TAX NEWS - DECEMber 2009

Taiwan Tax: Alternative minimum tax (AMT) to apply to overseas income of residents as from 2010

The Taiwan alternative minimum tax (AMT) will apply to the overseas income of resident individuals as from 1 January 2010 and the government has issued detailed instructions for reporting and filing the overseas income.

Individuals who are tax resident 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 a 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 expatriates in Taiwan if they qualify as residents.

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 shares in Taiwan; and
- Overseas income totaling NTD 1 million or more.

Except for overseas income, the other items have been included in the AMT since 1 January 2006. Although the inclusion of overseas income will increase the AMT burden, the foreign tax paid may be used as a credit for AMT payable, within certain limitations.

Expatriates in Taiwan should be aware of the impact of the Taiwan AMT on overseas income received during the time the individual is considered a tax resident in Taiwan.