[Income Taxes] 183 day Rule

Its a complex idea. But if they have you pay 20pct for the first six months then use those funds already withheld to pay for any taxes due the rest of the year you may come out ok.

Provided you can afford the 20pct cut in salary the first six months that is and still pay your bills.

It could work for some people. Lets do an exercise. Say you made 100,000nt a month for 12 months and got a 13th month as bonus at the end of the year? So on the old program say you had 6pct withheld monthly and your taxes were right about 6pct actual at the end of the year when you filed your income tax and you ended up not having to come up with more money but also not getting anything back. And it was up to you to save a portion of your annual income if you wanted to (and of course you should) and you had the 13th month as your annual bonus as you are not going to get much of a tax refund. So you had this 13th month as fun money for trips or whatever. Maybe that trip to Thailand. Thats your year.

Now under the new formula you had 20,000/month taken away each month for the first six months. This is 14,000 more per month then would have been taken under the old formula or about 467 nt/day. Not inconsequential but probably survivable considering the old formula you had about 3133/day after taxes and now have about 2667 a day. So perhaps you cant save the 10,000nt/month you were saving up under the old tax table, but this extra 14,000/month will be alleviated IF you were saving 10,000nt/month. Only IF you were, if you needed every penny of your income you are not in a good position at this point. And then the second half you had zero withheld because you have already built up a big war chest. Then you would have the full 100,000/month to work with. And at the end of the year you still got the 13th month bonus (taxes withheld at 6pct) and had the rest of your income withheld at 10pct effectively . As 20pct for the first half and nothing for the second half means 10pct for the year. And thus you could expect a 4pct refund from your taxes withheld or about 48,000nt (not counting the 13th month for which tax withheld remains the same under both formulas). This would be a nice chunk of change. So basically you now had the 13th month as fun money for the trip to Thailand as per the old formula but with the new formula enjoyed a tax holiday for the second half of the year and only had to scrimp a bit the first half but now have a forced savings of 48,000 that you could keep in the bank and/or help tide you over the "hump’’ for the lean first six months of the next year? Plus dont forget the second half of the year you have the full 100,000nt per month to work with instead of the old 94,000nt/month because you are not having any money deducted the second half? So you have 6000/month more for each month of the second half to save up with or have fun with. And thats 36,000nt.

For people who cant save money, this would help keep you in better financial health as its a free govt managed money management formula for YOU !!! Yes I should work for the govt mouthpiece :slight_smile:

Because if you are not a money saver by nature:

  1. old formula:

Monthly 6pct withheld equals pretty much your taxes for the year, no more needed and nothing back. Leaves you with 94,000/month to work with and a 13th month as your annual bonus to save or use on a trip. If you are not good at money management you will basically have not much left over from your work year.

  1. new formula:

48,000 refund at the end of the year (yes I know you dont actually get this until you file your taxes and get the refun in the next year)

6,000 more each month the second half of the year (but since you are not a money saver, this could end up going to more beer)

13th month bonus still taxed the same and still usable as you planned.

Actual savings possible 48,000 + 36,000 (if you didnt piss this 6000/month x 6 months away) = 84,000nt/year. Added to whatever else you save up, including perhaps your 13th month if you are miserly and only take the wildchicken bus to kenting and take a tent for your annual holiday.

At any rate, you will likely end up with at least the 48,000 that you got in one chunk. But if you use that for a new puter?? Well …at least you got that new puter you wanted. :slight_smile:

Everyone shouldn’t have to see a big chunk of their money disappear for a year and a half because some idiots can’t manage their money. Those who have actual need for the money shouldn’t be denied it. Those who can manage their money would rather put it in savings or invest it where they might earn something back. They’d also like to have it on hand if there is an unexpected emergency they need to handle. Not to mention that they would have their money under their own control without having to go beg the government to give it back. And if someone just goes and blows it all once the refund check comes it really isn’t ‘saving’ it.

If that’s all too elitist to get your sympathy then think about the foreign caregivers and blue collar workers who are here making $17,280 a month plus having $4k a month deducted for ‘brokers fee’. Now on top of that you want to take another 20% of their salary and lock it away for a year and a half when they make so little that they have no tax due in the first place. And then you expect them to somehow manage to get their refund back after they’ve been sent back to their village after the three year contract is up?

The original system had some validity if you accept that those who don’t establish a residence should be taxed differently. It had its own problems with the requirement period having to fall in one calendar year which is a bit silly, but at least you got to avoid the whole thing once you’d been here a while. This new system is just plain dumb.

Yes I do agree the old system IS better. I was just trying to see if it could be workable at all, in any sense this new plan? Is it official yet? Any chance it wont stick?

If you are a factory worker making 30,000nt/month your effective tax will likely be less then 6 percent. Lets say 4pct, thus a flat 20pct taken out for the first six months is pretty substantial. Most of the workers live in dorms and have food available at work, so at least they dont have these bills to worry about. Having a forced savings plan may actually be ok with them, but only if their families to whom they send money back to still receive all of the monies they normally would? If you had to pay bills and made this level, the 6000nt a month taken "detained as it is’’ is not negligible.

It would certainly be worse if they insist on taking 20pct out for the first six months and then still took away your normal 6 or whatever percent for the remainder of the year.

And as you say, if you are a factory worker making only around 18,000/month and have to fork over 4000/month for broker fees and now have to fork over 20pct as taxes retained, its even less workable.

But lets examine that situ for a second:

A factory worker making 18,000/month and paying 4000/month as broker fees. Lets say 4pct was withheld before per month in taxes or 720/month leaving him/her with 18000-4000-720= 13280/month. At the end of the year he/she is likely to actually still be getting back a refund check because the exemptions are effectively bigger the smaller your salary is. So he/she will still want that refund check. And cant you file in January? You dont have to file in late April. Whats the personal exemption on your taxes these days? 30,000nt? IF so her 4pct per annum taxes of 8640 will be refunded in whole and then some just with that exemption, not to mention the other 20pct of your salary being not taxable and plus the flat deduction, etc? In other words our factory worker is already entitled to a nice refund from taxes at the end of the year that he/she wont want to NOT collect.

So if he/she got 20pct of 18,000 taken for each month of the first six months or about 21,600 for the six months (and then had nothing held back the rest of the year). He/she will have an even more substantial tax refund due. And if he/she filed as soon as possible and got the money back fast as well, it would be a nice amount to take back to his/her country if his / her term of employment ended. I do think that a foreigner should be able to file taxes on Jan 1st and receive his/her money within a month by direct deposit into a foreign bank account of his/her choice. The govt can transfer funds internationally for nominal cost.

Im with you on this. I think just leave things alone as it is. The new plan sucks. But is there any way it could be less odious?

Just a quick question which I am hoping someone can answer:

I have been working in Taiwan for the past two years and so have been paying the 6% tax for a while now. I plan to leave Taiwan at the end of March of next year. Does this new rule mean that, because I won’t be resident for more than 183 days in 2009, I will not only have to pay triple the tax, but I also won’t be able to reclaim any of it back? (this is what my company seems to think).
The total difference in income for me for those first three months will be around 40’000NT, which I thought I’d be taking home, so I really hope my company is wrong about this.

[quote=“jimmyd970”]Just a quick question which I am hoping someone can answer:

I have been working in Taiwan for the past two years and so have been paying the 6% tax for a while now. I plan to leave Taiwan at the end of March of next year. Does this new rule mean that, because I won’t be resident for more than 183 days in 2009, I will not only have to pay triple the tax, but I also won’t be able to reclaim any of it back? (this is what my company seems to think).
The total difference in income for me for those first three months will be around 40’000NT, which I thought I’d be taking home, so I really hope my company is wrong about this.[/quote]

Thats what I gather as well. The old system you will have qualified in your previous years and therefore pay less taxes for 3 months work in 2009. The new system says you are judged year by year. And therefore unless you stay past 183 days you have a flat tax rate of 20pct. Whats worse you cant claim any exemptions or the deductions either as I understand it. Huge difference. Means that really to make things work , one would have to make sure one stays at least 183 days in Taiwan per tax year.

That’s right. The non-resident rate is a completely flat tax. If you are a non-resident you are taxed at 20% on your income, no deductions, no exemptions. The only way around it is to stay longer or leave early. Foreigners are often advised not to arrive in the last half of the year because it will take longer to qualify as a tax resident. Now we might want to add to that not to leave Taiwan during the first half of the year.

Ok, here’s my question. I actually own my bushiban, with everything legally in my name. What kind of repercussions can I expect from this?

You could pay yourself the minimum salary (the salary would be subject to the 20pct for the first six months) and then pay yourself a large bonus at the end of the year in December of the year. And that bonus will be subject to the regular tax?

Since you own your own business you can write your own salary check.

The present withholding is done based on residency status at the time payment was made. Technically you are supposed to file withholding within 10 days of payment, but if it is your own business how is anyone to know? Or you could not pay yourself salary for the first 6 months each year or something else along those lines.

I would assume none, do you even pay yourself a salary? Have you ever paid withholding tax? Ordinarily buxiban profits are calculated and taxed by the year.

Oh by the way, WTF? Not to you bubbles, to this baloney.

I never had an employer that enforced the 20% rule, even when I was teaching kindy years back.

I get paid by many different clients, mostly government ministries. Some deduct nothing while others varyingly deduct 6%, 10% or 20%. I don’t care at all since it doesn’t make any significant difference to my financial situation.

On a side note, the 20% withholding rule did cause me grief in my very early days in Taiwan more than two decades ago. At that time, I was offered a part-time job at Lee and Li, the biggest and most prestigious local law firm. It was only an editing job, but it had clear potential to lead to higher things, and as I was then just taking a break from my legal career to study Chinese while still planning to return to lawyering later, it fitted my ambitions very nicely. The interview went extremely well until the very end, when the interviewer mentioned that they’d have to deduct 20% of my salary as withholding tax. I’d been teaching English and having just 6% deducted, so I took issue with the interviewer about this, in effect telling him that he was wrong and that they wouldn’t need to deduct so much. He was clearly taken aback and rather pissed off, and the upshot was that they called me a couple of days later to inform me that they’d decided to give the job to someone else instead. I kicked myself and greatly regretted my youthful stupidity in throwing away such a good opportunity over such a trivial matter.

[quote=“Chris”]I never had an employer that enforced the 20% rule…[/quote]But we’re talking about a new rule: one that comes into effect in the new year. It may still be up to employers how much they actually withhold each month; I’m not sure. But in any case, if a foreigner leaves Taiwan before completing six months’ work in any year, the employer will have to pay 20% tax on his/her earnings.

I just got off the phone with a woman at the Kaohsiung tax bureau. They don’t care what kind of visa anyone has, all foreigners are considered non-resident for tax purposes before 183 days. That includes JFRV, by the way, which I specifically asked about. She said it also applies to interest from investments, which answers the question I started in another thread. She told me it does not apply to company profit…but my secretary just showed me a paper stating that non-residents who own a company here must pay 30% business tax.

All I know for myself is that I guess I’ll give up the fun of legally owning a business here, and go back to the tried and true method of registering everything in my wife’s name, and being “unemployed”. What a big pile of crap.

What she also said is that all employers are required to withold 20%. If they don’t, and the employee leaves before 183 days, the employer will be held responsible to pay the balance. What the heck?

I guess I left at the right time. I want more than NHI for 20% taxation.

So it still is up to the employer how much to withhold then?

I remember hearing something about how bad the DPP was for foreigners and how peachy-keen the blues were gonna be.

But aside from the first year of marriage when it’s optional, all spouses must file jointly. How’s that going to work?

But aside from the first year of marriage when it’s optional, all spouses must file jointly. How’s that going to work?[/quote]

If you work for a company they will deduct 20% regardless of your status. If you are self-employed (freelance, whatever) but paid by Taiwanese companies they will also deduct 20% (as one of my old publishers always does). If you have your own business I can’t see how it will work as yes you will file jointly with your wife and I can’t see how they can force you to deduct 20% from yourself every month.

In any case, wtf is going on with this new law?

It means you’ll either be getting a refund for the 14% “over” tax that you paid on income you earned for the first half of the year, or picking up the slack on taxes your spouse may have underpaid on her/his income. :laughing:

For tax deducted from wages or income, it really doesn’t make a difference if you are married or not. Tax is deducted from income at the time of payment. You pay on income you earn, she pays on what she earns. Come time to file, whatever you both paid throughout the year gets lumped in the same boat.

Look on the bright side. This just means a bigger bonus come August. :idunno: