TAIWAN Law and Practice Contributed by: Lihuei Mao, Dennis Yu and David Tien, Lee and Li Attorneys-at-Law
9. Tax 9.1 Taxation of Business Activities Corporate Income Tax
of reciprocal countries may be updated by the Taiwan Ministry of the Interior from time to time. In Taiwan, in a land and building sale, the titles to the land and building are transferred to the buyer only when such titles are duly registered under the name of the buyer with the local land office. The use of the land and building is subject to the zoning rules and occupancy permit-related regulations, respectively. Furthermore, generally speaking, a foreign investor is not subject to an FIA for its acquisition of real estate in Taiwan – unless the purchase price of the real estate is funded through either: • an equity contribution by the foreign investor into its Taiwanese company; or • a shareholder loan of one year or longer extended by a foreign shareholder to its Taiwanese company. Foreign Exchange Regulations Under the current foreign exchange control laws and regulations in Taiwan, cash dividends declared and payable on the shares of a Taiwanese company or the cash earnings of a Taiwanese branch may be convert - ed from New Taiwan dollars into foreign currency and transferred out of Taiwan to a foreign shareholder or the foreign headquarters freely without any additional Taiwanese government approvals relating to foreign exchange, as long as such foreign shareholder or for - eign headquarters maintains its status as a foreign investor as approved by the DIR or the MOEA. The Taiwanese company or branch only needs to present the required documentation to the wiring bank in order to initiate the wiring of cash dividends or earnings, According to the Negative List, which sets forth the sectors in which foreign investment is either restricted or prohibited, and the Positive List, which sets forth the sectors in which PRC investors are permitted to invest as promulgated by the DIR, the DIR’s review standards and intensity of scrutiny will vary according to the subject investment industries/sectors. See 1. Legal System and Regulatory Framework for further information. which is a straightforward process. Specific Industry/Sector Restrictions
Corporate income tax is levied at a flat rate of 20% of total taxable income. Taxable income of up to NTD120,000 is exempt from corporate income tax and corporate income tax may not exceed one half of the portion of taxable income that is more than NTD120,000. Alternative Minimum Tax (AMT) AMT is imposed on the tax-free capital gains from securities trading, among other tax-free income. Where the AMT amount (with an exemption for basic income of NTD600,000 per annum) is in excess of the ordinary income tax amount calculated in accordance with the Income Tax Law, the difference is subject to AMT at a rate of 12%. In addition, with the OECD’s introduction of Pillar 2, it is expected that the Global Anti-Base Erosion Rules will be enforced in 2024. In light of the OECD pillars, even though Taiwan is not a member of the OECD/G20, the Ministry of Finance has closely monitored the latest developments in interna - tional taxation. Starting from 2025, the AMT rate will increase from 12% to 15% for those multinational corporations whose annual revenue in their consolidated financial statements for any two of the previous four fiscal years amounted to EUR750 million. The Ministry of Finance took the practical experiences of other countries into consideration in analysing the feasibility and the inter - related facilities of the increase in the AMT rate. Surtax on Undistributed Earnings A 5% surtax on undistributed earnings is imposed on any current earnings of a corporation that remain undistributed by the end of the following year. Taiwan - ese branches of foreign companies are not subject to this 5% surtax, however. VAT Sales of goods or services within the territory of Tai - wan are subject to 5% VAT.
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