With all due respect, considering his experience, the tremendous work he does in Taiwan’s tangled legal and cultural thicket etc., I think it is unnecessarily confusing of Hartzell to introduce the question of the location of the employer, in determining whether or not work is done in Taiwan. Indeed, it is incorrect. The location of the employer is irrelevant. It is simply a question of where was the employee when the work was done.
I am particularly concerned about this, written by Hartzell in the second post in this discussion:
In a similar manner it could be argued that if you were submitting your completed work to the company’s subsidiary in Pakistan, then that IS NOT work done in the ROC.
With this, Hartzell gets it wrong in one. If the work is done in Taiwan, then it’s done in Taiwan, regardless of whether the employer is on the moon or in Antarctica or in Pakistan.
My guess is quite a few foreign workers in Taiwan are employed by employers outside Taiwan. This instance arises quite commonly in the journalistic field, for example. Many newpapers and magazines have correspondents in Taiwan. The employer is not located in Taiwan, and the employee is paid from outside Taiwan, but nevertheless, such journalists must pay tax, in Taiwan, on the work they do in Taiwan.
One question I have for Hartzell is whether the original inquirer Leo might be able to claim consultancy status, and if so, on what basis this status can be claimed. If this is the case, then presumably the consultant is not salaried but is “retained” for a certain fee, rather like a company might retain the services of a legal counsel (lawyer) or a public relations consultant. Would the 20% rule still apply in such a circumstance? And would other standard rules apply? For example, could one legally work for more than one company in such a role. Normally of course having more than one employer in Taiwan would be illegal (if you are a foreigner, that is).
Of course, even if such subtleties could apply under Taiwan law, another question might be whether the typical Taiwan employer (if there is such a thing) could understand them. My guess is, probably not, or would not have the time and patience to handle the matter. Also my guess is there is a common assumption that although the 20% deduction rule is a blunt instrument, the payor of the tax can always claim a refund at a later date, if they think they have a case. Also, recent hefty penalties against employers for hiring foreigners on an illegal basis, including jail terms, presumably create a situation where an employer will withhold tax as a kneejerk reaction. It is the way to play safe.
I can see that one complication that might arise is if an employee is only working in Taiwan for less than the 183 days. This makes the “normal domicile” outside Taiwan. In most countries, if one is not “normally domiciled” there, the tax is due in the other country, where one is normally domiciled. Commonly this depends on a 180-day rule, whether one maintains accommodation in the other country etc. I believe it also might depend on “reciprocity” agreements between different countries.
Another issue I would like to raise in connection with having an employer outside Taiwan is the rate of exchange. The English version of the tax handbook seems to suggest that the rate of exchange that applies is the rate at the time one was paid. That rate is decided by the Taiwan tax authority. The Taipei tax office on Chungwha Lu is currently making available the official rates of exchange for a variety of currencies, by the month, throughout 2001. Since the Taiwan dollar has fallen significantly against major currencies in this period, foreign tax payers with an employer outside Taiwan might do well to compute Taiwan dollar income on a month-by-month basis. Or that is my understanding. Does anyone know more about this? Has anyone been challenged on this, or has anyone challenged the tax office?
By the way, it seems to me that if the Taiwan dollar continues to fall, then a foreign person in Taiwan, particularly if they have an employer outside Taiwan, might do well to keep the bulk of their salary in a foreign bank. Tax would still be payable on it in Taiwan, of course.
Some banks in Taiwan offer a “foreign currency” account. Nevertheless, my impression is that wherever possible one should avoid having to use banks in Taiwan.
This could be the subject of a separate post, but the service at Taiwan banks seems incredibly slow and inefficient, the security guards blatantly rude when a foreigner enters the bank etc. Some local citizens even seem upset to see a foreigner in a bank, try to figure out the amount of cash one has, read one’s passport etc etc.
One the worst offenders is Citibank. I once tried to transfer money into my account in Citibank, from abroad. They screwed up everything. One Citibank security guard crept up behind me while I was waiting for service, tried to read my passport etc. Result: I no longer bank with Citibank.
Also, be warned, funds transferred to Taiwan may also end up deposited with a bank other than the one where you have your account. You then have to visit the bank in person, with passport etc., collect the funds and then deposit them in your own bank/account. Unbelievable, but true.
Now that many foreign banks, including HSBC (Hong Kong) are offering Internet banking, and funds can be withdrawn internationally through an ATM (which, unbelievable though it sounds was not always the case, as late as 1993 - 94), my advice would be “don’t deal with a Taiwan bank if you do not have to.” It’s always a bad experience.
You may not save money, but you may save a great deal of time and inconvenience if you handle transactions via the Internet. I am now paying my rent in Taiwan from a bank in Hong Kong via the Internet. All I have to do is sit at my PC. So far, so good. But in the meantime, has anyone had any problems with Internet banking? If so, let us know.
Lobogau