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 
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.
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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
I don’t think so. That’s not very common in Taiwan as it is in some other countries. Pretty much every kind of allowance is taxable, so most companies just pay salary.
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I think food/meal allowances are very common, no?
See also this thread:
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Not sure how that would work with coming from an overseas company, though. I guess it would cause at least some discussions with the tax office.
Personally, I just reimburse myself / let the company pay for travel expenses to customers and for IT equipment (work laptop, ….) and that’s it.
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This. Another was is to pay yourself dividends and I believe NT$200k paid in dividends is tax free.
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There are some options, but they’re limited. E.g. if the employee is not a resident you can reimburse rent, but only rent, i.e. it’s not really an “allowance”. Meal costs have caps etc. There’s also specific requirements on the accounting and paperwork side.
The hints I got from the accountant were that it was much easier to make everything a business expense and just be prepared to apologize if ever audited. I.e. that’s how everyone else does it.
Haven’t decided yet how comfortable I am with that! 
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That’s for companies registered in Taiwan, isn’t it? Dividend payments from overseas companies should fall under the IBT/AMT and have an exemption somewhere around 6.7million.
Of course, in case of overseas companies, one might also need to pay taxes on profits in another country while a salary paid to oneself in Taiwan should usually be deductible as a business expense. So it depends on many factors whether a salary or a dividend (or maybe a mix of both) is the most tax-efficient way to pay oneself. Generally speaking, with increasing profits, dividends become more attractive though (personally, I haven’t reached that point though).
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Yeah, that might be an “unofficial” reason why incorporating in Taiwan might be a benefit compared to starting a business overseas 
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Really? I’ve never heard of it. So, when a Taiwanese tells me they make $40k, does that usually mean they make $40k plus the food allowance?
I thought it was quite standard to include it in the stated salary in job ads and stuff, so NT$40k including the food allowance. I don’t think I’ve ever asked a Taiwanese person what their salary was though, but I’d guess they just say the gross amount on their payslip each month.
I assume it’s tax-free (otherwise I don’t know why they’d bother). I’ve sometimes wondered whether it counts as income for the purposes of APRC applications and stuff, but I’ve never tried to check.
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