Another niche question about Taiwan taxes. The tax office considers overseas income earned for work physically performed in Taiwan as Taiwan-sourced income:
Based on Item 3, Paragraph 1, Article 8 of the Income Tax Law of the ROC, if an alien stays in the Republic of China for more than 90 days during a taxable year, the remuneration he/she receives from his/her employer(s) outside of the ROC for services rendered within the territory of the ROC shall be considered as ROC-sourced income and he/she is required to file such income received in the ROC with the relevant tax authority-in-charge within the ROC and pay tax thereon.
So how about work done by Taiwan residents while physically outside Taiwan? Let’s say I was away in Thailand for a couple of months toward the end of 2022 and did a small amount of work for an overseas employer while there – from the text above, that wouldn’t seem to be Taiwan-sourced income, right? Or would Taiwan consider it taxable because I was resident in Taiwan for 2022 and here for most of the year?
Side question: even though the work was performed outside of Taiwan for a non-Taiwanese company, would this be affected by where I was when the money was actually received? So if I’d already returned to Taiwan when I invoiced the client and received the money, would this now become Taiwan-sourced income again? (I’m guessing not?)
Mostly just curious. I’m probably not going to bother separating the two based on where I was when the work was done/money received, but just wondering if I could reasonably do that.
Sorry. Can’t link you the source without taking too much time looking through my browsing history, but I can give you a little bit of additional info that I remember from reading through the tax laws a couple of years ago:
The cutoff is 183 days. If you’ve spent more than 183 days in Taiwan then you are considered a Taiwan tax resident, and any income you receive for work performed on short business trips overseas is still considered Taiwan-sourced.
I’ve also read through the tax regulations a couple of times, and I’m not confident that this situation is covered by them. Which isn’t unusual - a lot of tax rules haven’t yet been updated to accommodate remote work, and IIRC the text I quoted above discussing work performed physically inside Taiwan is a relatively new addition originally announced by the tax office in a notice several years ago based on their interpretation of the Income Tax Act and targeted at digital nomads etc. The key point in that text is “services rendered within the territory of the ROC”, which doesn’t apply here.
It seems like there would have been a simpler way for the tax office to write these announcements if the conducting the work physically inside Taiwan part isn’t important - they wouldn’t need to mention that bit at all if Taiwan considers all income Taiwan-sourced income if it’s earned by a Taiwan tax resident.
This wasn’t a business trip, I just wasn’t in Taiwan for a couple of months. (I think there is something in the ITA discussing people working for Taiwan-registered companies and traveling overseas on business trips, if that’s what you’re thinking of, but that’s also not the case here.)
During that tax year, you lived in Taiwan and performed work while overseas, no? That would be considered a business trip, regardless of other activities performed on said trip.
From what I remember reading, the nationality/location/place of registration of the employer only determines their tax liability, and isn’t relevant to your tax liability.
I think we’re both just speculating here? I’m not trying to have a competition with you to see who’s right and who’s wrong - I’m just curious what the situation is. My suspicion is that it’s an edge case that isn’t adequately covered by existing tax regulations, as with a lot of stuff related to remote work, because it’s something that doesn’t affect >99% of people and tax regulations weren’t written with this in mind. I might ask at the tax office at some point (and I also wouldn’t be surprised if they claim it to be Taiwan-sourced income).
I thought you were working for a Thai client or employer. If you weren’t even doing that, then I am even more confident that the work you performed during that trip was Taiwan sourced.
You’re welcome. If you’re still confused about the tax laws, the big four accounting firms keep a pretty good database on their websites concerning the tax laws of every country they do business in. That might be a good alternative source if the Taiwan tax websites are unclear.
Again, whether you feel confident or not, you’re speculating. I was looking for something more solid than “yes” then your opinion based on what you “remember from reading through the tax laws a couple of years ago”.
You don’t need to be condescending about it. I’ve asked a question and, as I’ve already said, I’m not trying to win an argument with you. I’m not sure why you’re apparently trying to win one with me? It’s not even an interesting topic.
I’ve also read the tax guides - at least two of them IIRC, because I wanted to understand the situation the first time I filed taxes here. This isn’t a topic I’m clueless about or a question I came here to ask without having read or thought about anything. If we’ve read similar things and come to different interpretations, that’s fine. I gather that you also work remotely, and if you’ve really read up on things you’ll know that there are widely differing amateur interpretations of tax laws in various countries and how they apply to remote workers. People have been disagreeing about this on the internet for at least 15 years.
Whether you consider yourself an expert on this or not, the reality is that the regulations, as in many countries, were written before remote work and digital nomadism became a thing. Taiwan’s tax regulations don’t even have a single clear way for us to declare overseas freelance income, which has motivated several threads here and is a far more common situation than a foreign resident of Taiwan doing work for an overseas client while being in neither country on an extended non-business trip. As an example, the regulations as written allow me to file my freelance income in two or three different ways with different tax codes and rates, even without starting a company and doing it that way. Even the employees at the tax office often don’t have definitive answers to these questions regarding unusual situations, so I’m not sure why you think it’s so obvious.
As I said in my original post, I’m likely going to just file the income here anyway because it’s not probably worth trying to separate things. It was a question asked out of curiosity.
Hopefully we can just leave it there (please don’t feel obliged to answer).
Why not file it under AMT? It’s foreign income. You can call it dividends or royalties for work done, which would fall under AMT. The line between salary and dividends/royalties is very blurry and the local interpretation seems to be whether you received a tax statement saying it’s for salary. Self employment can be classified as AMT, the same way as things like foreign rental income. Just give yourself some min salary so it doesn’t trigger the tax computers to mark your account for audit.
I thought AMT is only for investment income and stuff like that, and over NT$6.7 million?
I’ve read about AMT before but it was a while ago and I don’t remember exactly what’s included. In any case, I think it definitely doesn’t include remote freelance work like I do (or at least, I’d have a hard time making that case, especially without a company and after several years of filing it as salary/wages).
It’s a good example of how poorly defined the rules can be here, though! Aside from the blurry line between salary and dividends/royalties as you wrote, it wasn’t that long ago that tax offices outside Taipei were actually advising people that they didn’t need to pay tax on freelance income from outside Taiwan up to NT$6.7 million, because it was “foreign-sourced income” rather than “Taiwan-sourced income” as it’s now considered.
When even the tax offices are misunderstanding their own rules and not applying them consistently, even for fairly common situations, it’s quite clear that the regulations aren’t comprehensive enough to cover all the weird edge cases…
Probably true, but until like 5-6 years ago it was quite common to hear of people being told by tax offices to do just that. One example here. I guess that Taipei corrected all the other tax offices at some point.
There are situations where how income is classified is open to interpretation, like salary/wages vs. professional practice vs. gaofei. If you can justify it and the tax office accepts it…
The online filing software automatically adjusted my overseas salary income (category 5F) for the days I’ve physically been in Taiwan.
I.e. if you make 1 million, but only stay 300/365 days, you only need to pay tax on 822k.
They will also accordingly adjust the exemption accordingly.
I would assume it works like that for non-salary income accordingly. You might even be able to provide proof about specific income items - bit I’d assume that the simple distribution by days should be more beneficial in case you also enjoy some vacation days overseas.
You seem to be offended by my previous responses and attempts to help you. I wasn’t arguing with you (and certainly not trying to win anything), and didn’t think the need to indicate so. I also didn’t think you were being argumentative until your last post.
I wasn’t trying to be. In any case, sorry if I offended you.
The reason I didn’t offer you “something more solid” is because I’m not a tax professional. As with any comment posted in any internet forum by random anonymous internet users, my comments are based on my own experience and understanding.
I’ve been in your shoes and had the exact same questions and doubts, and was only offering what I’ve learned which is what I assumed what you were looking for. If you’re looking for professional advice, I suggest you contact a tax accountant.
It’s not fraud if it’s what the tax office advises you to do. If you bring a 1099 they will advise you that it’s under self employment / AMT. Except the beimen branch, who will advise that it’s salary. I don’t know which branch is more correct but the majority of tax offices in Taiwan believe foreign income is under AMT. Maybe the Taipei branch just needs more tax revenue to distribute back to resident tax payers.
Those two sentences seems to contradict themselves, since if that company is owned by one person and that person is in Taiwan then dividends are for work performed in Taiwan
Similarly is foreign rental income considered work performed in Taiwan?
If following formal definitions then salary means a fixed monthly salary from one employer. So self employment is not a salary since it varies each month. It’s more like dividends or royalties for your personal IP. You are an intangible asset that generates dividends and royalties based on your skill set.
And putting it behind a company is just a way of formalizing the definitions but in the end the same work is being performed.
