2025 Taiwan Individual Income Tax Return - How a “mixed status” couple (one spouse a Taiwan tax resident, the other a non resident) should file their annual individual income tax return
Taiwan official tax ruling (Decree No. 871980772) provides a specific election for "mixed-status" couples—where one spouse is a Resident and the other is a Non-Resident. Where a non-resident of the ROC has ROC-sourced income, and their spouse is a resident of the ROC, the non-resident spouse may elect to either file a joint return with their spouse in accordance with Article 15 of the Income Tax Act, or be taxed separately in accordance with Article 73 of the same Act.
If the election is made to be taxed under Article 73, the non-resident’s income shall no longer be consolidated into the gross income of the resident spouse. Furthermore, the taxes withheld at source or the taxes paid via the prescribed tax rate for that non-resident's income cannot be claimed as tax credits by the resident spouse, nor can any relevant personal exemptions or deductions be claimed for the non-resident spouse."
(Ministry of Finance Decree No. 871980772, dated December 30, 1998)
Key Points & Practical Implications
Under this ruling, a couple with mixed residency status has two choices for their tax filing:
Option 1: Joint Filing (Article 15)
Method: The non-resident spouse is treated as a resident for filing purposes.
Result: All income is combined. The couple can claim the personal exemption for the non-resident spouse and potentially benefit from standard/itemized deductions.
Benefit: Often better if the non-resident spouse has low income, as it allows the resident spouse to utilize the non-resident's exemptions.
Option 2: Separate Taxation (Article 73)
Method: The non-resident spouse is taxed via withholding at the source (usually at flat rates like 18% or 20%) or by filing a separate return for non-residents.
Result: The resident spouse files their own return and cannot include the non-resident spouse as a dependent or claim their exemptions.
Constraint: You cannot "double-dip." If you choose this, the tax already withheld from the non-resident’s salary is "final" and cannot be used to offset the resident spouse's total tax liability.
Why this matters
This election is a strategic tax planning tool. High-income non-residents often prefer Article 73 (Separate Taxation) because the flat withholding rate might be lower than the top progressive tax brackets (up to 40%) that would apply if their income were consolidated with their resident spouse.
Foreign currency remuneration for services received by expatriates from foreign employers shall be calculated based on the average exchange rate between the foreign currency unit and the TWD for that year. The exchange rates for the 2025 tax year are as follows:
· USD (U.S. Dollar): 31.1445
· JPY (Japanese Yen): 0.2061
· AUD (Australian Dollar): 20.0283
· CAD (Canadian Dollar): 22.2125
· EUR (Euro): 35.0466
· HKD (Hong Kong Dollar): 3.9713
· KRW (Korean Won): 0.0189
· GBP (British Pound): 40.9416
· SGD (Singapore Dollar): 23.8091
· NZD (New Zealand Dollar): 18.0250
Tax Rate & Withholding Tax Rates for Non-Residents (Individuals)
For individuals who are classified as "Non-Residents of the ROC," the following withholding rates apply to ROC-sourced income. These taxes are typically withheld at the time of payment.
I. Income Subject to Withholding
1. Dividends & Profit Distributions: 21% (Applies to dividends from companies, cooperatives, and profit distributions from partnerships or sole proprietorships).
2. Salaries & Wages:
o Standard rate: 18%.
o Reduced rate: 6% (If the total monthly salary is equal to or less than 1.5 times the monthly basic wage as authorized by the Executive Yuan).
3. Commissions: 20%.
4. Interest: 20% (Standard).
o Reduced rate of 15% applies to:
§ Interest from short-term commercial papers.
§ Interest from securitized assets (Financial/Real Estate Securitization Acts).
§ Interest from government bonds, corporate bonds, or financial bonds.
§ Interest from Repo (RP) transactions involving the above securities.
5. Rentals: 20%.
6. Royalties: 20%.
7. Prizes & Awards (Contests/Games of Chance): 20%.
o Exemption: Government-sponsored lottery prizes not exceeding NT$5,000 per prize are exempt from withholding.
8. Professional Practice Fees: 20%.
9. Retirement Income: 18% (Calculated on the balance after deducting the fixed tax-exempt portion).
10. Whistleblower Rewards: 20%.
II. Income Not Subject to Withholding (Must be self-declared at specified rates)
The following categories are not withheld at the source, but the taxpayer must file and pay tax based on the following prescribed rates:
1. Property Transaction Gains: 20%.
2. Employee Stock Options: 20%.
3. Transferred Tax-Deferred Stocks: 18% or 21% based on income category (Calculated on par value or market/transaction price, whichever is lower).
4. Mortgage Interest & Other Income: 20%.
5. Trust Benefits: 20% (For beneficiaries who are non-residents when a trust is established, modified, or added to).
6. Remuneration from Foreign Employers: 18%.
Applies if the individual stays in Taiwan for more than 90 days in a tax year and receives compensation from a foreign employer for services rendered within the ROC.
Good Earth CPA, Taipei