Tax Regulations for Start-Ups Follow Up

Presenter behind FutureWard podium speaking to an audience

Last Tuesday night (4/23) we attended Workshop #3 ‘Tax Regulations for Startups’ in FutureWard’s “How to Set Up a Business in Taiwan” series. This event was hosted by Tony Tsai of Chengda. The presentation aimed to illuminate issues surrounding corporate and personal tax for foreigners and their respective businesses.

How to Set up Your Company in Taiwan

The presentation began with a brief outline and timeline of setting up a business in Taiwan. On average, it takes at least 3 weeks to set up a company. Of course, the hassle-free way to do this is to consult a CPA who will process all your paperwork and documents.

One excellent tip was to make sure to open a company account with the bank that you do your personal banking with: this ensures that there is less paperwork and that your records and credit records can pass over seamlessly.

Refer to the steps below and the slide to double-check that you have the correct documents in place:

  1. Prepare Foreign Documents (notarised if applicable)
  2. Apply For Your Branch Name (your CPA can pick a suitable Chinese name)
  3. If Applicable, Apply For Special Permissions
  4. Recognition Of The Foreign Head Office
  5. Open Company Bank Account, Then Remit Money
  6. If Applicable, Time To Get The Special Permissions You Applied For In Step 2
  7. Show The MOEA The Remittance Papers As Proof That You Have Sent The Money And They Will Issue You A Tax Number.
  8. Application To The City Government To Register The Branch Office As A Tax-Paying Unit.
  9. If Applicable, Apply To Bureau Of Foreign Trade, MOEA, For Importer/Exporter English Name Reservation
  10. If Applicable, Apply To Bureau Of Foreign Trade, MOEA, For Importer/Exporter Registration
  11. Apply For Health and Labor Insurance

A graphic showing the process for geistering a company in Taiwan

Taxation on running a business in Taiwan

Tony started off by stating that for support in English by highly-trained staff, it is advisable to go directly to the National Taxation Bureau of Taipei situated on Zhonghua Road, No. 2, Section 1, Zhonghua Road, in Wanhua District. Once inside you will spot two counters dedicated to helping foreigners with corporate taxation issues and personal tax.

Taking effect from 1 January 2018, the Corporate Income Tax (CIT) rate in Taiwan is 20%. However, for profit-seeking entities with less than TWD 500,000 in taxable income, the CIT rate is 18% in 2018, 19% in 2019, and 20% in 2020 if taxable income exceeds TWD 120,000.

Tax breakdown graphicTax3Tax breakdown graphic

*Surtax is very specific – it is aimed at the profit earned in the previous year. For instance, any unused profits from your company in 2018 will be charged surtax. Therefore, to avoid paying surtax make sure that your profits are divided up correctly (salaries, reinvested into the company) and that you have the correct paperwork recording them. As a foreigner, it can get complicated to keep track, so Tony reiterates his recommendation that you find a CPA who knows the ins and out of your company – especially since the CPA has to file your VAT every two months.

Networkers at the event

Social Insurance

So what are your social insurance obligations if you hire a local employee?

Social insurance is calculated as a percentage of salary – thus, it all depends on the salary you pay. As a rule of thumb, employers can expect to pay 15-25% of their salary as the company contribution to social insurance. Pension is fixed for all employees at 6% of the employee’s salary.

Taiwanese Invoices

It is important to note that corporate invoices are completely different from standard invoices or receipts you get from shopping in supermarkets or shops. The Taiwan Invoice needs to be done by your CPA and must have the Taiwanese Company ID. Please see the example below:

An example of a Taiwan corporate tax invoice

Note: if there is no registered Taiwanese Company ID on the invoice, you will be fined $2,000 NTD. In addition, for any corporate transactions please be reminded that in Taiwan the Price on the invoice = Sales Revenue + VAT.

We thank Tony for his concise and succinct presentation. This event concludes a highly informative and useful series from Futureward- please check our previous Follow-up blogs.

This event coverage is brought to you courtesy of an agreement between All Hands Taiwan and FutureWard.

 

 

 

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