Terry was an engineer in USA and worked there physically, but owing to the global Covid-19 pandemic, each employee has no choice but work from home and selects their preferred working hours, so does Terry, so Terry got back to Taiwan working remotely and accustomed to this habitual working condition. However, should the payment received by Terry be counted as oversea income or Taiwan domestic income to proceed tax return in 2023?
First of all, we have to figure out if the taxpayer holds a household registration in Taiwan as well as enjoy the privilege of health and labour insurance or not. Supposed that such individual holds the household registration in Taiwan, we have to see if he/she would stay in Taiwan over 31 days or 90 days and his/her main source of income from Taiwan or not. One of the standards to judge is whether the spouse and children underage is the tax residents in Taiwan or not.
Under the circumstance that the individual stays at Taiwan less than 31 days and his/her main source of income outside of Taiwan, such individual is not counted as tax resident and qualified for exemption of withholding of wages.
However, if such individual stays at Taiwan more than 31 days or with household registration and enjoy the privilege of labour and health insurance, or his/her spouse and children underage are tax residents in Taiwan, he/she is deemed as a legal tax resident in Taiwan. Upon the tax return season, the oversea income once exceeds TWD 1,000,000, such income shall be listed as “oversea income” to proceed the individual income tax return (Alternative Minimum Taxation).
Under the circumstance that such individual stays at Taiwan more than 90 days, the wages from oversea country would be deemed as Taiwan domestic income and shall be combined with individual income tax to proceed tax return, instead of counting as oversea income (without the threshold under TWD6,700,000 for tax exemption).
As a result, is Terry obliged to proceed tax return at the next year? The answer is yes. Since Terry holds the household registration in Taiwan and stays at Taiwan more than 90 days, the wages received from US company shall be combined into Taiwan domestic individual income to declare on May 2023 without the application to threshold under TWD 6,700,000 for tax exemption.
On the other hand, Terry’s colleague Taiki is a Japanese citizen, is it necessary for him to proceed the tax return of wages from US company in Taiwan during the workcation period?
Since Taiki is a foreign resident, the obligation for taxation depends on the days he stays in Taiwan. If he provides labour services and stays at Taiwan less than 90 days, the obligation of taxation is not required. Instead, if the period of stay more than 90 days, the wages received from US company shall be declared in Taiwan and proceeded the withholding of tax before departure.
The workcation period for Taiki in Taiwan is 30 days, so the wages from US company are not required to declare, but if Taiki took any case within the territory of Taiwan, the income from Taiwan company to Taiki shall be counted as Taiwan domestic income, regardless of staying days. Such Taiwan company is also responsible for deduction of tax payment for Taiki.
Briefs as following table:
|Area||Taiwan Tax Resident||Taxation|
|(1) Household Registration||(2) Period of Stays||(3) Main Source of Income from Taiwan (Note)|
|Taiwanese||Yes||>1 day||Yes||Taiwan Tax Resident||Tax return in May|
|Yes||<31 days||N/A||Non-Taiwan Tax Resident||Tax return in May|
|Yes||<31 days||Yes||Taiwan Tax Resident||Tax return in May (listed as oversea income with TWD 6,700,000 amount of tax exemption)|
|Yes||Over 31 days (including the 31rd day)~ less than 90 days||N/A||Taiwan Tax Resident||Tax return in May (listed as oversea income with TWD 6,700,000 amount of tax exemption)|
|Yes||> 90 days (including the 90th day)||N/A||Taiwan Tax Resident||Tax return in May (listed as domestic income without TWD 6,700,000 amount of tax exemption)|
|Foreigner||N/A||< 90 days (including the 90th day)||Not Applicable||Non-Taiwan Tax Resident||1. Taiwan domestic company to pay at the basis of 18%
2. Oversea employer to pay- exempted.
|N/A||Over 90 days ~less than 183 days||Not Applicable||Non-Taiwan Tax Resident||1. Taiwan domestic company to pay at the basis of 18%
2. Oversea employer to pay- exempted.
|N/A||> 183 days (including the 183rd day)||Not Applicable||Taiwan Tax Resident||Tax return in May (or declare proactively by departure). The declared amount shall be included the wages from oversea employer.|
Note: The definition of “Main Source of Income from Taiwan” is dependent on each family and society, political culture and other activities and engagement, occupation, business location, property management place and other related factors. Please refer to the following comprehensive identification: