Taiwan Tax System: How to Report Overseas Investment Income
A summary of Taiwan’s dual-track tax system, basic tax, overseas income, and a suggested way to realize overseas capital gains periodically.
[Taiwan's tax system: how to report overseas investment income] Easy Investment Chat CLEC Investment Channel. Post date: July 16, 2020
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Taiwan has a dual-track tax system.
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General consolidated income tax and basic tax under the Alternative Minimum Tax base.
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General consolidated income tax and basic tax are compared, and the higher tax amount is paid.
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Basic tax = (basic income amount - NT$6.7 million) x 20%
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Basic income amount = consolidated net income calculated under the Income Tax Act + overseas income + life insurance and annuity insurance payments where beneficiary and policyholder are different persons + transaction income from beneficiary certificates of privately placed securities investment trust funds + non-cash donation amount + total dividends and earnings selected for separate taxation.
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If the total exceeds NT$6.7 million, it must be reported. Overseas income includes overseas investment funds, real estate, KY stock dividends, and investment-linked insurance policies. If total overseas income exceeds NT$1 million, it must be included in the basic income tax calculation.
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Mainland China-sourced income is not overseas income; it is part of Taiwan-sourced income.
General overseas funds and sub-brokerage are both counted as overseas income.
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General overseas funds and sub-brokerage should realize capital gains once when accumulated gains reach the Alternative Minimum Tax base, or basic income amount, of NT$6.7 million, and report basic income to calculate basic tax.
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Realize overseas capital gains to avoid accumulating too much one-time capital gain, causing the basic income amount to exceed general consolidated income tax and requiring higher tax payment.
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If unrealized gains from overseas funds and sub-brokerage investments plus other basic income have not reached NT$6.7 million before that year, there is no need to realize capital gains that year. Trading too frequently will increase unnecessary sub-brokerage fees and fund switching fees.
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Method for realizing overseas capital gains: near the end of the year, realize that year's overseas capital gains for reporting. Around mid-December, sell and immediately buy back profitable sub-brokerage investments. For ordinary funds, make a switch, for example from Franklin Technology Fund to Franklin Templeton Global Investment Series U.S. Dollar Short-Term Money Market Fund Class A, then switch back to Franklin Technology Fund. This realizes that year's gains. The December account statement can show the year's gains. Keep every December account statement. You report these gains as overseas income in Taiwan.
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This can make the best use of the NT$6.7 million annual exemption.
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Overseas income tax calculation
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