FAQTaiwan Individual Income Tax Q&A 06
| Q: |
What is the standard for calculating rental income from the amount of cash advanced from the pawnshop and rental deposit in Taiwan? |
| A: |
The Article 14 of the Income Tax Act stipulates that if there are money received in the form of rental deposit or in other similar forms for lease of property, and for money received as the price of a lien created on property, to calculated the income from lease the prevailing bank interest rate for one-year-term deposit shall be used as a basis. (The interest rate for 2019 is calculated at 1.04% per annum). |
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Q: |
Lending out the houses to individual for use for free in Taiwan, does it levy on the individual income tax? |
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A: |
When the house is lent to others for business use, or used by doctors, accountants and other professional practitioners, or residential purpose. The taxation regulations are divided into the following two points to explain: Lending the house to others for business use or professional practitioner to use, although it is free for lending, it is still necessary to calculate the rental income and declare the individual income tax according to the local general rental situation. The “others” mentioned above refers to the individuals or legal persons other than the person himself/herself, spouse and direct blood relatives. Lending the house to other individuals for residential use, the lender should provide the free loan contract signed by both parties and the contract should be notarized by two persons other than both parties according to the notarization procedure. Otherwise, there is rental income should be calculated according to the local general rental situation and declare the individual income tax. |
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Q: |
When the shareholder lend their house to the company on use for free in Taiwan, is it levied on the individual income tax? |
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A: |
The shareholder of the company provides their own houses for the company’s business use, although there is no rental income or deposit, according to the Income Tax Act, the shareholder is still have to calculate the rental income according to the local general rent situation and declare it to the individual income tax. The subparagraph 4, category 5, paragraph 1, Article 14 of the Income Tax Act stipulates that “Income tax on revenue from lease calculated in accordance with the local prevailing rental standard shall be paid for properties lent to others for use, unless it can be verified that no payment is made and the properties involved are not being used for business or for carrying out professional services”. The “others” mentioned in the article refers to an individual or legal person other than the person himself/herself, spouse and direct blood relatives. |
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Q: |
How to levy Individual Income Tax when the agreed rent of a house rental is lower than the rent of the local general rent in Taiwan? |
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A: |
When the rent agreed by the house rental is obviously lower than the local general rent. The National Taxation Bureau can refer to the local general rent and adjust it to calculate the rental income. The “local general rent” mentioned above is the rent approved by the Ministry of Finance after the investigation by the National Taxation Bureau. The calculation is as follows: If the house is for residential purpose, the local general rent for the whole year is the assessed present value multiply the designated rate approved by the Ministry of Finance. For the non-residential purpose of use, the local general rent is determined in consideration of specific circumstances, which based on the “Annual Non-residential Houses Local General Rental Income Standards”, the surveys of local rental conditions. After deducting 43% of the necessary expenses, the net amount is the rental income. |
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Q: |
Regarding to the rental income under the Housing Act in Taiwan, how does it levy on the Income Tax? |
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A: |
Rent their house to a person who receiving rental subsidies from the competent authority in accordance with the Article 15 of the Housing Act or the social housing provider of the Article 23 of the same Act. There is an exemption TWD 10,000 per house of each month from the rental income obtained during the period of rent of house. If it exceeds TWD 10,000, the remaining amount of exceeding amount after deducting the necessary losses and expenses shall be the rental income. The necessary losses and expenses shall be listed item by item. If the owner cannot provide evidence item by item, the standard of necessary loss and expense is 43% of the taxable rental income. However, if the renting of house meets the requirement of Article 23 of the Housing Act for social housing, the standard of necessary loss and expense is 60% of the taxable rental income. |
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