Taiwan Withholding Tax Penalty Rules Update
The withholding tax system in Taiwan is a method of tax collection in which the “payer” of income deducts a prescribed percentage of tax from the payment made to the “recipient” of the income. The payer must then remit the withheld tax to the Taiwan tax authority on behalf of the income recipient within the required time period.
The entire withholding process can be easily remembered by the four key steps:
withhold, remit, report, and issue.
Withhold: when the withholding agent makes a payment of income, if the tax payable by the income recipient exceeds TWD 20,000, the agent must “withhold” the amount in advance according to the applicable withholding rate.
Remit: The withholding agent must complete the payment slip and “remit” the withheld tax to the Taiwan tax authority by the 10th day of the following month.
Report: Within the prescribed filing deadlines, January of the following year for Taiwan tax residents, or by the 10th day of the following month for non-residents, the withholding agent must “report” by submitting all completed withholding statements to the Taiwan tax authority and provide the withholding (or exemption) certificates to the income recipients as required.
Issue: The withholding agent must “issue” the withholding certificates to the taxpayers by the statutory deadline, which is February 10 of the following year.
In addition, when making any of the following types of payments, a Taiwan company must withhold income tax on behalf of the recipient at the time of payment: salaries, rent, commissions, royalties, prizes or awards from contests, competitions, or games of chance, retirement payments, severance payments, resignation payments, pensions, and remuneration paid to individuals engaged in professional or business activities.
The withholding tax rates for various categories of income are as shown in the table below (effective from January 1, 2026)
|
Category of Income
|
Resident
|
Non-resident
|
|
Salary
|
(1) 5%
(2) Based on the salary withholding tax table (with
a withholding threshold of TWD 88,501 starting in 2025)
|
(1)If the total monthly salary does not exceed 1.5
times the government-approved monthly minimum wage, the withholding rate is
6% (the monthly minimum wage is TWD 28,590, effective January 1,2025)
(2)18%
|
|
Rent
|
10%
|
20%
|
|
Commissions
|
10%
|
20%
|
|
Dividends
|
-
|
21%
|
|
Professional Service Fees
|
10%
|
20%
|
|
Interest
|
10%
|
20%
|
|
Royalties
|
10%
|
20%
|
|
Price or Awards from Contests, Competitions, or
Chance-Based Activities
|
10%
|
20%
|
|
Retirement Income
|
Withholding at 6% after
deducting the fixed exemption amount
|
Withholding at 18% after
deducting the fixed exemption amount
|
Effective January 1, 2025, Taiwan’s Income Tax Act has introduced relaxed provisions. For penalties related to failure to file withholding (or exemption) certificates and dividend statements in accordance with regulations, a range of fines with minimum and maximum limits will be applied, replacing the previous system of fixed rates or multiples.
The new system can further break down penalty amounts according to the severity of the violation, making enforcement more consistent with the principle of proportionality while also enhancing flexibility and fairness. In particular, it helps reduce or even waive penalties for minor violations. To align with the amended law, Taiwan’s Ministry of Finance recently revised the reference tables for penalty amounts or multipliers, which serve as the basis of discretionary decisions by the tax authorities, and simultaneously adjusted the standards for reducing or exempting penalties in minor cases.
For instance, if Company A pays TWD 140,000 in fees to an overseas company but fails to withhold the required taxes, it may voluntarily make the supplemental payment and submit the required filings. In such a case, the late filling portion may be exempt from penalty and only incur interest. However, because the withholding certificate was submitted past the deadline, a penalty would still apply.
If the supplemental filling is completed within 10 days after the deadline and the amount filed does not exceed 30% of the total amount that should have been reported, the penalty can be completely waived. If the filing is more than 10 days late but still completed before the end of January of the following year, the penalty may be reduced by half. In the example above, this would further lower the fine to TWD 2,800.
Kaizen also reminds taxpayers that if the same type of violation occurs more than three times within the same year, the penalty-reduction rules will no longer apply. The updated standards also explicitly exclude “voluntary supplemental filing and payment of underreported taxes” from being counted toward the number of violations. In addition, they clarify that “the same violation” should be limited to the same specific sub-provision of the tax law. For example, “failure to withhold tax” and “failure to file withholding certificates” fall under different sub-provisions and therefore should be counted separately, an important protection for taxpayers.
KNOWLEDGE
