The point is not what you lose in interest or gains, the point is what you lose in cash flow.
Also, it’s very easy for someone making a 100k a month to legally pay almost zero taxes with all the deductions available, so the 18% deduction has a greater effect.
Have you experienced in other countries that the bank silently changes your declared tax residency to the country of your passport just because you’re a foreigner…?
I think no one here expects the authorities to issue a tax certificate at the beginning of the year. To my knowledge, those are usually only issued after taxes have been filed.
What’s happening here, however, is Taiwan saying that foreigners cannot be tax residents of Taiwan unless they stay > 183 days a year (no matter the circumstance) while Taiwanese citizens can become tax residents starting from day 1 in Taiwan in a particular year.
So in that regard, Taiwan has signed multiple double taxation treaties which refer to “domicile” and center of life and all those things while in practice they say that those things don’t apply to foreigners, but only to citizens.
As a result, it can happen that - despite making Taiwan your home - when visiting one’s home country for >183 days per year (because of work, family emergency, …) one can suddenly become a tax resident there again - even when one’s center of life clearly is in Taiwan. Just because the authorities in Taiwan will only look at the days in Taiwan (and nothing else). That contradicts the very purpose of those double taxation treaties.
But I feel that’s another “Taiwan” thing: Sign those treaties to get the maximum benefit to their own citizens - and then not reciprocate because of some strange reasons (in that case: Only citizens can have household registrations - thus foreigners cannot have their domicile in Taiwan, so only the 183-day rule applies to them).
Let’s say I make 100k a month and I am withheld 18% for 6 months of the year, that’s 108,000 which I have to wait over a year to get back. I don’t pay any actual tax on that money cos of all the deductions. Let’s say I’m buying a house during this time. Having an extra 108k in available cash would allow me to buy 550k more worth of property, if putting 20% down. That’s the real effect of the withholding rate, not interest on the money. I am literally in this situation right now, although gov only owes me about 90 something thousand.
I think you seriously miss the point here.
The jump in tax rate is a massive disruption in monthly cash flow for no good reason other than discrimination against foreigners. Holding your cash unnecessarily for 18 months is ridiculous.
It’s incredibly, incredibly terrible. Or would you like to give me 10% of your income every month? Don’t worry I’ll give it back to you 18 months later, with 0% interest of course.
It’s more than this. It should be calculated based on taxable income not total income. For an annual salary of NT$1.2 million, based on a single person with no dependents (in 2022):
First six months: NT$600,000 x 18% = NT$108,000
Second six months: NT$600,000 x 5% = NT$30,000
Total withheld: NT$138,000
Actual taxable income: NT$1,200,000 - NT$423,000 = NT$777,000
Tax: NT$560,000 at 5% and NT$217,000 at 12% = NT$54,040
Excess withheld for being a foreigner: NT$83,960
I would say this is quite a lot of money to be forced to provide as a low-interest loan to the government each year. And that’s using quite a high salary and the lowest deductions - for people on lower salaries and with dependents, the effects will be greater.
I’m curious how have they addressed the contradictions with respect to the Nationality Act?
As a requirement for a foreigner to apply for naturalisation they must be domiciled in Taiwan. But in order for a foreigner to be considered domiciled in Taiwan, they first need to naturalise and get HHR? It’s a ridiculous legal paradox. I would argue that Taiwanese law clearly provides for foreigners to be domiciled without HHR.
Easy solution: Stop allowing foreigners to naturalize because they cannot be domiciled in Taiwan as demonstrated by the tax authorities \s 
I was comparing to what a Taiwanese person would have had withheld and thus putting a price on the discrimination as opposed to how much everyone may be lending to the government interest free. I assume, though I may be wrong as I haven’t discussed this with any locals, that they don’t automatically factor in how much you can deduct when calculating withholding.
But it sounds like I hit a nerve. If it is in fact the delay and excess withholding that is the core issue, then it sounds like it should be the focus of any fix.
@qwert_zuiop - RE CRS: I haven’t had it done to me, but I’ve read that some overly cautious banks auto report to your home country anyway just in case. And, I don’t think it matters. It doesn’t mean your liable for taxes back home, but they will know a bit more of what you’ve been up to.
Additionally, I think people here think there is a lot of malicious intent with this, whereas in reality international tax law and politics is very messy. They just tried to jam a square peg in a round hole and figured it was good enough as is.
And how are you suggesting that be fixed differently? Please be specific.
This withholding happens because of the domicile/residence issue, which is what we’re talking about. So what are you talking about? That we should agree that we’re not really resident here but beg for the withholding rate to be reduced, even though 18% is correct for non-residents?
Other countries have managed to deal with this specific issue just fine without discriminating. Personally, I haven’t said anything up to now about malicious intent - I think it’s the same situation as most of this stuff in Taiwan. They’re just being lazy and didn’t give a toss about discriminating against foreigners in the first place.
Once they’ve been made aware of it and choose to continue discriminating though, and when they insist on the discrimination being necessary after multiple complaints, it’s difficult not to see malicious intent.
I’m surprised there’s so few Americans in this thread, and then I remembered they have worldwide taxation and can never escape from US domicile, hence no point complaining since it works in their favor if they are not considered Taiwan domiciled.
Though if Americans complained to congress and managed to delay/stop the US-Taiwan double tax agreement, I’m sure that’ll raise awareness in Taiwan real quick since many Taiwanese want that agreement to get passed so they have lower withholding rates for US stock dividends, royalties, business and other income, and I’m sure they’ll complain to their local Taiwanese politicians if it got delayed because of some small issue like permanent residents aren’t recognized as having domicile. https://focustaiwan.tw/politics/202309150008
ok, now bear with me. If I need to think like the typical TW bureaucrat, I would elucubrate that “well, this foreigner wants to come clean and get nationality, so it is showing his intent to stay here long time, so reactively the years of residence become of domicile too as that was his intention all along, just that now I CAN SEE IT”.
there you go, I can wage a dollar on this being the actual interpretation of MOI/MOF
Did you formally change your self to non resident for tax with Canadian tax office and banks. I changed my Australian bank address to Taiwan and Australian tax office to non resident. I know many people who simply ignore doing this.
Correct. I opened my account before 2019 here. They probably just report to my home country and never asked.
I agree that most people on here are true residents. I just smell a whiff of the gold card digital nomad crowd. Again though, it would open a giant global tax dodge loophole if you only need to touch down for 31 days a year. One option is doing something like Malaysia, where if you were a tax resident the previous year, you are assumed to be one this year. It’s actually a bit more complex than that there, but that’s one aspect of it.
I have a GC, under the finance sector. It would be in my best interest not to be considered tax resident here, I am fighting with my teeth to be considered as such instead. I pay my taxes here even though I would have super easy ways not to do that (or, at least, greatly reducing them) which would be completely legal, albeit maybe considered morally incorrect.
TBH there is not fiscal advantage as per tax-optimisation to be considered tax resident here, if you want to grift better doing it somewhere else with better tax brackets. I use to be also a tax advisor, so I can speak from professional experience.
Why would it be a tax dodge? Taiwan isn’t a tax haven. Up to 40% personal income tax. US and Canada require 0 days for domicile if you have ties there - wouldn’t they be bigger tax havens? Singapore, HK also don’t require half the year to establish domicile and their taxes are much lower, with no capital gain taxes.
I don’t have all the answers, but a minimally invasive and quick surgery could be for the government just ask companies to withhold at the resident rate if the employee was a tax resident the year before. I bet most companies withhold the hire rate as a cover your ass type of decision as they may be on the hook for any unpaid taxes should the foreigner skip town. The government could let them off the hook for that (I’m sure its small change relative to the rest of their tax take), and provide a hotline for foreigners or company accountants to contact to push any reluctant companies into compliance. You could add some extra carrots and/or sticks without law changes.
Apparently lower withholding is allowed, but it seems it just isn’t encouraged or enforced.
I don’t maintain any Canadian bank accounts and have no assets in Canada… haven’t had any ties to Canada since 2017 besides the occasional holiday to visit family.
When you move away from Canada you need to inform CRA that you are emigrating so that they no longer consider you tax resident, which I did when I filed my final taxes. I need to dig up those documents though as it was 6-ish years ago. I also always indicated I was a UK resident visiting Canada when I went through border control.
Sorry what? Get off your high horse. Gold card holders are legitimate residents too, and they are the ones Taiwan’s government is specifically trying to attract… it’s a really bad look for Taiwan to invite foreign professionals to the country with GC and then confront them with discriminatory taxation practices.
No it wouldn’t. As others have already told you, other countries like Canada handle this perfectly fine without issues. If you only spent 31 days in Taiwan you would be expected to prove strong residential ties / center of economic interest in order to maintain tax residence, but it should be possible. The same tests that are applied to citizens should also be applied to foreigners.
This is a bit off topic, but I’m with you about not wanting to be a tax resident here if I don’t have to be. Talk of expanding the idea of domicile scares me a bit as I might be roped in.
The tax residency thing is related to ‘perpetual travelers’ from high tax countries who try to be tax residents of nowhere only to find out that their home high tax country still wants a cut and that banks want you to put down something other than ‘nowhere’ on the CRS form. There is plenty of internet discussion about getting a quick (less than 183 day) tax residency in a favorable jurisdiction so you could travel. I agree Taiwan isn’t the best tax free option, but the tax rate here is much lower than most of Europe. Ages ago, my own lawyer had advised me that something like this will likely not work anyway, but seems like a lot of people are trying. Also, due to limited information exchange between other countries and Taiwan, if you want to cheat, probably better to do it here than in Europe.
TW fully participates to CRS and FATCA though, and it is also integrated into the AEOI.
Whether it does it correctly or not, that’s another story, but TW tax authority pings the CRS and FATCA declarations to the respective countries.
If TW wasn’t doing this, Italy and other countries would have never signed DTAs with TW and TW would still be a black-list country, so for instance me as an Italian if I were resident here in TW as a black-list country, I would still be subject to Italian taxation.