Taiwan Employee Unemployment Income

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In regards to if the unemployment income received by Taiwan employees should be charged with taxes or not, first of all, we have to understand whether such income is “One-off Payment” or “Instalment”.

 

The unemployment income is counted as separation pay, including retirement pension, severance pay, separation pay, lifetime pension, non-insured old-age pension and so on, which are privileged to benefit the tax exemption/

 

For the unemployment income, the provisions and examples of the fixed allowance in 2023 are as follows:

 

  1. One-off Payment

    First stage: if the lump sum is less than NT$ 188,000 multiplied by the length of service, the income will be 0.Second stage: if the amount exceeds NT$ 188,000 multiplied by the number of years of retired service, and the amount is less than NT$ 377,000 multiplied by the number of years of retired service, half of it shall be regarded as income.

    Third stage: the amount of more than NT$ 377,000 multiplied by the length of retired service is all income.

    For Example:

    Mr. Chen was 25 years old and retired from the company in 2022. If Mr. Chen chooses to receive a lump sum of 8 million in TWD, his taxable retirement income in that year is 1.65 million in TWD (first stage 0 +second stage 1.65 million in TWD). The calculation is as follows:
    The first calculation: NT$ 188,000 times 25 years = 4.7 million in TWD, and the income is 0.
    The second calculation: NT$ 377,000 multiplied by 25 years = 9.425 million in TWD, 8 million in TWD minus 4.7 million in TWD = 3.3 million in TWD, half of 3.3 million in TWD = 1.65 million in TWD, and the income is 1.65 million in TWD.
    Third stage calculation: not applicable.

 

  1. Instalment Payment

    For those who receive retirement income by stages, the income shall be the balance of the total amount received in the whole year after deducting NT$ 814,000.For example:

    Mr. Chen was 25 years old and retired from the company in 2022. If Mr. Chen chooses to receive a retirement pension of 8 million yuan at a time and 80 thousand yuan every month after calculation, his annual taxable retirement income will be NT$ 146,000. The calculation is as follows:
    Total amount received in the whole year: NT$ 80,000 *12 months = NT$ 960,000.
    Annual income: NT$ 960,000-814,000 = NT$ 146,000.

 

Kaizen reminds that when Taiwan Company issues a withholding voucher, it is necessary to check whether the tax-free amount has been deducted and then issued to the employee in net amount. Therefore, taking the above example as an example, the amount of the withholding voucher that Mr. Chen got will see 1.65 million in TWD. However, when many individuals declare personal comprehensive income tax, they directly put the “total payment” at 1.65 million in TWD, but the correct amount should be 8 million in TWD. If it is set at 1.65 million, the tax allowance will be deducted again, which will lead to underreporting of income. If employees find this situation themselves, they can quickly put forward corrections. According to the provisions of Article 48-1 of Taiwan Tax Collection Law, taxpayers will automatically make up the tax to the tax collection organ and pay back the missed tax without reporting or investigation by the tax collection organ or the investigators designated by the Ministry of Finance and may be exempted from punishment by adding interest.

 

As for the legacy fee mentioned at the beginning, it is assumed that a person with a monthly salary of NT$ 80,000 and 18 years’ service is left behind. According to the provisions under the new pension system of Taiwan Labor Standards Law, he can get a legacy fee of NT 480,000, and the income of NT$ 480,000 is 0 (first stage 0).

 

The first calculation: NT$ 188,000 times 18 years = 3.384 million in TWD, and the income is 0.

Second stage calculation: not applicable.

Third stage calculation: not applicable.

 

At present, employees who apply to the new 6% pension system have an upper limit of legacy fees, and the upper limit is the maximum monthly salary of six months. Therefore, in most cases, employees do not need to pay taxes on unemployment income.

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