Global Watch - Taiwan - Incentives for attracting foreign professionals 

Background
  
In March, the European Chamber of Commerce in Taipei mentioned in a news article that Taiwan's progressive individual income tax rates of up to 40 percent might discourage foreign professionals from living and working in Taiwan.  Therefore, Taiwan's Executive Yuan has approved several new tax and non-tax incentives for the purposes of attracting more foreign professionals.  These new incentives will benefit both non-tax resident and tax resident foreign professionals.
  
Foreign professional
  
A foreign professional is defined as either holding the position of a high level management or employed by high-tech industries.  In addition, the foreign professionals must conform to the regulations set out by either the Ministry of Economic Affairs or National Science Council.  A foreign professional does not include Taiwanese with dual citizenship.
  
Tax incentives
  
The key features of the tax incentives are highlighted below:
  
(i) Non-tax resident foreign professional
  
Currently, a non-tax resident is taxed at various rates based on the category of their income.  For example, remuneration and interest income are taxed at 20% and investment property income is taxed at 35%.  However, under the new tax incentive scheme, a flat rate of 20% is applied to all categories of the non-tax resident foreign professional's Taiwan source income.
  
In addition, a non-tax resident foreign professional will only be required to file a tax return if they stay in Taiwan for 183 days or more, instead of 90 days or more in a calendar year.
  
(ii) Tax resident foreign professional
  
Additional expenditures incurred by the employing company for the foreign professional such as traveling, relocation, utilities, house cleaning, telephone, rental/lease and related repair and maintenance expenses, child education scholarship, etc, will not be taxable to the foreign professional.
  
(iii) Tax treaties
  
Currently, Taiwan has entered into tax treaties with 16 countries.  Where there is no tax treaty with the home country of the foreign professional, new tax treaties will be signed in the near future in order to reduce the tax burden of the foreign professionals.
  
Even though the above-mentioned tax incentives have been approved by the Executive Yuan, the ruling on the tax incentives is currently pending approval from the Ministry of Finance in order to be effective.
  
Non-tax incentives
  
The key features of the non-tax incentives are highlighted below:

1. The types of non-tax incentives developed to attract more foreign professionals working in Taiwan are as follows:
    
1. Extending the period for submission of application for extension of the foreign professional's work permit to 4 months before the expiry date;
    
2. Relaxing the approval requirements by allowing the employing company to act as the guarantor for the foreign professional's Chinese spouse entering Taiwan;
    
3. Allowing the children of the foreign professionals to attend local government elementary and secondary schools;
    
4. Reduced restrictions for the children of foreign professionals from Hong Kong and Macau to attend international schools;
    
5. Requiring only a copy of the Alien Residential Card ("ARC") to be presented for application of a credit card;
    
6. Allowing Chinese foreign professionals to apply for a credit card whereby the credit limit is restricted to their monthly salary;
    
7. Permitting foreign professionals to purchase cars; and
    
8. Reducing the restrictions for foreign students to perform their practical training in Taiwan.
    
2. The government will provide assistance for the development of international schools in order to provide better education opportunities for children of the foreign professionals.
    
3. A Chinese spouse of a foreign professional is allowed to make numerous visits into Taiwan and the expiry date of the spouse's ARC would be identical to the expiry date of the foreign professional's ARC.
    
4. Chinese parents of either the foreign professional or the foreign professional's spouse will now be allowed to visit Taiwan.
    
5. The additional length of stay in Taiwan has been extended from 7 days to 14 days upon expiry of the foreign professional's ARC to allow more time to settle their affairs before departing Taiwan.