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Taiwan Individual Income Tax Q&A 27

Q: Why does Taiwan implement Alternative Minimum Tax?
For a long time, Taiwan has adopted various tax deduction and exemption measures in order to achieve specific economic and social goals. As a result, the scope of reductions and exemptions has gradually expanded, and the benefits have been focused on a small number of taxpayers, making the fairness of taxation questionable.
2. A comprehensive review and amendment of outdated tax reduction and exemption regulations is the fundamental way to solve the problem.
3. With reference to international experience, such as the practice of the United States, South Korea, Canada and establish an Alternative Minimum Tax system, so that legal entities and individuals who pay lower income tax burdens or even tax exemptions under the applicable tax reduction and exemption regulations bear at least a certain proportion of income tax, which moderately alleviate the unfairness caused by excessive application of tax reduction and exemption regulations, and make up foe the shortcomings of the current system.

What are the legislations for the Alternative Minimum Tax? Since when it was imposed?
In order to implement the Alternative Minimum Tax, Taiwan legislated the Income Basic Tax Act, which was formed on 28 December 2005 and came into effect on 1 January 2006.

Who are the implementation targets of the Alternative Minimum Tax?
The implementation targets include profit-making businesses and individuals.

Why does Alternative Minimum Tax implement on individuals?
Considering that high-income individuals avoid paying for income tax through in-kind donations is becoming more serious, implementing Alternative Minimum Tax on individuals can achieve a moderate income redistribution effect.

Why does the applicable threshold of the Alternative Minimum Tax been set on TWD 6.7 million?
The Alternative Minimum Tax is applicable to individuals who have very high incomes but are completely tax-free or have very low tax burdens due to carious tax reductions. Therefore, the applicable threshold for individuals is set at TWD 6.7 million, so that those whose declared income is lower than the amount would not be affected by the Alternative Minimum Tax and the threshold amount is adjusted in line with the consumer price index.