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A Pillar Two Review of Taiwan’s Tax Regime

In this article we take a detailed look at Taiwan’s tax regime from a Pillar Two perspective. 

Key aspects covered include tax incentives provided by the Statute for the Establishment and Management of Free Trade Zones, the Statute for Industrial Innovation and the provisions of the Income Tax Act.

Corporate Tax Rates

Article 5(5) of the Income Tax Act provides that the standard rate of corporate income tax is 20% for companies with taxable income that exceeds 120,000 yuan. Taiwan does not provide for any reduced rates of corporate income tax for MNEs.

Whilst the headline corporate income tax rate is above 15%, companies may well fall in scope particularly if there were significant permanent differences (such as the 200% deduction for R&D expenditure mentioned below) or GloBE adjustments. 
 
Article 66-9 of the Income Tax Act provides for an undistributed profits tax levied at 5% on the undistributed surplus.
 
The undistributed surplus is the net profit after tax in accordance with the provisions of the Commercial Accounting Law, the Securities and Exchange Law or other laws on the preparation of financial accounts.  A number of deductions are permitted, including losses and dividends. 
 
The GloBE rules include specific provisions for controlled foreign company (CFC) tax regimes. 

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Picture of Lee Hadnum

Lee Hadnum

Lee is a qualified Chartered Accountant and Chartered Tax Adviser. A former Senior Tax Analyst at Bloomberg Tax, Lee began his career in Ernst & Young's Entrepreneurial Services department and has 20 years of international tax planning experience. Lee's books have been recommended by The Times, The Guardian and The Telegraph.

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