Overseas Income Included in Alternative Minimum Tax Starting 2010

The Executive Yuan recently decided that beginning on January 1, 2010, individual overseas income exceeding NT$1 million per year will be listed in the taxpayer’s basic income, along with income earned in Taiwan, non-cash gifts, non-taxable income payments, employee stock dividends, and income from non-listed stocks, and will be subject to the alternative minimum tax. This includes income on securities investment, land transactions, and bank interest.

After the new rule takes effect, failure to report overseas income will result in all such income being taxable.  If total income exceeds NT$6 million, it will be taxed at the rate of 20% in accordance with Article 13, Paragraph 1 of the Income Basic Tax Act. Income earned in mainland China, however, will continue to be subject to income tax in accordance with the provisions of Article 24, Paragraph 1 of the Statute Governing Relations between the Peoples of the Taiwan Area and the Mainland Area. Income earned in mainland China, whatever its amount, will not be included in the alternative minimum tax.
Source: CEPD Newsletter No. 94

Comments: The proposal has been met with strong opposition both by some local interest groups as well as by foreign chambers of commerce, as it would possibly deteriorate Taiwan’s tax environment to the detriment of future investments in and into Taiwan, both by domestic and foreign investors. It may further counteract to the government’s long term objective of making Taiwan a center for asset management in Asia. It is widely hoped that the inclusion of overseas income for AMT purposes would at the same time be accompanied by a general decrease of the comparably high personal income tax rates, but such decrease has not yet found a consensus within the government. Future developments in this matter will continue to be watched carefully.