Background
Under the Foreign Tax Act, eligible foreign special professionals can receive a five-year tax incentive: a 50 percent exemption on annual salary exceeding NTD 3 million, provided they reside in Taiwan for at least 183 days and earn more than NTD 3 million in salary in the calendar year.
According to the regulations a foreign individual must:
- Hold a valid Special Skilled Work Permit “(SWP”) or Employment Gold Card (“EGC”).
- Obtain first-time approval to reside in Taiwan for work purposes.
- Work in a recognized professional field eligible for SWP or EGC.
- Not have Taiwan household registration or have been a Taiwan tax resident in the past five years prior to employment in Taiwan.
The draft amendment keeps these core requirements but introduces new fields of expertise, provides greater flexibility in qualifying for the incentive, and imposes stricter procedural rules.
Key Changes Proposed Under the Draft Amendment
Expansion of Recognized Professional Fields (Amendment of Article 2 of the Regulations)
The draft amendment expands the scope of recognized fields for foreign special professionals, affecting eligibility for the SWP and EGC. New fields include digital technology, environmental sciences, and biotechnology. The term “sports” will be changed to “athletics.”
Work Permit Flexibility Introduced (Amendment to Article 3 of the Regulations)
- The draft amendment seeks to address delays often faced by foreign professionals when applying for Taiwan’s SWP or EGC. Under current practice, lengthy qualification reviews sometimes require applicants to obtain a general work permit first and then apply for the SWP or EGC later, creating uncertainty about tax incentive eligibility.
- The proposed rule removes this concern. If the SWP or EGC application is submitted before or at the same time as the general work permit application, and the individual continues working under the same employment contract and recognized role, eligibility for the tax incentive will apply retroactively from the date the general work permit was issued. This seeks to mitigate the risk of administrative delays affecting eligibility for tax incentives.
Consequences of Failure to Apply Within Deadline and Exceptions (Amendment of Article 5 of the Regulations)
- Introduced Deadline for Application: Tax incentive applications must be submitted during the annual income tax filing period (the following year before May 31) using the designated application format. This requirement remains unchanged. Under the draft amendment, if the tax incentive application is not submitted by the tax filing deadline, the tax incentive for that tax year cannot be claimed, nor can it be retroactively claimed unless falling under an exception.
- New Exception – Grace Period: If the SWP or EGC is issued after the tax filing deadline due to reasons beyond the applicant’s control, the applicant will have a one-month grace period to submit the application, starting from the date the SWP or EGC is issued.
- Additional Documentation Required (if applicable): If the foreign individual needs to demonstrate that the SWP or EGC was applied for before the general or other work permit, documents must show the timing of both applications and confirm engagement in the same professional work under the same employment contract.
- Incomplete Applications Not Corrected Will Be Rejected: If documentation is incomplete, tax authorities will notify applicants to correct within a specified period. If corrections are not made within the deadline or remain incomplete, the tax authority will reject the application.
