The Ministry of Finance yesterday unveiled guidelines for a planned levy on income earned overseas, saying the tax will have little impact on capital repatriation because of its high thresholds.
Starting Jan. 1, all domestic and foreign residents with incomes including capital gains earned abroad and exceeding NT$1 million (US$308,000) a year will be subject to a 20 percent minimum income tax if they fail to meet exemption requirements, Deputy Minister of Finance Chang Sheng-ford (張盛和) told a media briefing last night.
“Only personal income exceeding NT$6 million, including that earned in Taiwan, will be taxed,” Chang said. “However, taxpayers who already pay income taxes upward of 20 percent will be spared from the new tax.”
Under the plan, overseas income includes salaries, rentals, dividend payments and equity investment gains.
People who have paid a tax on their overseas income in other countries can deduct the amount from the tax from the amount to be taxed in Taiwan, the ministry said.
Many people have voiced concern the next tax would halt or inhibit capital return from Taiwanese businesspeople in China, which would be at odds with the government’s effort to foster economic growth or turn the country into a regional asset management hub.
Chang dismissed the concerns, saying the new tax would not apply to incomes earned in China because that income would come under cross-strait rules. For tax purposes, however, Hong Kong and Macau would be considered foreign territory, he said.
“The levy is designed to uphold the principle of fair taxation, but it may paradoxically facilitate capital return as it will make overseas investment less attractive,” Chang said. “It is not unreasonable to make people earning more than NT$6 million a year pay a minimum income tax.”
He declined to speculate on how much the government thinks it will take in from the new tax, saying it was difficult to track overseas income in the first place.
The new tax will not apply to investments made prior to its implementation, Chang said.
Last year, 1,616 individuals paid a total of NT$1.6 billion in minimum income tax, while 1,002 firms paid an extra NT$9.3 billion, the ministry’s statistics show.
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