TAX NEWS - January 2010

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Taiwan: Updated personal tax exemption, tax deductions and applicable tax rate for 2010 individual income tax


To attract foreign professionals to Taiwan and reduce their relevant tax burdens, the Taiwan tax authority has reduced the individual income tax rate for certain tax brackets and also increased the personal exemption and deductions amounts.

The progressive tax rates for a resident individual in 2010 are as follows:

Net Taxable Income (NT Dollar)    Tax Rate       Progressive Difference
From To
0 500,000                                        5%                        0
500,001 1,130,000                          12%                    35,000
1,130,001 2,260,000                       20%                   125,400
2,260,001 4,230,000                       30%                   351,400
4,230,001 Up                                  40%                   774,400

The updated exemption and deductions for 2010 Taiwan Individual Income Tax are as follows:

                            (NT Dollar)
Personal Exemption         Taxpayer, Spouse and Dependent:                  82,000 (per person)
                                     Lineal Ascendant who is over 70 years old:     123,000 (per person)
Standard Deduction         Single:                                                          76,000
                                     Married couple:                                            152,000
Special Deduction for Salary or Wages*                                               104,000 (per earner)
Special Deduction for Disability                                                            104,000 (per person)
Special Deduction for Tuition                                                                 25,000 (per student)

* A deduction amount equivalent to the full amount of salary can only be claimed if the total amount is less than the maximum deductible amount.

In addition, the Ministry of Finance has relaxed the withholding tax rates on certain income as listed below, taking effect from January 1, 2010:

Item of Income                                                                      Residents         Non-residents
Salary                                                                                        6%                     18%
Interest from Bank                                                                     10%                     20%
Interest from short-term commercial papers, governments            10%                     15%
bonds, corporate bonds, and financial bonds
Interest from income from transactions in structured                     10%                     15%
products and interest on securitized products
Dividend                                                                              Notapplicable              20%*

* Regardless of whether or not the investment has been approved by the Investment commission, Ministry of Economic Affairs.

The length of an expatriate's stay in Taiwan in a calendar year is the key factor to determine their residency and filing requirement. Thus, for the high-income expatriates, they may consider controlling their length of stay in Taiwan to be less than 183 days so that they can apply for the flat tax rate at 18% for their salary Income sourced from Taiwan. On the contrary, for the low-income expatriates, to be taxed as the tax residents may be more beneficial to them because progressive tax rate lower than 18% is applicable and the personal exemptions and deductions are also available.

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