Non-resident enterprises with no branch or PE in Taiwan are subject to withholding tax at source on Taiwan sourced income. Withholding taxes may be reduced for non-residents in jurisdictions with which Taiwan has a tax treaty.
Withholding Tax Obligations
Withholding taxes are to be remitted by the tax withholder, typically the payer in Taiwan, within 10 days of the end of the month in which the payments subject to withholding are made. In addition, the withholder must prepare withholding certificates and submit them to the Taiwan tax authorities by the end of January following the year in which the payments were made and given to the recipient of payments by the 10th of February.
Withholding Tax Refund
Non-resident enterprises with no PE in Taiwan that were subjected to withholding tax on Taiwan sourced income are allowed to appoint a tax agent in Taiwan who can lodge a claim for a tax deduction for costs and expenses incurred in relation to the income. A tax refund can be applied for within five years from the payment date.
Interest Tax
Taiwan levies a withholding tax of 20% on interest payments to non-residents. However, a 15% rate will apply for non-residents for interest derived from the following:
- Short-term bills
- Securitized certificates
- Corporate bonds
- Government bonds or financial debentures
- Interest derived from the repurchase of the above types
Withholding rates for nonresidents may also be reduced by relevant tax treaties.
Royalties Tax
Non-residents are subject to a withholding tax of 20% on royalties payments received, unless reduced by a tax treaty. However, non-residents may be exempt from royalties withholding tax if the intellectual property on which the royalties are paid is specially approved and registered in Taiwan in advance.
Services Tax
Payments for services are generally subject to a withholding tax of 20% if deemed Taiwan sourced, unless reduced by a tax treaty. However, subject to approval from the tax authority, a non-resident providing technical services may be taxed on a deemed profit of 15% on the total contractual amount, in which case income tax of 3% may be withheld (20% tax on 15% deemed profit).
Commissions Tax
Non-residents are subject to a withholding tax of 20% on commission payments, unless reduced by a tax treaty.
Rentals Tax
Non-residents are subject to a withholding tax of 20% for rentals, unless reduced by a tax treaty.
Dividends Tax
Non-resident enterprises are subject to a withholding tax of 20% on dividends received from Taiwan residents, unless reduced by a tax treaty. Effective from 1 January 2018, the withholding tax rate has been increased to 21%. The government has clarified that the increased rate applies for dividend and earning distributions paid from 1 January even if the vote to distribute took place earlier. Further, effective 1 January 2018, the credit for the retained earnings tax paid when dividends are distributed to foreign shareholders has been abolished. However, as a part of transition, credit is allowed for the retained earnings tax paid on dividends declared in 2018. The credit is calculated at 50% of the 10% retained earnings tax.
Capital Gains Tax
Non-resident are subject to a general withholding tax on capital gains of 20%. However, gains from the alienation of shares are generally exempt. Further, non-residents may be subject to a 35% rate for gains from alienation of immovable property acquired on or after 1 January 2016 (45% if held less than a year).
The following table shows the most up-to-date standard domestic withholding tax rates.
| Capital Gains |
0%
|
| Dividends |
21%
|
| Interest |
20%
|
| Royalty Copyright |
20%
|
| Royalty Patent |
20%
|
| Royalty Trademark |
20%
|
| Sales |
0%
|
| Service Management |
20%
|
| Service Technical |
20%
|
*Rates are current as of 19 March 2023