When an individual in Taiwan obtains dividends income, even though it would not be withheld in the income tax, it may be deducted for 2nd generation National Health Insurance (NHI) supplementary premium. If the taxpayer declares directly with the account credited amount, it may cause an omitted declaration and may face a penalty for supplementary tax payment.

For example, Mr. Cheng is a major shareholder of Company A, who received TWD618,610 as dividends in 2018. However, since the amount has reached the deduction threshold, an amount of TWD11,815 has been deducted as supplementary premium for 2nd generation NHI. The amount that Mr. Cheng actually received through bank deposit is TWD606,795.

A problem raised during the next tax return declaration. Since, Mr. Cheng did not receive a physical stub for the dividend’s payment due to digitalized working procedures, he revised the dividends amount to TWD606,795 according to his memory, which is different from the amount provided by the National Taxation Bureau, not knowing that it may cause an omission in tax return.

The Taiwan authority says, currently the dividends income distributed by Taiwan companies to Taiwan residents would not be imposed for income tax. However, according to “Regulations Governing the Deduction and Payment of the Supplementary Insurance Premium of the National Health Insurance” introduced by the Ministry of Health and Welfare, company acting as the tax withholder, when it issues the dividends, which the amount is over TWD20,000 in lump-sum, then a supplementary premium should be deducted on regulated proportion.

Mr. Cheng claims that the amount he actually received is TWD606,795 only, the income should be calculated according to that amount. However, after review and appeal, the final judgment still considers that the supplementary premium of TWD11,815 is part of the dividends income which is taxable.