Taiwan tax: Residents' overseas income subject to AMT from 2010

The Taiwan Executive Yuan announced on 15 September 2008 that the alternative minimum tax (AMT) will apply to an individual's overseas income as from 1 January 2010, and on 22 September 2009, the Ministry of Finance announced detailed instructions for reporting and filing the overseas income. Although the inclusion of overseas income will increase the AMT burden, the respective foreign tax paid may be used as a credit for AMT payable, within certain limitations.

Individuals who are tax residents in Taiwan with AMT taxable income of more than NTD 6 million may be subject to a 20% AMT. The AMT payable will be the balance of AMT after deduction for income tax payable and any foreign income tax credit. An individual is tax resident in Taiwan if he/she is domiciled in Taiwan or stays in Taiwan for 183 days or more in a calendar year. Thus, the AMT may apply to an expatriate who is a tax resident in Taiwan.

If an individual has to file the AMT return, he/she will be required to add the following items to net taxable income calculated under the general tax rules to determine the AMT taxable income:
- Non-cash charitable contributions;
- Qualified insurance benefits;
- Capital gains attributable to sales of unlisted stock in Taiwan; and
- Overseas income totaling NTD 1 million or more.

Except for overseas income, other items have been included in the AMT since 1 January 2006. Overseas income less than NTD 1 million will be excluded from AMT base.

All expatriates in Taiwan should pay attention to the Taiwan AMT impact on overseas income received while the expatriate is considered a tax resident in Taiwan.

Although the regulation has been announced and will be effective from 1 January 2010, there are lobbying efforts against the regime, so affected taxpayers should monitor the AMT situation closely.