Our guide to Payroll in Taiwan

Doing Business in Taiwan

Investing in Taiwan

Taiwan’s Government encourages inward investment to continue to strengthen the economy, with specific incentives aimed at development zones.  Taiwan is recognized globally as having a strong entrepreneurial nation and having invested in the development of advanced production processes and manufacturing efficiency.

Foreign and local investors are treated equally and are both eligible for investment incentives.

Basic Facts about Taiwan

 

How to Say

• Hello: 你好 (nǐhǎo)
• Good Morning: 早上好 (zǎoshànghǎo)
• Good Evening: 晚安 (wǎnān)
• Do you speak English?: 你會說英語嗎? (nǐ huì shuō yīngyǔ ma?)
• Goodbye: 再见 (zàijiàn)
• Thank you: 謝謝 (xièxiè)
• See you later: 回头见(huítóujiàn)

Registrations and Establishing an Entity

The company is required to have a legal entity established in order to process a payroll.

Certain documents and procedures must be adopted and submitted to the government.  It normally takes about three to four weeks for the registration process to be completed.

Taiwan Company (Subsidiary) Registration Procedures:

• Application to Department of Commerce, MOEA to reserve a company name
• Application to Investment Commission of MOEA, SPA or EPZA (based on location of the invested company) for approval of foreign investors
• Application to Investment Commission of MOEA to examine and certify foreign equity investment
• Application to relevant authorities for approval of company registration
• Application to local authorities for business license

Banking

It is mandatory to make payments to employees and third-party authorities from an in-country bank account.

Working Week

The working week in Taiwan is Monday to Friday. The working day for commercial offices is typically from 0900 to 1800.

If an entity is newly established, an initial registration for both employer and employee to participate in Social Security Schemes will be required. Subsequent to the initial registration, enrolment or termination of Social Security will be required whenever an employee is newly hired or terminated.

Income Tax

The employer is required to deduct withholding tax when salary related payments are made to the employee.

A resident’s net taxable income is taxed at graduated rates ranging from 5% to 40%. The maximum tax rate is currently 40% on net taxable income earned over 4,980,001(5,190,001) New Taiwan Dollars (TWD). For non-residents subject to tax in Taiwan, the applicable tax rate for the salary income will be fixed at 18% of gross salary income.

Resident withholding tax contributions are to be paid by the 10th of the month following the month that the salary is paid. The withholding tax statement is to be filed by January 31st in the following year for the year covered. Interest surcharge will be imputed for late payment of withholding tax and a penalty will be levied for late filing of a withholding tax statement.

Non-resident contributions for withholding tax and filing for withholding tax statement are to be paid and filed within 10 days following the month the salary is paid. Interest surcharge will be imputed for late payment of withholding tax and a penalty will be levied for late filing of a withholding tax statement.

Calculation Example

For regular monthly taxable income, withholding tax is deducted based on the statutory withholding tax table released by the government.  The main factors to determine the withholding tax are the amount of monthly taxable income and number of dependents. 

Social Security 

Labor Insurance

The types and benefits of Labor insurance coverage are categorised as the following:

• Ordinary insurance: There are five different kinds of benefits which are maternity benefits, injury or sickness benefits, disability benefits, old-age benefits and survivor benefits.

• Occupational accident insurance: There are four kinds of benefits which are injury and sickness benefits, medical-care benefits, disability benefits and survivor benefits.

The insurance premium of labor insurance is calculated using the insured person's monthly insurance salary and insurance premium rate. The current premium rate of labor insurance is 11% and the premium rate for employment insurance is 1%. The OI will change from 11% to 11.5% in year 2025.

 

National Health Insurance

The National Health Insurance program is compulsory for all citizens in Taiwan. Every Taiwanese citizen with official residency or foreign national living in Taiwan with an Alien Resident Certificate (ARC), regardless of age, gender, or employment status, must enrol in the program.

The Insurance Premium Rate: 5.17% since January 1, 2021 and is calculated based on the monthly income they report to the National Health Insurance Administration.

For supplementary NHI, the employer will need to pay the supplementary premium when total monthly taxable income exceeds total monthly-insured cap.  Further, the employer will be required to deduct 2.11% supplementary NHI, if the accumulated amount of bonus paid during a Tax Year exceeds four times of NHI insured cap of the employee to whom bonus is paid.

Labor Pension

The Labor Pension System refers to the system under which an employer is legally obligated to provide retirement pensions to a worker. There are currently two systems in place—an old pension system and a new pension system.

Old-Age Pension – This is a scheme outlined in the Labor Standards Act. Under the old system, every month, an employer contributes a sum that amounts to 2% to 15% of a worker's monthly wage.

Labor Pension Act- The Labor Pension Act came into effect on July 1, 2005.  Under this system, the employer contributes 6% or more of a worker's monthly wage.  

Social Security payments are to be paid to authorities by the following dates:

Labour Insurance – 30th of the following month

Health Insurance – 15th of the following month

LPA – 25th of the following month

Interest surcharge will be imputed for late payment of Social Security contributions.  

Reporting

W/H Tax Payment Slip 

For W/H Tax Payment Slip the following information is required:

• Employer’s Name

• Tax ID

• Address

• Taxable Income

• W/H Tax

• Number of Employees

Social Security Enrolment and Termination Forms

For social security enrolment and termination forms, the following information is required:

• Employer’s Name

• Insurance No

• Tax ID

• Employee Name

• Birth Date, Insured Cap

• Effective Date

• Dependents Name

• Birth Date

• ID No

A signature is not required on these documents, however, for social security, the company’s stamp and responsible person’s stamp will need to be affixed on the form. In Taiwan, this type of stamp is called a ‘chop’.

All documents can be submitted either by the payroll provider or by the client.

Payroll

Reports

Payroll reports must be kept for at least 10 years.

Payslip Example

It is legally acceptable in Taiwan to provide employees with online pay slips.

Local language example: 

New Starts

New employees have to be registered with Social Security authorities. There are no regulations clearly stating the deadline for the employee to be registered with authorities; however, they should be registered at the on-boarding date.

For setting up a new start, the following information is required:

• Employer’s Name

• Insurance No.

• Tax ID

• Employee Name

• Birth Date

• Insured Cap

• Effective Date

• Dependents Name

• Birth Date

• ID No. 

Leavers

Payment for leavers must be made within 30 days subsequent to the termination of employment.

For voluntary termination, the employer needs to file termination of social security with authorities.

For involuntary termination, the employer needs not only to file termination of social security, but also report to the government of redundancy with reasons for employee’s termination.

Holiday Accrual / Calculations

A worker who continues to work for the same employer or business entity for a certain period of time shall be granted special leave on an annual basis on the following scale:

• 3 days for service of 6 months or more but less than 1 year

• 7 days for service of 1 year or more but less than 2 years

• 10 days for service of 2 years or more but less than 3 years

• 14 days for service of 3 years or more but less than 5 years

• 15 days for service of 5 years or more but less than 10 years

• 1 additional day for each year of service over 10 years up to a maximum of 30 days

Employees on annual leave shall receive full pay.

Maternity Leave

Maternity leave entitlement is up to eight weeks with full pay after the birth. Where a female employee is pregnant for less than two months but experiences a miscarriage, she is to be given five days of maternity leave. Employees who suffered miscarriage after three months of pregnancy are entitled to four weeks of maternity leave.

The computation of wage during the maternity period shall be in accordance with related laws and regulations. When pregnant employees are diagnosed by a physician as needing to recuperate, their leave-taking and wage during the period of medical treatment, care, or recuperation, shall be in accordance with related laws and regulations.

During an employee’s term of pregnancy, their employer shall grant them five(Seven) days of leave for pregnancy checkups.

When an employee’s spouse is in labor, their employer shall grant them five (Seven)days off as paternity leave.

During the maternity period, employees with at least six months of service are entitled to full pay (paid by Employer). Employees with less than 6 months of service are entitled to 50% pay.

Paternity Leave

Male employees in an organization with more than five employees are entitled to 7 days paid paternity leave for the birth of a child.

Sickness

Where an employee is required to be treated medically or to rest for injury, sickness or medical reasons, the employee may take sick leave pursuant to the provisions below. Where the aggregate number of days of sick leave taken in a year does not exceed 30 days, half-wages must be paid. 

• Where the employee is not hospitalized, the aggregate number of permitted days of sick leave may not exceed 30 days in a year.

• Where the employee is hospitalized, the aggregate number of permitted days of sick leave may not exceed one year within a period of two years.

• The aggregate number of permitted days of sick leave for non-hospitalization and hospitalization may not exceed one year within a period of two years.

• A female employee having difficulties performing her work during menstruation period may request one-day menstrual leave each month. If the cumulative menstrual leaves do not exceed three days in a year, said leaves shall not be counted toward days off for sick leave. All additional menstrual leaves shall be counted toward days off for sick leave. Wages for menstrual leaves, whether said leaves are sick leaves or non-sick leaves as prescribed in the preceding paragraph, shall be half the regular wage.

Minimum Wage is adjusted to

• TWD 190(196) per hour.

• TWD 28,590(29500) per month.

National Service

National Service may be required for education or duty service. Employees are entitled to official leave for National Service with full pay.

Employee Benefits

Expenses

Travel expenses claimed by employees may be included in the monthly payroll.  Car mileage relevant to business use may be claimed and paid along with salary.  A company may rent a car for an employee’s use; the rent may be paid by employer directly or reimbursed to employee.  If the lease agreement is signed in the name of employee, the rent paid by the employer will be taxable to the employee.

Pursuant to the Employment Service Law, all foreign nationals shall obtain a work permit before they can work in Taiwan.  The application for the Work Permit shall be made by the employer in Taiwan.  If necessary, the foreign national may use his or her work permit to obtain a resident visa.

The work permit can be granted for a maximum of 3 years.  

For your reference, the requirements set for employers and the requirements set for their foreign staff are outlined below:

Requirements for Employers

The company that intends to obtain a work permit for its foreign staff shall comply with one of the following requirements:

• For a company not yet incorporated for 1 Year:

• Has paid in Capital of at least NT$5,000,000 if it is a company incorporated under ROC law; or

• Has Working Capital of at least NT$5,000,000 if it is a branch office of a Foreign Company.

• For a company already operated for more than 1 year:

• Has average annual operational income during the past three years of at least NT$10,000,000; or

• Has Operational Income in the most recent year of at least NT$10,000,000; or

• Has average annual import/export trading volume during the past three years of at least US$1,000,000; or

• Has import/export trading volume in the most recent year of at least US$1,000,000; or

• Has brokerage commission income during the past three years of at least US$400,000; or

• Has brokerage commission income in the most recent year of at least US$400,000.

Requirements Set for Foreign Staff

All foreign nationals who intend to obtain a work permit shall comply with one of the following requirements:

• Has Ph. D. degree or master degree in related field; or

• Graduated from a College or University with major in related field and at least two years’ work experience related to the position to be held; or

• Has at least 5-years outstanding work related to the position to be held

• Has worked at a Multinational Corporation for at least 1 year and being assigned by such corporation to Taiwan

• Professional training certificate

• Special performance

   

---

Further Information

For more information, or assistance with Taiwan tax and payroll enquiries please contact: gi@activpayroll.com

---

About This Payroll and Tax Overview

Please note that this document gives general guidance only and should not be regarded as an authoritative or complete statement of the law, regulations or tax position in any country.  You should always seek specific advice for each specific situation.  This document should not be relied upon as professional advice and activpayroll accepts no liability for reliance on its contents.