There are hundreds of financial management tools. Opting for overseas financial products could trigger additional tax filing obligations. National Taxation Bureau of Kaohsiung, Ministry of Finance pointed out that individuals filing overseas income shall watch out for the filing threshold, exemptions and methods of taxation as to prevent any filing omission and subsequent penalties.
The officers pointed out that there are many investment tools nowadays. Many domestic investors invest in overseas financial products or assets through channels such as bank, e.g. funds, debentures and overseas stocks, etc.
Although these overseas financial products could be traded domestically, the methods of taxation are totally different from the domestic financial products. The officers pointed out that the investment returns of overseas financial products, whether it be fund dividends, trade gains or any other forms of returns, all fall into “Overseas Income” and shall be filed as basic income.
The officers pointed out that the basic income shall be filed with each year’s individual income tax return, same as filing per household. The filing threshold will be reached when the same household has accumulated to TWD1 million or above for the whole year. For the amount less than the filing threshold, it is not required to be included in the basic income, and not necessary to be filed.
Although each household shall file for overseas income reaching TWD1 million, the officers pointed out that there is a basic income exemption mechanism. Each category’s basic income is combined into net consolidated income and enjoying TWD6.7 million basic income exemption. Unless the individual is a big player in the stock market, generally as long as individuals can fulfill their filing obligations properly and the amount of such income is within the basic income exemption, it shall not be subject to additional tax.
If the amount of the basic income exceeds TWD6.7 million exemption, the officers pointed out that 20% basic tax shall apply according to the Income Basic Tax Act.
The calculated basic tax is not always subject to taxation. The officers pointed out that the basic tax needs to be compared with individual income tax. In the case where the basic tax is higher, the tax differences need to be paid off.
For instance, Mr. Wang obtained TWD14 million overseas income in 2019, whilst his domestic income was TWD1 million. However, he had forgotten to file overseas income and basic income tax. After the National Taxation Bureau’s investigation, it was ratified that Mr. Wang’s basic income was TWD15 million during 2019 and was subject to tax penalties.
The officers reminded that although the tax filing for 2020 is completed, any individuals invested in overseas financial products through financial institutions and forgot to file overseas income shall check their records and make supplementary statements to avoid penalties.
Internet is well-developed nowadays and there are many channels for investment and financial management. As such, overseas investments become popular for Taiwanese. Whenever there is any income, taxes would be involved. Generally, for Taiwan tax residents, each declarer receiving yearly overseas income at TWD1 million or above each year, such overseas income would be counted into basic income; whereas when the declarer’s yearly overseas income does not reach TWD1 million, the overseas income is not required to be counted into the basic income.
Overseas income is considered as income sourced outside of Mainland Area according to Article 8 of Act Governing Relations between the People of the Taiwan Area and the Mainland Area. In facilitating calculation, individual overseas income item or category shall be the same as source of income under Republic of China which is classified into 10 categories, including overseas’ 1. Income from Profit-seeking, 2. Income from Professional Practice, 3. Employment Income, 4. Interest Income, 5. Income from Lease and Royalties, 6. Income from Self-undertaking in Farming, Fishing, Animal Husbandry, Forestry and Mining, 7. Income from Property Transactions, 8. Income from Contests and Games and from Prizes and Awards Won by Chance, 9. Separation Pay and 10. Other Income. Any declaration queries arise from the above, you may seek for CPA assistance for declaration or consultation as to ensure your funds can be used flexibly.
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News Source：【Economic Daily News 2021/07/22】
