Hi, I wonder if anyone could give me some basic information regarding deductions from our salary. I hope to work in Taiwan pretty soon but I need to make sure the finances work.
I have heard of the 183 day rule of 18% tax and from then it should drop to somewhere between 6-12%. Does this happen every year? Presuming I stay the full year, do I get a rebate for those 183 days? If so, when would the rebate arrive?
Does the housing allowance get taxed?
What other deductions should I expect?
I’m expecting to get about 75k a month including a 10k housing allowance.
Deductions are possible. Medical costs; Educational Costs, Rent, life insurance (upto a max), mortgage interest, … there are a few more… Also, there will be deductions for Labor, NIH, and pension … all of which are mandatory.
Taxes here are fairly simple compared to systems in the West. Rates are reasonable, and there are thresholds to apply, … but the system generally favors those with more deductibles (ie. families). There is even a downloadable that will help you calculate and file your taxes. For most single people, the taxes are simplish… Good luck!
[quote=“meldrew”]Hi, I wonder if anyone could give me some basic information regarding deductions from our salary. I hope to work in Taiwan pretty soon but I need to make sure the finances work.
I have heard of the 183 day rule of 18% tax and from then it should drop to somewhere between 6-12%. Does this happen every year? Presuming I stay the full year, do I get a rebate for those 183 days? If so, when would the rebate arrive?
Does the housing allowance get taxed?
What other deductions should I expect?
I’m expecting to get about 75k a month including a 10k housing allowance.
Thanks in advance.[/quote]
You’ll be taxed at 18% for half the year and then 6%. You’ll get the 12% difference back on August 1 of the next year, maybe a little more.
Just to make sure this is clear: in any calendar year (2016, 2017, etc), if you are not physically in Taiwan for 183 days, you will be taxed at a flat rate of 18% of your income–no deductions possible. So if you are thinking of a one-year contract beginning, say, August 1, you won’t be able to avoid this situation in 2016–and in 2017 you’ll need to count your days to ensure you reach the 183 days. With a progressive rate and possible deductions, it will make a big difference.
If you are single, you can put your parents as deductibles -they assume here we are filial and help them. So you need some document saying you came from them and hence you will have two dependents to add as deductables!
You don’t have to be single, if you’re married you can have four dependents! Brother or sister in education or not able to work? Bang, more dependents!
There’s a lot of great information here. I’m looking at, presuming I like it, to make TW my home for the forseeable future, atleast for the next 5 years so coming mid year or after and not getting the tax rebate… is not a massive issue. I just basically need to know in advance.
I have a few questions based on what’s been said here:
What would be the benefit of claiming rent as an expense?
What would be the benefit of adding my parents as dependents for deductibles and how would I actually do this? As it is, my parents are pensioner age and I do financially help them out every month (They really helped me through university and so it’s only fair now).
What kind of document is needed to prove my parents are dependent on me?
regarding the benefit of rent as an expense - Everyone gets a standard income exemption of 85,000 and a standard deduction of 90,000. You can use your rent expense to replace the 90K standard deduction in addition to other itemized deductions (pg 52 of the Taiwan tax booklet). So if your yearly rent is higher than 90K or if you have other deductions then it is a benefit to you. It is a little unclear however if you might get your landlord in trouble if you claim rent as a deduction. Some (or many) landlords don’t claim rental income as income and I think the tax office will contact your landlord about this income and expect them to pay taxes. You aren’t doing anything wrong but this could cause poor relations between you and the landlord and either your rent will go up or you won’t be able to renew your lease. Just a word of caution.
In addition to the 85,000 and the 90,000 you also get a 128,000 salary/wages deduction. Overall it is about 300K of non-taxable income for a single tax filer with no dependents.
The benefit of your parents being dependent on you is an additional 85,000 of non taxable income (age 60-70) or 127,000 (age 70+) per parent. That is a refund of 10-15,000/parent if you are in the 12% tax bracket. I do not know what documentation is needed to claim them as dependents since I do not do this. My parents are 60 and 62 now but I would feel a little conflicted about claiming them since I don’t support them financially at all. Perhaps later on but both still work. This was one thing that came up in an off topic conversation while I was recently at home. Health insurance (US) is still way too expensive for them until they reach age 67 (Medicare) for them to not work (I didn’t ask any questions nor will I offer advice).
You get your money back the following August after you file your taxes. So for the 2015 income taxes you get your refund in August 2016.
ilikecoffee listed all of the possible deductions but those are only if your company provides you with something like housing. The deductions from your paycheck should only be for income taxes, NHI (around <1000NT if you earn 60,000/mo), and labor insurance (a little more than NHI I think). Pension (and the deduction for it) is only available to those that are married to a Taiwanese spouse AFAIK.
The numbers above are from the 2015 tax booklet. All deductions have increased a little this year but I don’t have that booklet linked yet. pwc.tw/en/publications/asse … k-2015.pdf
Proof for support of overseas parents is dependent on where you come from as to what they want to see. In practice I have been able to get deduction from a notarized declaration from my home country. aFAIK taiwanese do not need to show money transfer to parents to claim this deductible.
Good summary Abacus!
Yes, this a very good summary. To claim lineal ascendants (aka parents!) I have needed to provide proof that I’ve wired funds to them–and that these funds match or exceed the amount claimed. At least this is what the tax office in Taipei City has requested–I have heard that other tax offices elsewhere in Taiwan will just take your word for it!
Yeah, I haven’t needed that out where I live: photocopies of their passports, with birth dates; my birth certificate, with their names on it; and some kind of evidence they were financially active in the relevant tax year - we’ve just printed out scans of an insurance bill that has both their names on it. No notarization or anything.
I haven’t had to provide proof of transferring funds and would strongly object if it is requested as it is not a requirement for Taiwanese citizens and it’s supposed to be a non-discriminatory system…I do have to provide proof of life every year, actually every 2 years if you time it correctly, I get a copy of my parent’s car insurance certificate for this year which “proves” they are still around and can use it for 2015 taxes processed this year and also 2016 taxes processed next year, I’ll get a fresh one in early 2017 to do another 2 years. Taiwanese don’t have to do this as they have a Hukou and ID card so con’t complain too much on this one.
Regarding the age requirement, your parents do not have to be 60+ in order to claim as a dependant, if they are not/unable to work they are dependants and you can claim with proof. Similarly other family members be they in university or what not can be processed as dependants.
I will also echo the fact that Taipei city tax office asked for more documentation whereas some of the other tax offices requirements were far more lax.
As others have mentioned, I’ve also provided the tax office with proof that my parents are alive. Their bank back home is easily able to provide a corroborative letter for this purpose.
I presume that most of you who are claiming deductions for lineal ascendants while not providing proof that you’ve wired money to parents are living and filing taxes outside of Taipei City. AmIright?
There’s so much great information here, thanks to all the above posters.
I feel slightly overwhelmed by what needs to be done to maximise my return on taxes but it’s great that they have so many alloances. I’ve not read through that PDF tax guide. I won’t bother until closer to the time I arrive.
I, most likely, wont be in Taipei City.
Is there a set date when I would need to file my taxes to get the rebate in the Ausgust?
Is it just one document/package that I can pick up from a local tax office to fill out everything?
I don’t mind providing financial information if needed because I have documented proof anyway and I will be sending money to them on a monthly basis (presuming it’s quite easy to send money home in TW.
Just to add regarding deducting for money sent to parents- I only need to show a photocopy of a ‘old fashioned’ bank check (along with passport copy). They just take your word that the money is deposited.
Also they allow for deducting for my living grandmother.