Working remotely for a self-owned foreign company without an office in Taiwan - legal?

The nice thing about setting up a “real” company would be the possibility to equate payment flows, i.e. paying out a regular salary rather than a larger amount every couple of months.

But yeah, if I decide to move forward with this, I would definitely need to visit an accountant before receiving the first “payment” of any sort, in order not to cause myself any further issues in the future.

Maybe a combination would work: One of these PEOs with a low salary for NHI registration and getting a work permit just in case and then paying the rest of the salary directly - maybe even as “foreign income” then.

I’ll see - still many other things to take care about first.

What’s the difference with ‘manpower’? ‘Independent’ contract labor?

Not sure if I get your question, but these PEOs offer „employer as a service“ basically. Like a personnel leasing service.

But as I said: Not really sure if you really need them or not. But apparently from what I have read so far, it doesn’t seem to be possible to live in Taiwan and being employed by a foreign company without an office in Taiwan. And that’s basically their offer: Allowing regular employment without having an office yourself.

Since the hold card allows you to live in Taiwan independent of employer… For the short term, anyway, could you not just keep your current regular employment and take long remote working trips to Taiwan? That is, effectively live in Taiwan but still get paid as if you were living in you current country? You’d be liable.to pay Taiwan taxes if you stay here more than 90 days I believe, but I am not sure if you’d be subject to double taxation. And also not sure about National Health Insurance.

For the short term, anyway, could you not just keep your current regular employment and take long remote working trips to Taiwan?

In theory, that would work. But practically speaking, I would be liable to pay taxes back in my home country then. And they have one of the highest tax rates in the world (> 50% when including social insurances).

And I couldn’t even register a company because that one (no matter where in the world) would also become a tax resident of my home country requiring all kinds of bureaucracy and fees.

Another aspect to consider would be the “tax residence” of the foreign company.

Luckily, Taiwan does not seem to have CFC-rules in place which would make the foreign company a tax resident on Taiwan. However (see Corporate - Significant developments (PWC Taiwan) ):

The Income Tax Act was amended in July 2016 to include anti-tax avoidance rules in Article 43-3 (Controlled Foreign Company [CFC]) and Article 43-4 (Place of Effective Management [PEM]) of the Income Tax Act.
[…]
For PEM rules, under this new tax regime, if a foreign company meets all three criteria triggering the PEM definition, including (i) decision making location, (ii) record keeping and maintenance location, and (iii) actual operating location are all in Taiwan, the foreign enterprise will be deemed as having its head office in Taiwan and will be subject to tax assessment in accordance with the Taiwan Income Tax Act and other tax regulations. The Regulations Governing Places of Effective Management were announced by the Ministry of Finance in May 2017.

So in order to actually control a foreign company from Taiwan, at least “record keeping and maintenance location” have to be outside Taiwan in order for it not to become liable to pay taxes in Taiwan.

However, there is also this aspect ( Corporate - Taxes on corporate income ):

A non-resident company is taxed on income derived from Taiwan sources. A non-resident company with a fixed place of business (FPOB) or business agent in Taiwan is taxed similarly to a resident company (i.e. subject to filing of an annual CIT return based on the same CIT rate provided above). A non-resident company having no FPOB or business agent in Taiwan is subject to WHT at source on its Taiwan-sourced income

I think this means that having the owner of a foreign company permanently residing in Taiwan means that the foreign company has to file company income tax in Taiwan!

For me this means that I should either work self-employed or actually start a Taiwanese LLC.

PEOs in the US generally charge a fixed fee (e.g., $1000/yr/employee, https://justworks.com/pricing).

I wonder if there are companies offering technology solutions to create Taiwanese LLCs/Rep offices like clerky.com or gust.com in the US?

Hi there, just wondering, did you ever figure this out? I’m in a similar situation except I already have the LLC and such set up in the US, but I’m trying to figure out what the best setup is for 2022.

Currently looking into this again based on a post in another thread:

So starting from this year’s tax return in the next year, there will be taxation of CFCs in Taiwan. However, there’s an exemption for companies earning less than NTD 7 million.

I am not fully sure how exactly they will tax the CFC earnings, but from my understanding of that “poster” by the MoF it looks like this will be done as part of the basic income tax (formerly AMT).

Overall it sounds like that as long as one pays out enough salary and/or dividends from their overseas company to keep the profit under NT$ 7 million per year, there shouldn’t be anything to worry about under this new regulation. And even profits slightly over NT$ 7 million shouldn’t incur any additional tax if one is also paying tax on the salary in Taiwan (as the basic income tax is a minimum tax considering the total of all income and factoring in the taxes already paid).

And if someone really greatly exceeds NT$ 7 million in profit per year - well, I guess there should be some money left for paying the necessary taxes :wink:

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Isn’t this already in place since Jan 1 this year?

Didn’t see your post back then.

I went forward starting an OÜ in Estonia and paying myself a monthly salary which I then pay taxes on in Taiwan (as Taiwan-sourced income because the income is being earned while physically being in Taiwan). No issues about that with the tax office - apart from some back and forth as they would like to have a notarized payslip every year…

I don’t pay myself dividends because the tax rates of dividends in Estonia (20%) would be more than what I need to pay in Taiwan as income tax.

I do retain some earnings in my OÜ - but even with the new regulation this shouldn’t be an issue for “small amounts” as described in the previous post. (EDIT: Also, Estonia doesn’t actually seem to fall under the CFC rules as it isn’t a low-tax country from the point of Taiwan).

Regarding company tax: This doesn’t seem to be an issue if one doesn’t have any clients in Taiwan.

Yeah, sorry, I meant when filing taxes for 2023 in next year.

Some more detailed information:

There seems to be another restricting: The CFC rules only apply for companies in “low–tax burden countr[ies]” fulfilling any of those two rules:

  • Corporate income tax rate in the foreign country/jurisdiction is not more than 70 percent of the tax rate in Taiwan (20%*70%=14%)
  • The foreign country/jurisdiction imposes taxes on a territorial basis (does not impose taxes on income derived from offshore, or imposes taxes only after income is remitted back onshore).

EDIT: Low-tax countries seem to be the “usual subjects”. Notably, Hong Kong is included in the list. Nothing about Estonia, though :slightly_smiling_face:

Regarding filing taxes:

If the computed total CFC income for the tax filing household is less than TWD 1 million, then there is no need to report this income. If the current-year earning of a CFC is less than TWD 7 million, then there is no need to report this income. However, if there are a number of CFC’s and all CFC income for the tax filing household together exceeds TWD 7 million, then the full amount needs to be reported.

Also, once being taxes as CFC income, no need to pay tax on the distribution of dividends:

Computed CFC income shall only be taxed once. There is no need to report this income again in the year of dividend distribution, unless the amount distributed is higher than what has already been reported as CFC income.

EDIT2: Even more information

https://www.dot.gov.tw/Eng/singlehtml/en_214?cntId=dot_201901210002_214

EDIT 3: Another link:

The Income Tax Act was amended in July 2016 to include anti-tax avoidance rules in Article 43-3 (Controlled Foreign Company [CFC]) and Article 43-4 (Place of Effective Management [PEM]) of the Income Tax Act.

In general, profits retained at the CFC level, which is located in a low tax rate jurisdiction and without commercial substance, will be taxed in advance at the Taiwan parent company level. In the past, taxation of foreign investment income was deferred until the Taiwan parent company received dividend income. Going forward, qualified investment income will be deemed distributed and taxable in Taiwan in advance. The Regulations Governing Controlled Foreign Companies were announced by the Ministry of Finance (MoF) on 31 May 2017. On 14 January 2022, the Executive Yuan announced that the CFC Rules will come into force from 1 January 2023.

For PEM rules, under this new tax regime, if a foreign company meets all three criteria triggering the PEM definition, including (i) decision making location, (ii) record keeping and maintenance location, and (iii) actual operating location are all in Taiwan, the foreign enterprise will be deemed as having its head office in Taiwan and will be subject to tax assessment in accordance with the Taiwan Income Tax Act and other tax regulations. The Regulations Governing Places of Effective Management were announced by the Ministry of Finance in May 2017. However, the PEM taxation mechanisms have yet to take effect.

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Thanks for being German about it and researching all the details! Good luck to the tax office with untangling all the trading companies in Hong Kong and Singapore and their various levels of Taiwanese ownership.

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Thank you for this research!

If possible to confirm if I interpret this correctly… I receive dividends (less than 4M TWD) from a low tax juridiction (Singapore in my case). I guess and wouldn’t need to report that income next year since it’s under 7M exemption?

The CFC rules are (mostly) about retained earnings. Dividends should always fall under the basic income / AMT (overseas income), so they need to be reported if more than 1 million, but there is an exemption of 6.7 million.

So my understanding is that you would need to declare the 4 million dividends, but they should be tax free (if that’s the only income you receive). In addition, if your company retained more than 7 million, you will also need to declare that income which will be factored into your basic income, too.

So basically with the CFC rules, you won’t be able to just retain all your earnings in a low tax country without having to pay taxes anymore.

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Where did your ARC/work permit come from while you were doing this?

I have an Employment Gold Card which includes an open work permit.

See: The Employment Gold Card Super-Thread

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Is there also some scope for paying some allowances from the company to the employer (such as for meals, training, transportation, housing) in a tax free way?

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*edit: I meant allowances paid to EMPLOYEE