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3.1. Corporate Tax Residence

The residence of a company for Taiwan tax purposes is dependent upon its place of incorporation or the location of the company's seat (head office). A company which has been incorporated in Taiwan in accordance with Taiwan law or has its head office in Taiwan, is considered a tax resident.

Companies incorporated or with head office outside Taiwan but with a branch or other fixed place of business in Taiwan are not considered corporate residents.

Taiwan corporate residents are subject to tax on worldwide income. Regardless of residency, anyone who has Taiwan sourced income will be taxed on that income. Those with residency or with permanent establishment will be subject to corporate income tax, while those without will be subject to withholding tax. Those subject to withholding tax may have that tax reduced by tax treaties.

In 2016, Taiwan's Legislative Yuan approved the introduction of place of effective management rules for the determination of tax residency. Under these rules, foreign companies may be deemed to have their place of effective management, and consequently resident in Taiwan, based on the following criteria:

  • Key business decision makers reside in Taiwan or major business decisions are made in Taiwan (general management, financial management, and HR management);
  • Financial statements, accounting books and records, or board or shareholder meeting minutes are prepared or stored in Taiwan; and
  • Principal business activities are executed in Taiwan.

When a foreign company is deemed to have its place of effective management in Taiwan, it will be subject to tax on its worldwide income.

Although the Ministry of Finance has not announced an effective date, it is expected that the new rules will apply from 2018.