Taxes for 9B editing for a guy with an ARC - Prepay?

Legal Taxes
1

Hello, all–
I’ve searched the forum and did not see the situation I’m in, so I’m posting.

I’ve been editing research papers for Ph.D.s and, after 6 months of pretty steady work, only one university has ever asked me for my ARC and deducted 20% for taxes. My invoice has my U.S. mailing address on it, but all payments are made in NT$ wired to my local Post Office account.

Just today, I got an email from a client who said that his company (this research was not sponsored by a university) expected me to itemize the 20% tax for them. They transferred my full fee without accounting for taxes and were apparently concerned that I would get penalized if I reported the income.

Does anyone know how I should do this in the future? Should I send my ARC number with every bill and itemize the 20% so they know how much to pay the tax man on my behalf? I’m not making enough to go over the 5% bracket in the long run, but I hear that taxes should be prepaid here at the higher rate.

Suggestions? Any good insight is appreciated! Thanks! --loaker

2

[quote=“loaker”]Hello, all–
I’ve searched the forum and did not see the situation I’m in, so I’m posting.

I’ve been editing research papers for Ph.D.s and, after 6 months of pretty steady work, only one university has ever asked me for my ARC and deducted 20% for taxes. My invoice has my U.S. mailing address on it, but all payments are made in NT$ wired to my local Post Office account.

Just today, I got an email from a client who said that his company (this research was not sponsored by a university) expected me to itemize the 20% tax for them. They transferred my full fee without accounting for taxes and were apparently concerned that I would get penalized if I reported the income.

Does anyone know how I should do this in the future? Should I send my ARC number with every bill and itemize the 20% so they know how much to pay the tax man on my behalf? I’m not making enough to go over the 5% bracket in the long run, but I hear that taxes should be prepaid here at the higher rate.

Suggestions? Any good insight is appreciated! Thanks! --loaker[/quote]

You should probably discuss this with a lawyer, as such work is illegal unless you have a work permit for it. As soon as a client “pays the tax man on your behalf,” there is an official record of the illegal work, which may cause legal problems in the future for you or your client, or both of you. There are lots of threads on Forumosa about this kind of situation. Do a search on “work permit”.

If you have open work rights (e.g. through marriage to a local citizen or through an APRC), or if you have a work permit for each specific employer, then the work is legal. If you don’t, then it’s not.

3

Loaker, suggest you ignore the last comment because this guy has no idea what he is talking about. Such is the nature of internet forums. :neutral:

Just for the record, category 9B is not salary and does not require a work permit. It is perfectly legal for ARC holders to earn 9B in addition to salary and there is no limit on the amount of 9B you can earn. Freelance writing and editing both qualify as 9B.

9B is tax-free up to a limit of NT$180,000 each year. However, you are required to pay withholding tax on all income earned from sources in Taiwan, including 9B. If you earned more than NT$180,000 in category 9B, you will pay tax only on that portion of 9B that exceeds NT$180,000. The tax rate is computed according to your total income. So, if you pay 12% on your salary, you would also have to pay 12% on the portion of 9B in excess of NT$180,000.

I’d say let your clients withhold tax if they really want to because getting that money back is a trivial matter. Companies are required by law to declare those 9B payments and for you to ask them not to is unreasonable and unprofessional. Even if you decide to leave Taiwan, you can continue earning 9B overseas and appoint a proxy to attend to the tax refund for you.

Feel free to PM me if you need further help.

4

[quote=“monkey”] Such is the nature of internet forums. :neutral:
[/quote]

Wrong, such is the nature of this thread since you chimed in monkey. :unamused: I suggest that you get your own facts straight before you (a) talk out of your hat in an area about which you obviously know very little, and (b) give posters misguided advice that is liable to get them into legal trouble.

The actual fact:

Work resulting in income in 9B does require a work permit just like work resulting in income in any other category.

Just because work income does not fall in the tax category of “salary” does not mean that the work producing the income is exempt from work permit requirements.

5

Rotalsnart, my limited knowledge comes from making hundreds of 9B payments to dozens of residents and non-residents. I also spend a lot of time each year helping those people get their tax refunds.

I’m sure freelancers who write/edit and enjoy a nice tax-free 9B income must be having a good chuckle at your posts.

6

[quote=“monkey”]Rotalsnart, my limited knowledge comes from making hundreds of 9B payments to dozens of residents and non-residents. I also spend a lot of time each year helping those people get their tax refunds.

I’m sure freelancers who write/edit and enjoy a nice tax-free 9B income must be having a good chuckle at your posts.[/quote]

Monkey, If you have made hundreds of 9B payments, then you really should know better. As it is, you remain misinformed about the legality of this situation. In practice, foreigners without work permits or open work rights indeed can and do file taxes on 9B income and get refunds, but the fact remains that their work in such cases is ILLEGAL. And tax reporting and filing in such cases further creates an official and un-erasable paper trail of this illegal work. In some of these people’s cases, this will come back to bite them in the a** some years down the line (for example, if they ever want to apply for permanent residency based on the period in which they were doing this work). And if you are not informing the alien taxpayers you serve of this risk, then you are doing them a disservice.

7

Category 9B isn’t paid employment. It is gao fei and and this kind of income (authoring fees, honorariums, etc) is perfectly legal if the work falls within the scope of gao fei.

As an example, those hundreds of foreign professors and industry experts who are paid to give speeches here every year aren’t violating the terms of their visas because they are paid gao fei. The government does not class giving a speech as “work”.

Similarly, a lot of foreign teachers and editors in Taiwan work as freelance writers and editors. To date, I have never heard of anyone who got punished for earning gao fei.

Maybe others can chime in about their experiences with this. …

8

[quote=“monkey”]Category 9B isn’t paid employment. It is gao fei and and this kind of income (authoring fees, honorariums, etc) is perfectly legal if the work falls within the scope of gao fei.

As an example, those hundreds of foreign professors and industry experts who are paid to give speeches here every year aren’t violating the terms of their visas because they are paid gao fei. The government does not class giving a speech as “work”.

Similarly, a lot of foreign teachers and editors in Taiwan work as freelance writers and editors. To date, I have never heard of anyone who got punished for earning gao fei.

Maybe others can chime in about their experiences with this. …[/quote]

Yes, 9B is gao fei (literally: “manuscript fees” for readers who may not be familiar with this term), but no, “authoring”(e.g. freelance writing, speech writing, etc.) is not legal work for a foreign national in Taiwan unless the foreign national has a work permit for the specific job producing the gao fei.

In practice, lots of people do this and get away with it every day. The Taiwan tax office doesn’t ask questions. They are just happy to get the revenues, and they cheerfully pay refunds (what a great agency they are!). In accounting practice in Taiwan, a lot of stuff goes on routinely that is not legal, but it only becomes recognized as a problem when somehow the person in the case finds themselves under scrutiny for one reason or another. Then they can find themselves quite screwed. I’ve seen this happen on more than one occasion. Believe me, you are not the only professional in the dark about this. Plenty of people working in HR departments or accounting departments of local firms that outsource writing or similar work to foreign freelancers in Taiwan are under this same misconception. Most people in the past have been fortunate and gotten away with it. In the past few years, however, it has increasingly been coming back to haunt people as the authorities (immigration in particular) have started to enforce these laws more strictly. Because the tax authorities don’t ask questions, the people who get screwed don’t know until it’s too late, when other authorities have noticed the issue.

9

[quote=“Rotalsnart”][quote=“monkey”]Category 9B isn’t paid employment. It is gao fei and and this kind of income (authoring fees, honorariums, etc) is perfectly legal if the work falls within the scope of gao fei.

As an example, those hundreds of foreign professors and industry experts who are paid to give speeches here every year aren’t violating the terms of their visas because they are paid gao fei. The government does not class giving a speech as “work”.

Similarly, a lot of foreign teachers and editors in Taiwan work as freelance writers and editors. To date, I have never heard of anyone who got punished for earning gao fei.

Maybe others can chime in about their experiences with this. …[/quote]

Yes, 9B is gao fei (literally: “manuscript fees” for readers who may not be familiar with this term), but no, “authoring”(e.g. freelance writing, speech writing, etc.) is not legal work for a foreign national in Taiwan unless the foreign national has a work permit for the specific job producing the gao fei.

In practice, lots of people do this and get away with it every day. The Taiwan tax office doesn’t ask questions. They are just happy to get the revenues, and they cheerfully pay refunds (what a great agency they are!). In accounting practice in Taiwan, a lot of stuff goes on routinely that is not legal, but it only becomes recognized as a problem when somehow the person in the case finds themselves under scrutiny for one reason or another. Then they can find themselves quite screwed. I’ve seen this happen on more than one occasion. Believe me, you are not the only professional in the dark about this. Plenty of people working in HR departments or accounting departments of local firms that outsource writing or similar work to foreign freelancers in Taiwan are under this same misconception. Most people in the past have been fortunate and gotten away with it. In the past few years, however, it has increasingly been coming back to haunt people as the authorities (immigration in particular) have started to enforce these laws more strictly. Because the tax authorities don’t ask questions, the people who get screwed don’t know until it’s too late, when other authorities have noticed the issue.[/quote]

The tax office does ask a lot of questions. Because gao fei represents a potential NT$180,000 tax holiday, it’s in the interest of the tax office to make sure that the 9B category isn’t being abused. They will definitely ask for documention if the paying company has no obvious need to pay gao fei.

10

The tax office asks questions about tax issues relating to the work itself, such as whether 9B income is being paid for work that actually falls into that category. So far, however, they are not asking questions about the legal working status of the taxpayers who are doing the work, because that is not their purview. The job of the tax office is to catch tax offenses, not immigration-related work offenses. This does not make the work any less illegal.

The 9B tax exemption is purely a tax incentive, designed to encourage creative and intellectual work. It is not an exemption from labor laws governing foreign nationals. If a company in Taiwan, whether a local company or a branch of a foreign company, hires a freelance foreign national to do 9B work without having a work permit for that specific work (or otherwise having open work rights such as through marriage or permanent residency), both the company and the person doing the work are committing legal offenses punishable under Taiwan’s law. It’s as simple as that. So far, the tax office is looking the other way. In recent years, the immigration authorities have been less consistently looking the other way, and some people have been getting into trouble. My point is that people should be informed and aware of the very real risk involved.

This situation is similar to the substitute teaching issue that is often discussed on Forumosa (i.e. teachers teaching in schools other than where they have their work permit). Sure, most people who do it don’t get caught, and they pay their taxes on the illegal work and get their refunds. But it is still illegal, and people still occasionally get singled out, prosecuted, and even deported for it. Doing 9B work without a work permit is equally illegal.

[Edit to add:] Incidentally, the relevant article of law for this is Article 48 of Taiwan’s Employment Services Act, which specifies the requirements for foreigners to work in Taiwan. It gives the following three exemptions to the work permit requirement [translation from Lawbank.com.tw]:

  1. A foreign worker to be employed as consultant or researcher by the respective government or their subordinate academic research institutes.
  2. A foreign worker has married a national of the Republic of China with a registered permanent residence in the Republic of China and has been permitted to stay therein.
  3. A foreigner employed at a public or registered private college/university within six months in the field of a course of lectures or an academic research approved by the Ministry of Education.

If a foreign national earning 9B income falls in one of the categories above, they are cool. A foreign national earning 9B income who does not fall in one of these categories and does not have a work permit for the specific work producing the income, or qualify for some other special exception, is working illegally.

11

Hi, all–
Thanks for your input. I qualify as a #2 exemption as my wife is native Taiwanese and I have a registered permanent residence in Taiwan. Also, my work is clearly gao fei 9B, so the legality of my work here is moot. I simply would like to know if I need to put some sort of prepayment information in my invoice, since only one of my customers has ever been asked for it by his accounting department. Any thoughts along those lines? Thanks, --loaker

[quote=“Rotalsnart”]Incidentally, the relevant article of law for this is Article 48 of Taiwan’s Employment Services Act, which specifies the requirements for foreigners to work in Taiwan. It gives the following three exemptions to the work permit requirement [translation from Lawbank.com.tw]:

  1. A foreign worker to be employed as consultant or researcher by the respective government or their subordinate academic research institutes.
  2. A foreign worker has married a national of the Republic of China with a registered permanent residence in the Republic of China and has been permitted to stay therein.
  3. A foreigner employed at a public or registered private college/university within six months in the field of a course of lectures or an academic research approved by the Ministry of Education.

If a foreign national earning 9B income falls in one of the categories above, they are cool. [/quote]

12

[quote=“loaker”]Hi, all–
Thanks for your input. I qualify as a #2 exemption as my wife is native Taiwanese and I have a registered permanent residence in Taiwan. Also, my work is clearly gao fei 9B, so the legality of my work here is moot. I simply would like to know if I need to put some sort of prepayment information in my invoice, since only one of my customers has ever been asked for it by his accounting department. Any thoughts along those lines? Thanks, --loaker[/quote]

In that case I would simply touch base with each client, at the time you accept an editing job, about how you intend to bill them (or how they expect you to bill them). Unless you wish to set up a registered business so that you can issue official invoices, then the natural approach I think would be to ask each client to withhold tax for you at the time of payment and to issue you a withholding statement. (If the clients are individuals who cannot issue withholding statements, you may have to self-report the tax.) You can prepare a checklist of things that need to be discussed at the time you accept a job, such as whether they need you to issue an (informal) invoice, whether you need to put prepayment information in the invoice, whom you should send your invoice to, at what (email) address, what your tax withholding rate should be etc, and prepare a photocopy of your APRC to send them at the same time for their records.

(BTW sorry to get off track earlier as was not aware that your are married to a local citizen. I’ve lately seen a number of cases of people running into trouble for working illegally, some of whom were not conscious at the time that what they were doing was technically illegal – so sometimes I’m too quick to harp on this issue.)

13

Thanks, folks. As I understand it, the key here is to check with each client to see how taxes can be withheld on my behalf. I can easily do that. Thanks, --loaker

14

As for the third provision in Article 48 of the Employment Services Act, does this mean that someone employed at a local university can work at ANY other outside job with only an ARC (one work permit) – not just 9B editing jobs?

[color=#FF4040]Article 48
Prior to employing Foreign Worker to engage in work, Employer shall apply to the Central Competent Authority for Employment Permit with relevant documents submitted. However, The following foreigners are exempted：

1.A Foreign Worker to be employed as consultant or researcher by the respective government or their subordinate academic research institutes.

2.A Foreign Worker has married a national of the Republic of China with a registered permanent residence in the territory of the Republic of China and has been permitted to stay therein.

3.A foreigner employed at a public or registered private college/university within six months in the field of a course of lectures or an academic research approved by the Ministry of Education .[/color]

15

My understanding is that specific work eligibility is still required for each job. Just because a person qualifies for a certain job under Article 48 does not mean that they can also perform another job that is not specified under Article 48. The tax category 9B is irrelevant to work permit issues – it is purely a tax break – as I mentioned in my earlier posts in the thread.

16

On the subject of taxes, I have a question.

I have a JFRV through marriage.
A lot of my work is now private lessons.
I therefore need to self declare my income.
Must I only do this at the end of the tax year, when it is time for my wife and I to submit our return.
Obviously there will be no withholding of taxes by the folks I teach.

Thanks