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

Taiwan Discrimination in Taiwan
443

The issues seems to result from a different method of applying rules of tax residency… steaming from a different way of thinking. Not sure that can be resolved.

Country A with large migrant population may treat a person as a tax resident from begining of year if they have work rights, have a tax number, are in the country etc. Then at tax return time if the person spent less than 183 days in country and held tax residency overseas they’ll deal with it at that point of time.

Whereas Taiwan wants to ensure a person meets tax residency requirements each year as and when it happens before tax return time. This is just a completely different approach stemming from a different way of going about things, almost a cultural difference. Not sure this will ever change.

444

The thing is: This approach only applies to non-citizens.

For Taiwanese citizens, it’s very similar to your example with country A.

And Taiwan has (voluntarily) signed multiple tax-treaties in which they commit to following a no-discrimination approach to taxation and to follow OECD guidelines regarding tax residency based on domicile. Both aspects, Taiwan simply ignores for foreigners.

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445

Unfortunately, those tax treaties likely only cover the tax for and at the end of the tax period… not the vagaries of how it inplementated during the tax period.

446

For example some countries have pay as you go tax where employer deducts tax from each pay… some other countries have no such thing and the employee must front up the tax at the end of the tax period.

447

Still, Taiwan will ignore treaties which specify that the first factor when determining tax residency should be the domicile. This means that if I live in country A, my family lives there, etc. and I temporarily stay out of said country for an extended period of time (e.g. travelling the world, internship abroad, … - while keeping my apartment in said country), my tax residency will still be in country A.

They simply argue that the concept of domicile cannot apply to foreigners, but only to Taiwanese citizens. So even if a foreigners on an APRC has been living in Taiwan for a decade but then - in one year - only stays 180 days in Taiwan (due to travel, …), they lose their tax residency status in Taiwan. The same would not be true for a Taiwanese citizen.

Do these countries approaches also only apply to foreigners (even to permanent residents), but not to citizens…?

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448

Generally yes. (Correction that should have said “no”)

449

Could you give an example about such a country?

450

Why, I just agreed with you?

451

Australia has a system where tax is deducted from pay… Hong Kong has a system where employee pays their own tax.

452

Maybe we’re talking past one another.

My question was regarding this:

Which countries do have different approaches in place for taxing foreigners on permanent residency vs. taxing citizens?

453

But that is the thing, that argument can’t be made about Taiwan… as it washes out in tax return. The treaties talk about tax periods (tax years).

454

No, it does not (always). Notably in two cases:

  1. Moving to or from Taiwan: If a foreigner moves to Taiwan with the intention to stay, they won’t be regarded as a tax-resident if they stay less than 183 days in that year. Whether they establish a domicile (according to OECD definition) in Taiwan is completely ignored by the tax authorities.
  2. Temporary absence from Taiwan: If a foreigners who lives in Taiwan goes on extended vacation for example and just falls short of staying for 183 days - they will no longer count as a tax resident. Again, it doesn’t matter if they have a domicile (OECD definition) in Taiwan.

Now compare this with Australia:

https://www.ato.gov.au/individuals-and-families/coming-to-australia-or-going-overseas/your-tax-residency

Work out your tax residency

You can use the residency tests to work out if you’re:

Residency tests

There are statutory tests to determine your residency:

You can also use our work out your residency status for tax purposes tools to help work out your residency.

And then:

Resides test

The primary test of tax residency is called the resides test. If you reside in Australia, you’re an Australian resident for tax purposes and you don’t need to apply any of the other residency tests.

Some of the factors that can be used to determine residency status include:

  • physical presence
  • intention and purpose
  • family
  • business or employment ties
  • maintenance and location of assets
  • social and living arrangements.

If you don’t satisfy the resides test, you’ll still be considered an Australian resident if you satisfy one of 3 statutory tests.

Domicile test

You’re an Australian resident if your domicile (the place that is your permanent home) is in Australia, unless we are satisfied that your permanent place of abode is outside Australia.

A domicile is a place that is your permanent home by law. For example, it may be a domicile by origin (where you were born) or by choice (where you have changed your home with the intent of making it permanent).

For more information about this test, see the domicile test.

So to become a tax resident in Australia, it’s sufficient to reside there or have strong ties to Australia. Alternatively, to have a domicile there. They especially mention “intention and purpose”, “family”, “business or employment ties”, … When having those, one doesn’t even need to be present for 183+ days to become a tax resident in Australia.

Note that the entire page also only mentions citizenship once:

This means you […] can be an Australian resident for tax purposes without being an Australian citizen or permanent resident

So the rules are (basically) the same for citizens and non-citizens.

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455

Yeah i get that… but Australia’s tax residency rules can also result in pretty perverse outcomes too. There was a guy who worked overseas for years and the court decided he was still an australian tax resident for the whole period.

456

They actually have two examples like that on the Australian website:

Example: Australian resident under the domicile test

Emily leaves Australia to work in Japan as a teacher of English. Emily has a one-year contract after which she plans to tour China and other parts of Asia before returning to Australia to continue work here.

Emily lives with a family in Japan during her time there and rents out her property in Australia. Emily is single. Her parents live interstate and her brother has moved to France. Emily is an Australian resident for tax purposes even though she is residing in Japan because, under the domicile test:

  • her domicile is in Australia (as she is a resident who has lived in Australia and will generally retain a domicile here when absent overseas), unless she chooses to permanently migrate to another country)
  • her permanent place of abode remains Australia.

Example: Foreign resident for tax purposes

Bronwyn, an Australian resident, receives a job offer to work overseas for 3 years, with an option to extend for another 3 years. Bronwyn, her husband and 3 children decide to make the move.

They rent out their house in Australia as they intend to return one day. While overseas they rent a house with an accommodation allowance provided under Bronwyn’s contract.

Bronwyn is unsure if she will extend her contract to stay for another 3 years. She will decide later depending on how the family like life.

Bronwyn is a foreign resident for tax purposes because she does not satisfy ‘the resides’ test. This is due to:

  • the length of her physical absence from Australia
  • other circumstances not being consistent with residing in Australia, even though she has retained the family home – such as
    • establishing a home overseas with her family
    • renting out her family home in Australia.

Bronwyn has also not satisfied the domicile test, as:

  • her permanent place of abode is outside Australia due to
    • the length of time committed to being overseas
    • the establishment of a home overseas
    • her family going with her overseas
  • the fact that she won’t be selling the family home in Australia, although relevant, is not persuasive enough to overcome the finding on the basis of the other factors
  • it can be argued that she has abandoned her home in Australia for the duration of her stay, by renting it out.

That’s, however, mostly the “standard case” - many countries handle it like that (similar things happen in UK, Germany, …). Taiwan is really the exception here.

And do note that some people on this forum actually argue that the current way Taiwan does things is actually beneficial for some: If they (as a foreigner) plan to stay less than 183 days per year, they don’t need to worry about “accidentally” becoming a tax-resident (especially for US-citizens this would cause double-taxation in some cases). Citizens need to be “more careful” about that as sometimes in extreme cases a single day in Taiwan could trigger tax residency.

So it’s less a discussion about what’s better in the individual situation, but more a question of general fairness and having those rules implemented without any discrimination.

457

My issue is the differing tax periods … july to june Australia and jan to Dec Taiwan … it is possible to be resident in both places in overlapping tax years.

458

Yes, and that’s when the double taxation agreements come in.

Taiwan and Australia seem to have one:

https://investtaiwan.nat.gov.tw/faqQContent?lang=eng&search=77

So it’s quite likely that taxes only need to be paid in either territory. Just don’t argue that your domicile is in Taiwan because Taiwan won’t let you argue that way unless you’re a citizen :man_shrugging:

459

So if in that situation one was to maintain tax residency in australia… but also meet 183 days a year in taiwan for either aprc or citizenhip eligibility i wonder how they would view that on applying for aprc or citizenship (i know i have veered off topic)

460

Usually, the tax treaties take domicile into account first.

So if you have domicile in Australia, but no domicile in Taiwan (because you cannot have this as foreigner in Taiwan under the current rules), you will only need to pay taxes in Australia.

Which is good if taxes are lower in Australia than in Taiwan. Otherwise, you might start to understand why some people around here argue that Taiwan not allowing foreigners to have a domicile here for tax reasons is discriminatory…

If Taiwan recognized a domicile, most probably the 183 day rule would decide in which country you’ll be liable for taxes. So in this case, no taxes for Australia but taxes for Taiwan.

But as always: No legal advice, ask a tax accountant or lawyer when in doubt.

461

While maintaining domicile in both countries. Im keeping my wife and kid in australia for now, have a gold card arc, employed through australia with office available in taiwan. I think ill have to go read tax treaty again…

462

Yeah, but here comes the issue this thread is about: Foreigners cannot have a domicile in Taiwan according to the Taipei Tax Bureau, so you only have a domicile in Australia. Thus, the double taxation agreement states that you need to pay taxes in Australia - no matter how long you stay in each country.

If you were a citizen in Taiwan, the situation might be different (although your family being in Australia could be an argument for your domicile only being there). That’s exactly the point of this thread :upside_down_face:

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