Taiwan Individual Overseas Investment Tax Guide
Taiwanese individuals who invest in overseas financial products or real estate must file an Alternative Minimum Tax (AMT) return if their total annual foreign-source income exceeds TWD1,000,000 and their basic income surpasses the exemption threshold (TWD 7,500,000 for the 2024 tax year). It is important to note that different types of income, such as capital gains and interest, are categorized seperately and cannot be aggregated for tax calculation purposes.
Taiwan’s comprehensive income is categorized into ten types (1) profit-seeking income, (2) income from professional practice, (3) salary and wage income, (4) interest income, (5) rental and royalty income, (6) income from self-operated farming, fishing, animal husbandry, forestry, and mining, (7) capital gains, (8) prizes or awards from contests, competitions, and games of chanes, (9)retirement income, (10) other income.
For example:
Mr. B filed his Individual Income Tax Return for 2023 and reported foreign-source income of TWD 6,200,000, calculated as TWD 7,700,000 in overseas interest income minus a TWD 1,500,000 loss from overseas capital transactions.
However, based on information obtained by the Taiwan National Taxation Bureau, his foreign-source income was reassessed at TWD 7,700,000. The reporting error occurred because Mr. B incorrectly offset a TWD 1,500,000 capital loss (a separate income category) against interest income, which is not allowed.
The Taxation Bureau recalculated his basic income by adding the TWD 7,700,000 in interest income to TWD 4,100,000 in other net comprehensive income, resulting in a total of TWD 11,800,000. After deducting basic exemoption in 2023 of TWD 6,700,000, the taxable base for the Alternative Minimum Tax (AMT) was TWD 5,100,000. Applying the 20% AMT rate, the basic tax liability was calculated as:
(TWD 11,800,000 – TWD 6,700,000) x 20% = TWD 1,020,000.
Since MR. B had already paid TWD 545,000 is regular income tax, the difference of TWD 475,000 was assessed as additional tax payable:
TWD 1,020,000 – TWD 545,000 = TWD 475,000
Another frequent and notable error involves the misreporting of prior-year foreign capital losses as deductions for the current year. For example:
Mr. A filed his Individual Income Tax Return for 2023 and reported TWD 0 in foreign-source income, based on a declared TWD 9,000,000 gain and a TWD 19,900,000 loss from overseas capital transactions.
However, according to information obtained by the Taiwan National Taxation Bureau, Mr. A was found to have underreported TWD 9,000,000 in foreign capital gains. The discrepancy arose because Mr. A mistakenly deducted a TWD 19,900,000 capital loss from 2022 against his 2023 overseas capital gains, which is not permitted.
The Bureau recalculated his basic income by adding the TWD 9,000,000 in capital gains to TWD 860,000 in other net comprehensive income, totaling TWD 9,860,000. After subtracting the 2023 basic exemption of TWD 6,700,000, the taxable base for the Alternative Minimum Tax (AMT) was TWD 3,160,000. Applying the 20% AMT rate, the basic tax liability was calculated as:
(TWD 9,000,000 + TWD 860,000 – TWD 6,700,000) x 20% = TWD 632,000
Since Mr, A had only paid TWD 51,000 in regular income tax, the difference of TWD 581,000 was assessed as additional tax payable:
TWD 632,000- TWD 51,000 = TWD 581,000
Foreign-source income has never been included among the items automatically retrieved through Taiwan’s electronic tax certificate download system. Whether accessed online or in person at a National Taxation Bureau service counter, such data cannot be automatically imported. Therefore, Taiwanese individuals must proactively declare their foreign income. Failure to do so may result not only in a tax reassessment but also in potential penalties if underreporting is discovered.
If a taxpayer identifies past inacuccracies in reporting, they may voluntarily gile an amended return and pay the tax and interest before the National Taxation Bureau initiaties an investigation or receives a third- party report. According to Tax Collection Act in Taiwan, doing so allows the taxpayer to avoid penalties, with only the tax and interest payable.
In addition, not all funds remitted from overseas to Taiwan are subject to taxation. For example, if the remittance is merely a movement of personal funds, such as the return of principal from a bank deposit and does not constitute income, then it is not taxable and does not need to be reported. However, if the remitted funds represent profits, such as income from stock trading or other financial investments, they may be considered taxable income and must be reported accordingly.
KNOWLEDGE
