萬國法律事務所

The draft alternative minimum tax proposed by Taiwan’s Ministry of Finance passed its third reading in the Legislative Yuan recently, with an announcement from the Ministry that implementation of the alternative minimum tax, Taiwan’s first tax hike in almost fifty years, will not adversely impact Taiwan’s economy.

The new law will become effective from 1 January 2006 and the Government will begin to levy taxes at the rate of ten percent to twelve percent on business entities that have yearly profits that exceed NT$ 2 million (approximately US$ 59,700) after subsidies are accounted for, and a tax rate of 20 percent for individuals with annual income in excess of NT$ six million (approximately US$ 187,500), including overseas income above the NT$1 million (approximately US$ 31,250) mark. Furthermore, employee bonus shares will be deemed personal income at market, rather than par value.

However, the Executive Yuan is empowered to adjust the tax rate in accordance with the prevailing economic circumstances and is also authorized to begin collecting taxes on overseas income of high-income earners by no later than the year 2010.

The Ministry of Finance had been advocating the alternative minimum tax schedule in the early part of the year 2005 and has predicted that the new rates will apply to approximately 5,000 companies, and as many as 17,000 households. The new Law is expected to facilitate some rationalization of Taiwan’s tax system in the not-so-near future, while higher taxes and employee compensation costs will be felt by some companies in the more immediate future.