Paying Taxes on Overseas Income

This is not financial or tax advice. Do your own research, and consider consulting a CPA.

I know that on this forum we have previously come to the consensus that we don’t need to pay taxes on overseas income less than 6 million per year, and don’t even need to report our overseas income if less than 1 million per year, but I’ve always struggled to find government sources in plain English that confirm this. Today I found some clear sources that I’d like to share.

I found some Q&As in a PDF titled “The Income basic tax levied on individual overseas income-Q&A (Simple version)(PDF File)” on the Taxation Administration’s official website:

First we need to define overseas income, luckily they have a simple answer for that.

Question 2

Q: What is the scope of individual overseas income?

A: According to the Income Basic Tax Act, individual overseas income shall be that not derived from the sources in the ROC under the provision of Article 8 of the Income Tax Act and not from the sources in the Mainland Area under the provisions of Act Governing Relations between Peoples of the Taiwan Area and the Mainland Area.

I think this is quite clear, overseas is income is any income made not in Taiwan or the Mainland Area. Mainland Area refers to the territory of the Republic of China outside the Taiwan Area…

So do we have to pay tax on our overseas income? They have a relatively clear answer to that:

Question 7

Q: Is an individual who has overseas income greater than or equal to 1 million NT dollars necessarily required to pay income basic tax?

A: No. An individual who has overseas income greater than or equal to 1 million NT dollars but his or her basic income is less than or equal to 6 million NT dollars is not necessarily required to pay income basic tax.

The key point to take from this quote is that as long as your “basic salary” is less than or equal to 6 million NT, you don’t need to pay income basic tax on less than or equal to 1 million NT of overseas income. However, I’m less certain on the meaning of “basic salary”, I believe it means your regular Taiwan income, the amount you’d normally pay tax on, but I’m not totally certain.

So, do we need to report our overseas income? Question 4 offers some more information:

Question 4

Q: Who has the obligation to include his or her overseas income in the amount of basic income?

A: Someone who meets both of the following conditions shall include his or her overseas income in the amount of basic income:

(1) He or she is a resident of the ROC, and

(2) His or her filing unit has aggregated both overseas income greater than or equal to 1 million NT dollars and basic income greater than 6 million NT dollars in one year.

It seems that as long as your basic income, and overseas income together total 6 million NT or less, you don’t need to include it in your basic income, but it’s not clear whether you still need to make the tax administration aware of this income.

After reading through the PDF a few times, questions 6 and 7 started confusing me:

Question 6

Q: What is the threshold of overseas income to be included in the amount of basic income?

A: The aggregated overseas income per filing unit of individual income tax in any year is greater than or equal to 1 million NT dollars, the total amount of such income shall be included in the amount of basic income in the annual income basic tax return.

Question 7

Q: Is an individual who has overseas income greater than or equal to 1 million NT dollars necessarily required to pay income basic tax?

A: No. An individual who has overseas income greater than or equal to 1 million NT dollars but his or her basic income is less than or equal to 6 million NT dollars is not necessarily required to pay income basic tax.

At first I thought these two directly contradicted one another. Question 6 seems to say that if the overseas income is greater than 1 million NT we need to include it in our basic income amount, whereas question 7 seems to say that if the amount is between 1 million NT and 6 million NT we do not. However, after looking carefully I think I finally understand. Question 6 says that if the overseas income is greater than 1 million NT we need to include it in our basic income amount, and question 7 is saying that as long as the overseas income is less than 6 million we won’t pay basic income tax on it. That is consistent with what we have discussed on the forum before: don’t need to include it in your tax return if it is less than 1 million, and you don’t need to pay tax on it as long as it is less than 6 million. However, because of question 4, I believe that if your Taiwan income and your overseas income together are greater than 6 million you do have tax obligations. It’s all very confusing really isn’t it? Luckily, even if we are taxed on the income, it’s a very fair rate.

This is not financial or tax advice. Do your own research, and consider consulting a CPA.

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When i make 6 mil a year, i will just have one of my people do it for me :stuck_out_tongue:
Very good post.

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Not exactly: My understanding is that if you’re over 6 million in basic income (i.e. all income combined, including Taiwan-sourced income and overseas income), the tax office will calculate the basic income tax. However, you only need to pay that if it’s more than the tax you’re already paying!

So if you’re already paying a considerable amount of tax on your “regular” (Taiwan-sourced) income, they might not charge basic income tax at all because it would be less than what you’re already paying!

(Short rant: The “basic income” is such a confusing term in this context - I think they used to call it AMT / alternative minimum tax which IMHO is much clearer)

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