Oct 2009
|
In Brief:
The Ministry of Finance ("MOF") has recently issued rulings on 22 September 2009, related to the inclusion of offshore income in the income basic tax ("IBT") assessment. The ruling is intended to have an impact on Taiwan resident individuals with offshore income / investments effective from 1 January 2010 onwards. |
On 22 September 2009, a tax ruling was announced regulating the income basic tax assessment on offshore income of individual taxpayers, which is effective from 1 January 2010. The tax ruling provided guidance on the types of offshore income that should be reported, how offshore income should be calculated, and how foreign tax credits may be utilized to offset the taxes payable. Offshore income in the tax ruling is defined as income derived from countries outside of Taiwan and the People's Republic of China.
In general, resident individuals receiving basic income (tax exempt items from regular income tax perspective) over NT$6 million should prepare an IBT calculation. Furthermore, resident individuals with offshore income exceeding NT$1 million in a tax year should include the offshore income in the IBT calculation in the year the offshore income is received.
For certain categories of offshore income, it is calculated as gross income less costs and necessary expenses. Where costs and expenses are not supported by evidentiary documentation, various deemed profit rates are available.
Additionally, for various offshore securities purchased prior to 31 December 2009, the closing price or net asset value of the securities as at 31 December 2009 may be deemed as the acquisition costs of the securities to calculate the offshore income if the original acquisition costs of the said securities are lower.
The tax ruling also addressed the foreign tax credit available for us in the offshore income IBT calculations, which shall not exceed the below limit:
(Basic income tax – regular income tax) x (offshore income / total basic income)
When reporting offshore income, taxpayers shall submit relevant documents such as receipt / payment records, contracts and other documentation evidencing income calculation.
With this ruling, the MOF is determined to broaden IBT to include offshore income. Hence, the individuals (including foreigners with tax residency in Taiwan) should review their offshore investments and determine the IBT implications on their offshore income from 1 January 2010 onwards.
Note: This bulletin is designed for the information of readers. Whilst every effort has been made to ensure accuracy, information contained in this bulletin may not be comprehensive or may not yet be passed into law. Recipients should not act upon it without seeking professional advice.
