Tax on offshore dividends

Hi,

  • I own a company in Singapore that mainly provide service for the US and Europe
  • I’m under an open work permit
  • Staying more than 183days in Taiwan

So my question is what was the tax if I issue dividends for myself? I’ve read 21%, but would love to have confirmation if possible.

Thank you!

I’m in a very similar situation; my company is in the US and I am compensated via both salary and dividends. I talked to a lawyer in Taiwan about this issue, he told me the following:

  • You do not owe tax on dividends when the company is foreign and the money is deposited into a foreign bank account.
  • You do owe tax on your salary for work that was performed in Taiwan, even in the case when the company is foreign and your salary is deposited into a foreign bank account.

I believe the distinction is that dividends are theoretically “unearned income” while a salary is “earned income”.

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Just have a look at the tax regulations

Interesting, as I am in a similar situation. I own a US S-Corp (single owner), my salary is 35k USD, but my “Ordinary Business Income” is much much more. As mentioned the IRS considers S-Corp generated income “Ordinary Business Income”. If I am abroad the IRS would not consider that income eligible for the FEIC, only my salary of 35k.

Any idea how Taiwan authorities would classify income from a US pass-through entity?

This is incorrect

I don’t know the answer, but if I had to guess without doing any research I would say it’s taxed at same rate as your salary.

Dividends/capital gains are not as clearly taxed differently from salary in tw as in the west

It seems like the lawyer I spoke to didn’t know what he was talking about. It looks like dividend income from foreign companies can be taxed up to 20% if the “Income Basic Tax” is used.

@marcopoloTW this could be a good resource: https://www.pwc.tw/en/publications/assets/taiwan-pocket-tax-book-2018.pdf (see page 52).

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Does anyone know if capital gains are taxed on offshore accounts? I’ve heard that there’s no capital gains tax in Taiwan… but I’m not entirely sure if that’s true.

Also, are dividends invested into an IRA in the US taxable by Taiwan? I invest with Vanguard, and they don’t even make a nice form which summarizes taxable activity inside of an IRA because the US considers that tax free. I just don’t know if Taiwan considers them to be non taxable as well.

Finally, is there an amount of dividends that are tax free? I only get a few dollars worth of dividends. Not sure if it’s worth reporting?

Taiwan doesn’t have a capital gains tax for securities. So sell away your offshore and onshore stocks - there won’t be a tax hit. This was meant to help out the otherwise floundering Taiwan tax market a few years back.

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@Caspian @endy, I’m wondering if oversea securities gains don’t fall under the AMT category?

Also, there is 2 types of profits: capital gains and dividends.

Anyone could confirm or not?

This is what I managed to find: https://www.pwc.tw/en/publications/assets/taiwan-pocket-tax-book-2018.pdf

See pages 50-53 for capital gains and dividends.

I don’t think I need to pay taxes on offshore dividends. Still not sure though…

I also found this: https://www.ntbt.gov.tw/etwmain/front/ETW118W/CON/1687/6206174845235233933

Special Deduction for Savings and Investment: Interest derived from deposits made in financial institutions and profits accrued from trust funds with the nature of savings, as well as dividends occurred from the transaction, gift, or inheritance of the tax-deferred stocks divided before December 31st, 1998 received by a taxpayer, his/her spouse, and the dependents filing jointly listed in his/her gross income return for taxation may be exempt from income tax in full, if the total amount of such income for the whole year does not exceed NT$270,000. If the amount exceeds NT$270,000, the deduction shall be limited to NT$270,000.

Of course, there’s exceptions. Read the above link.

I think there is a difference between offshore company dividends paid to an owner of that company, and dividends paid from stock/equity ownership.

The problem that I can see with the stock ownership dividends is that you would get hit with a 25% non-resident tax at source by the US government (if it is a US listed stock) and then (likely) an additional 20% on the Taiwan side on whatever remains(possibly minus deductions). Ouch.

It is definitely an argument for trying to find a pure growth stock that has little to no dividend.

Mind you, on the plus side, you can move your money to a regular non-registered account, and not worry about capital gains tax at all.

So, I think that if your total income (salary + investment income, etc) is less than NT$6 million I don’t think you need to pay tax on the investment earnings. At least I think that’s the way it works?

That PDF above directly mentions foreign source income… Which would include offshore dividends.

Thats AMT, you need to pay either AMT or “normal” tax, whichever is higher.

You need to pay tax on offshore dividends, just as you would on onshore dividends. You might get a tax credit for taxes paid offshore though in order to eliminate double taxation, I suggest you check the tax treaty for that https://www.mof.gov.tw/Eng/Detail/Index?nodeid=264&pid=82780

It is nonsense that you wouldn’t be liable to pay tax on offshore. dividends if you could simply avoid it by having the dividend deposited offshore as well.

So, “owner” and stock/equity ownership are the same thing. Or you mean to differentiate between private and pubic company ?

I guess what matters is how the Taxation department views it. I don’t have any personal experience with this, so it would be great to hear from someone who does.

For me, I am just trying to wrap my head around how the government taxes dividends, and in particular how it would affect me, as a resident of Taiwan, if I own stocks or ETFs (US based) through an online trader, that pay a quarterly dividend.

Thanks for the advice.on avoiding double taxation though, that could definitely help.

Don’t invest in countries that don’t have tax treaty with Taiwan, so that would include the us

If you insist on investing in the us do I trough a holding company in a country that does have a tax treaty with tw(and us), eg Singapore or U.K.

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I’m wondering how common this is? Any links/source? I was thinking doing this, it solves the crazy estate tax and crazy tax rate when getting the dividends.
Also, I guess this involves to keep your holding company while having your investment in progress?

It’s very very common, and yes you need to keep your holding company

Haven’t got any links, but google will tell you a lot

But basically you can set it up yourself, and then get an accountant to handle the yearly filings

The tricky part will be to get a bank account/trading account opened for the company, but the accountant you go with should be able to help with that

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