Each country has its own set of differing regulations and processes when it comes to employee payroll processing and tax contributions. In Taiwan it is important for employers to ensure they comply with all social security schemes as well as ensure employees comply with the relevant tax laws. The tax laws for employers and employees in Taiwan consist of individual income tax, withholding tax, business tax and VAT. Let us explore the various payroll and tax contributions in Taiwan.
Both employers and employees are required to contribute to social security in Taiwan. An enterprise in Taiwan is required to make the following contributions to employees’ individual pension funds:
For Taiwanese employees: 6% of an employee’s total earnings.
For non-Taiwanese employees no pension fund payment needs to be made.
The National Health Insurance contribution is 4.69% of gross salary. Employers are responsible for contributing 60% of the premium, employees are liable for 30% of the premium and the remaining 10% is contributed by the government.
Labor insurance consists of:
Employers are responsible for making a contribution of 7%, while employees contribute 2% and the government contributes 1%.
An obligation is placed on employer to deduct income tax when salary or wage payments are made. A person’s liability to pay tax in Taiwan is determined by his/her residence status. A person would be considered a resident if they have remained in Taiwan for a period of 183 days or more in the period of one year since their arrival.
A person would be a non-resident if they have been in Taiwan for a period of less than 90 days in a calendar year. For an expatriate, if the remuneration is either paid by a Taiwanese enterprise or is charged back from a foreign employer to a Taiwan enterprise, a withholding tax rate of 18% will be deducted. However, there is no tax deducted if the compensation has been paid by a foreign employer and the compensation has not been charged back to a Taiwanese employer.
If a person has been in Taiwan for a period exceeding 90 days but less than 183 days, they will still be considered to be a non-resident. However, such a person would be liable for an 18% withholding tax to be deducted, after which a non-resident tax return can be filed, in order to recover the compensation.
A resident in Taiwan is subject to the following income tax rates (on a yearly basis):
It is important for employers in Taiwan to ensure that they account for the correct payments to be made towards an employee’s social security. It is of equal importance that an employer withholds the correct individual income tax and social security contributions of an employee. Employers are also obligated to issue pay slips to employees for each pay period. The pay slips must be kept for a period of 10 years and they may be issued online.
When it comes to payroll and tax in Taiwan, INS Global can help your company administer the monthly payroll. Our experts stay up to date with the relevant laws and regulations, to ensure your business remains fully compliant. INS Global can also assist your company in finding the right staff using our Taiwan recruitment services as well as hiring staff through our flexible Taiwan PEO solution. Contact us today and let our experts assist your business with all its HR needs.
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