e-Tax alert 185 eng - Applicability of Tax Incentives for Employment Gold Card Holders
e-Tax alert 185 eng - Applicability of Tax Incentives f
In Taiwan, oftentimes Employment Gold Card (“EGC”) holders are not fully aware of the requirements that must be fulfilled in order to be eligible for related tax incentives and are sometimes unable to reap the tax benefits......
In Taiwan, oftentimes Employment Gold Card (“EGC”)1 holders are not fully aware of the requirements that must be fulfilled in order to be eligible for related tax incentives and are sometimes unable to reap the tax benefits. Based on our observations, EGC holders are primarily unaware that to qualify for the tax benefits, the EGC holder must be residing in Taiwan for the purpose of work for the first time and cannot be a Taiwan tax resident or have a household registration in the five years prior to the date when the EGC was obtained.
Why this matters
Employers and the foreign professionals they send to/bring into Taiwan may benefit from lower assignment-related costs if they qualify for the tax incentive measures applicable to the foreign professionals.
The tax incentive scheme for EGC holders has seen a soaring increase in the number of EGC applicants over the years.2 However , in practice, EGC holders or prospective EGC holders should be reminded that there are particular requirements that must be fulfilled in order to qualify for such tax incentives.
The key takeaway is that, in addition to meeting the legal requirements of the Foreign Talent Act as described below, EGC holders must correctly fill out the “Application for Exemption from Income Tax of a Taxable Year for Foreign Special Professionals” and attach relevant documentation evidencing eligibility/applicability when filing their Taiwan annual income tax return so that the tax incentives can be applied.
In the recent years, in order to attract foreign talent, the Taiwan government promulgated the Recruitment and Employment of Foreign Professionals Act (hereinafter “Foreign Talent Act”) in 2017,3 whilst the National Immigration Agency launched the Employment Gold Card (“EGC”) initiative. The Employment Gold Card encompasses work permits in Taiwan, resident visas, alien resident certificates, and re-entry permits for qualified foreign professionals; it also provides tax incentives for EGC holders given certain requirements are met. (For prior coverage, see GMS Flash Alert 2022-098, 9 May 2022.)
EGC holders can enjoy tax incentives for five consecutive years as long as they reside in Taiwan for more than 183 days in a calendar year and their annual salary exceeds NTD 3 million in the tax year. Should these requirements be met, 50 percent of their annual salary that exceeds NTD 3 million is exempted from tax and is not subject to the Alternative Minimum Tax regime.
Common Issues for EGC Holders
Since the enactment of the Foreign Talent Act and the launching of the EGC, there has been ongoing debates on whether tax incentives still apply to foreign professionals who work in Taiwan for the first time under a regular Work Permit and change to an EGC so as to be entitled to tax incentives. However, according to the Foreign Talent Act, a foreign professional who has worked in Taiwan under a regular Work Permit and decides to change to an EGC may not apply for tax incentives, given that when such foreign professional obtains the EGC, it would no longer be his/her “first time residing in Taiwan for the purpose of work.”
In sum, the key, and often overlooked, requirements to apply for the tax incentive are:
- The EGC holder must be residing in Taiwan for the purpose of work for the first time.
- The EGC holder has not been a Taiwan tax resident for the past five years nor has she/he had a household registration since the date of obtaining the EGC.
Therefore, we would like to remind EGC holders to evaluate their eligibility for the tax incentive when filing their annual income tax returns to avoid the risk of being rejected by the Taiwan tax authority if they do in fact claim the tax incentive.
Requirements for Tax Incentive Application and Required Documents
EGC holders who meet the legal requirements to apply for tax incentive in a tax year should prepare the following documents for the tax incentive application that is to be submitted along with the annual tax return:
1. Documentation to evidence the individual has been approved for the first time to reside in Taiwan for the purpose of work:
- Copy of the Employment Gold Card
This requirement does not apply for individuals who resided in Taiwan for purposes unrelated to work, such as for family or for education, etc., in the five years prior to obtaining the EGC. However, individuals must still prove the fact that they do not have a household registration in Taiwan nor that they are Taiwan resident as described below.
2. Documentation to evidence the individual is engaged in professional work related to a recognized special expertise in Taiwan:
- Copy of the employment contract and other document showing the employee is engaged in professional work related to a qualified professional field
3. Documentation to evidence the individual does not have a household registration nor is he/she a Taiwan resident in the five years prior to obtaining the EGC:
- Copy of the Employment Gold Card
It is important for EGC holders or those who intend to obtain an EGC to consult with their qualified tax professional or a member of the KPMG GMS team (see the Contact Us section below) to assess the applicability of tax incentives and determine their annual income tax return along with the application for tax exemption are correctly completed and submitted.
1.Employee Gold Card is a 4-in-1 Card that combines work permit, resident visa, Alien Resident Certificate, and re-entry permit under Article 9 of the Foreign Talent Act.
2.Taiwan Centers for Disease Control About Employment Gold Card - Taiwan Employment Gold Card Office (What is the Taiwan Employment Gold Card? | Taiwan Gold Card)
Ying-Tai Ting Partner
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