The Legislative Yuan passed amendments to Article 17 and Article 126 of the Income Tax Act on 21 August 2026. The amendments are intended to reduce the tax burden on families, particularly those with dependent children, while also expanding the scope of deductible insurance premiums. Subject to promulgation by the President, the changes will take effect from 1 January 2026 and will first apply to the 2026 tax year returns filed in May 2027.1,2
WHY THIS MATTERS
The amendments provide additional tax relief for families raising children through an increase in the exemption amount available for dependent minor children. In addition, premiums paid for certain mandatory social insurance programs will no longer be subject to the current annual deduction cap applicable to personal insurance premiums. These measures are expected to reduce taxable income for many taxpayers and may create additional tax savings opportunities when preparing Taiwan individual income tax returns. Employers may also wish to understand these developments when communicating expected Taiwan tax liabilities to employees, particularly under tax equalization or tax protection arrangements.
Background
Under current Taiwan individual income tax rules, taxpayers may claim personal exemptions for themselves and qualified dependents. Prior to the amendment, dependent minor children were entitled to the standard personal exemption amount of NTD 101,000 per person. In addition, taxpayers electing itemized deductions may generally deduct qualifying personal insurance premiums, subject to an annual cap of NTD 24,000 per insured individual. An exception currently applies to National Health Insurance premiums, which are fully deductible without limitation. To address declining birth rates and strengthen support for families, the government proposed amendments to increase tax relief for households with children and to expand the scope of insurance premiums eligible for unlimited deduction treatment.
Key Highlights
Increase in Personal Exemption for Dependent Minor Children (Amendment to Article 17, Paragraph 1, Subparagraph 1, Item 2)
The amendment introduces a 50 percent increase in the exemption amount available for each dependent minor child. ( The age of majority under the Civil Code was reduced from 20 to 18. Accordingly, for the increased exemption, a dependent minor child is a qualifying child under age 18.)
Item | Current rule | Amended rule |
Exemption for a dependent minor child | NTD 101,000 | NTD 151,500 |
As a result, taxpayers supporting minor children will be entitled to an additional exemption of NTD 50,500 per child when calculating taxable income.
Interaction with Preschool Special Deduction
- The increased exemption may be claimed in addition to the existing Preschool Special Deduction for children under age six.
- According to the Ministry of Finance, beginning with the 2026 tax year, the combined tax benefits available for each dependent child under the age of six will increase to NTD 301,500 for the first child (NTD 150,000 Preschool Special Deduction plus NTD 151,500 Personal Exemption) and NTD 376,500 for the second and each subsequent child (NTD 225,000 Preschool Special Deduction plus NTD 151,500 Personal Exemption).
- These changes are intended to further reduce the tax burden on families with young children.
Expansion of Insurance Premium Deductions (Amendment to Article 17, Paragraph 1, Subparagraph 2, Item 2)
- The amendment extends the removal of the deduction cap to premiums paid for certain Taiwan social insurance programs, including Labor Insurance, Farmers' Health Insurance, National Pension Insurance, Military Insurance, Civil Service Insurance, and Public School Teacher Insurance. It does not remove the NTD 24,000 cap from all qualifying personal insurance premiums. Under the current rules, taxpayers may deduct up to NTD 24,000 per person for qualifying personal insurance premiums, while National Health Insurance premiums are not subject to any limitation.
- Accordingly, premiums for the above programs will no longer count toward the NTD 24,000 annual deduction cap.
Effective Date
Subject to presidential promulgation, the amendments will apply from 1 January 2026 and are expected to first affect 2026 Taiwan individual income tax returns filed in May 2027.
KPMG INSIGHTS
The amendments may reduce taxable income for taxpayers supporting dependent minor children and for taxpayers who itemize deductions and participate in the specified social insurance programs. The extent of the benefit would depend on the taxpayer’s family circumstances, insurance participation, deductions, and applicable marginal tax rate.
Affected stakeholders might wish to consider:
- Employers could identify assignees whose hypothetical or actual Taiwan tax calculations include dependent minor children.
- Employers could review 2026 tax accruals, tax equalization estimates, and reconciliation processes to determine whether the revised exemption and deduction amounts need to be reflected.
- Taxpayers could consider verifying whether they qualify for the increased exemption, the Preschool Special Deduction, or uncapped deductions for specified social insurance premiums.
- Taxpayers could retain supporting records for dependents and qualifying insurance premium payments for use when preparing their 2026 Taiwan individual income tax returns.
If assignees and/or their programme managers have any questions or concerns about the scope of the update, its application and potential impacts, and appropriate next steps, they should consult with their qualified tax professional or a member of the GMS tax team with KPMG in Taiwan (Republic of China) (see the Contacts section).
ENDNOTES:
1 Taxation Administration, Ministry of Finance, Taiwan (in Chinese), “立法院今（21）日三讀通過「所得稅法第17條、第126條條文修正草案」，減輕育兒家庭租稅負擔-財政部賦稅署,” published on 21 August 2026.
2 Laws & Regulations Database of the Republic of China (Taiwan), Ministry of Justice (in Chinese), “所得稅法§17-全國法規資料庫.”
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