Taiwan to Cut Income Tax to Lure Foreign Professional Talent

By Yu-Tzu Chiu

Sept. 1— Taiwan is set to revise tax rules with plans to cut income tax for foreign professionals and ease their multinational employers' tax burden, the Cabinet said.

According to Kao Shien-quey, deputy minister of the Cabinet's National Development Council, the government has identified 27 priority areas for policy changes to attract more foreign professionals to Taiwan. She said Sept. 1 that some of the issues will be resolved through an overhaul of current taxes.

Kao said a number of foreign professionals have criticized Taiwan's high individual income tax rate. The top-tier 45 percent tax bracket in Taiwan is much higher than Hong Kong's 17 percent and 20 percent in Singapore, she said.

“The Ministry of Finance will soon come up with a proposal to revise tax rules, levying less income tax on foreign professionals at least at the first three years,” Kao told a news conference following a Cabinet meeting.

Timing Uncertain

However, Kao said, details of the amendment are unavailable, and it remains uncertain when the revision will be made.

The American Chamber of Commerce in Taipei urged the administration of President Tsai Ing-wen to reform its taxes to ensure Taiwan's economic health and competitiveness.

In a June white paper, the business group said Taiwan has had relatively high individual income tax rates and condensed tax brackets, resulting in a heavy tax burden as well as challenges in attracting talent.

Citing the lower income tax rate in both Hong Kong and Singapore, “As a result, both countries are more successful in terms of attracting international talent,” the report says.

Reviewing ‘Tax in Tax' Policy

Kao said the government also will review a much-criticized “tax in tax” policy applying to employers hiring foreign talent, which requires individual income tax to be treated as an employee's “salary income” pursuant to the 2010 tax ruling. AmCham Taipei said this leads to an extremely high tax burden for multinational companies who bring high-caliber international talent to Taiwan.

“For a three-year expatriate assignment, for example, the effective individual income tax rate could reach as high as 77 percent, and the longer the assignment, the higher the tax burden,” AmCham Taipei says in the report.

According to AmCham Taipei, the corporate income tax implications are even more onerous when taking into account the corporate income tax implications in cases where expatriates are hired out to Taiwan entities that act as a contract research and development provider, and would apply a cost-plus markup on such individual income tax payments for corporate income tax purposes.

“The amendment would be conducted in the near future as the tax reform directions to attract foreign talent are now clearly set,” Yi-hui Li, a senior tax administration official, told Bloomberg BNA September 1.

To contact the reporter on this story: Yu-Tzu Chiu in Taipei at correspondents@bna.com

To contact the editor responsible for this story: Penny Sukhraj at psukhraj@bna.com

Copyright © 2016 The Bureau of National Affairs, Inc. All Rights Reserved.