Taking action against Taiwan's definition of domicile/residence relating to foreigners

[Andrew]

@no_comment

Problem:

1. Tax is withheld at a higher rate than normal if you work in Taiwan and stay in Taiwan less than 183 days.
2. Tax is withheld at a higher rate than normal for your first 183 days if you work in Taiwan and live in Taiwan long term, but you get a refund at the end of the year.
3. Some people want to be tax resident in Taiwan without spending 183 days a year.

Proposed Solution:

Redefine ‘domicile’ to something more fuzzy as your ‘center for vital interests’ or allow foreigners to get a household registration.

Is this correct?

I think that summary is basically fine.

I would add the additional/related problems of “people living here long term are required to demonstrate their tax residence every single year and have tax withheld at a higher rate for the first 6+ months of each year until they do” and something about the false CRS self-certifications (which is how a lot of this discussion started).

I would also change the “you get a refund at the end of the year” part in Problem 2. This isn’t really accurate - taxes are filed in May of the following year and the excess returned in July or August or something (?), so you’re talking about the excess being kept for something like 12-18 months, every single year. It’s quite a big difference, and quite a long time.

Yes, I think the solution should be a less arbitrary definition of “domicile” than saying resident foreigners are only resident if they stay more than 183 days, and having that as something that needs to be demonstrated again and again every single year.

I guess there needs to be a more detailed discussion at some point of what constitutes “domiciled”/“ordinarily resident” for foreigners in Taiwan, but I think it might be something along the lines of “anyone holding an ARC/APRC [for longer than 6 months?] and physically inside Taiwan for >31 days”. I imagine there needs to be some kind of physical presence aspect because it’s possible to hold an ARC without being inside Taiwan (gold card holders, for example). It’s difficult to find a definition that covers 100% of cases, but the current definition just seems to be a very lazy one that doesn’t work well for the vast majority of foreigners living here.

@no_comment

Problem 2: Plenty of countries, including the US, withhold taxes greater than the amount that may be due from people who may not be around to file and pay. You just get your money back once you file your paperwork. I 100% understand why Taiwan would want to withhold, so you don’t fly out for good half way through the year and never pay them.

I don’t think the withholding part in itself is the problem, but the withheld amount should be fair for people who reside here and it’s currently not.

As far as I know, Taiwanese citizens aren’t assumed to be non-resident in Taiwan for the first 30 days of each year and they don’t have tax withheld at 18% every January because they might leave Taiwan? Can you imagine how unpopular it would be if the government suggested something like that?

@no_comment

Problem 3: Pretty standard globally to have to spend 183 days in a particular year in a country to be considered a tax resident. Few exceptions are out there, but the ones that offer a tax residency with less time are tax havens and often looked at suspiciously. And, maybe good luck convincing a high tax European country that you are a tax resident of a lower tax country because you are domiciled there but spent less than half the year there.

AFAIK, 183 days comes up a lot in these conversations about tax residency but normally as one of the tests for assessing it, not the only test. I don’t think that most countries assume that resident foreigners holding alien resident certificates or their equivalents are not really residents and tax them accordingly for the first six months of every year?

@no_comment

what may be good for you personally may be bad for plenty of other people living or visiting here

We’ve discussed this in another thread, but it seems like the number of people who would be worse off from the proposed change should be much smaller than the number of people who would benefit. I think the former group is just high-earning foreigners who anyway try to keep themselves as non-resident here by staying less than 183 days? I feel like it’s more important to fix the interpretation for residents.

@no_comment

if there is something in there that does do that, maybe focus on fixing that rather than redefining a fundamental local concept.

I’m not sure what this means? What’s the fundamental local concept you think we’re trying to redefine? I would say we are trying to fix the underlying issue - the National Taxation Bureau’s differential interpretation of “domicile” under Article 7 of the Income Tax Act as not being available to foreigners.