Does it mean that if I have money invested in my home country, I will have to pay taxes over those gains, even though I never brought that money to Taiwan?
Offshore investment income and gains comes under a different tax rule, the Alternative Minimum Tax (AMT). If you are tax resident in Taiwan then you would have to pay 20% tax on investment income and gains, though there is a NT$6.7million annual exemption.
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This is true…
This also happened to me…they know you had to file in the US and will ask you to file for any years spent over 90 days in Taiwan. They will ask for US tax documents to determine your tax due, if any.
The OPs original question is interesting. It’s been some time, but I believe that when I was here as an expat on a US salary, my company did the withholding as required by Taiwan law (and the US of course). Incidentally this is how they found out to ask about the prior years I had been in on business over 90 days, making me file for those after filing in Taiwan the first time on an ARC.
I’m not sure what would happen in the OP’s situation. I guess the best case is they just make him pay everything at that time. Won’t speculate on the worst case, no idea.
BTW, the person at the counter in the tax office won’t know anything about this. You’ll get a letter later after someone runs an audit on the immigration data.
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I’m curious about going the 1099 route. If my employer switches me from W2 to 1099, Won’t that put my employer at risk with the IRS for employee misclassification?
I’m certainly no CPA / Tax Attorney, and I’ve heard rumors that CA is one of the most strict states out there about their taxes so it probably would well be worth paying for an hour of one of their times to properly answer this, but I’d think that the answer would be no since:
- You’re moving out-of-country and I don’t think can legally work for the company as an employee in Taiwan unless they setup a branch office here (in which case you’d be transferring to their Taiwanese company anyway and not an employee of the original company)
- You could not use any/many of the benefits of being an employee, so it doesn’t really make sense to be paid like one with that stuff taken out of your paycheck
According to this I’d think that as long as you switch to being paid like a contractor (i.e. “per-day” or “per-week”, no explicit benefits [instead that would just be included in your rate], etc) I’d think that you legally should be able to go 1099 even in the US (but again IANAL).
- I think they are mostly worried about companies forcing employees to switch to contracting to avoid unemployment insurance, but are still living in the exact same place and being billed exactly the same. You’re situation is quite a bit different in that you couldn’t even use the unemployment insurance and are moving out of country.
Good luck! It’s definitely more administrative overhead to run an LLC on a 1099 – but I still think that is the “correct” classification in these cases (IANAL)
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You can also register a corp in a tax-friendly jurisdiction and have your pay sent there, then receive dividends back.
Taiwan has a ~6.7 million NTD exclusion on foreign income. As long as the company has no nexus to Taiwan (ie, you’ve been appointed as the executive in charge of the TW branch) then any income sourced from abroad falls into this category. Many on this forum would contest this, so YMMV.