The DNC of the US House of Representatives passed a tax increase bill on the 15th. If the review goes well, it is expected to be implemented in the future. It may greatly impact Taiwanese corporations with annual incomes over US$5 million; high-income Taiwanese working in the United States; and Taiwanese who hold green cards or dual nationalities and take root in the United States, according to the Big Four accounting firms.
In order to raise US $3.5 trillion in President Biden's social expenditures plan, the Democratic Party intends to increase the maximum personal income tax rate from 37% to 39.6%, and the maximum corporate income tax rate from 21% to 26.5%.
Regarding individual income tax, the preliminary plan is to increase the marginal tax rate from the current 37% to 39.6%. Capital gains tax rate will be increased from 20% to 25% for Americans with taxable income over US $400,000. In addition, for high-income earners (income of more than US $5 million), non-passive income from individuals, trusts and estates will be levied on net investment income tax and a high-income surcharge of 3%. The US also reduces the current lifetime tax exemption of US$11.7 million for bequests to US $5 million.
In terms of corporate tax, the preliminary plan is to change the tax rate from the original single tax rate system (21%) to a three-tier accumulated tax rate system. For those with an annual income of less than US$400,000, the tax rate is 18%, and the tax rates are 21% and 26.5% for an annual income between US$400,000 and US$5 million and an annual income over US $5 million respectively.
According to the Big Four, based on the current proposal, the tax rate applicable to Taiwanese corporations with an annual income of more than US $5 million will be increased from the current 21% to 26.5% in the future.
In addition, according to the preliminary plan for individual income tax, the Big Four stated that the capital gains tax for high-income Taiwanese working in the United States will be increased in the future, as will the individual tax rate.
As for Taiwanese Americans such as a person with dual nationalities or a green card, if they purchase a property in the United States, they will have to pay more bequest tax in the future due to the reduction in the US bequest allowance under this plan.
The Big Four suggested that since most Taiwanese white-collar workers or Taiwanese businessmen in the United States hold green cards, they are strongly advised to start asset planning as soon as possible, such as using trust to arrange early gifting, if they plan to take root and pass on to the next generation. However, they must also take caution as the tax bureaus in Taiwan and the United States may both deem the act of gifting subject to tax and levy tax accordingly.
| Summary of US tax increase bill |
|||
| Category |
Current |
Future Development |
Impact |
| Taiwanese corporations with an annual income over US $5 million |
Corporate income tax: 21% |
Corporate income tax expected to be raised to 26.5% |
Higher tax burden for high-income Taiwanese businessmen and employees |
| High-income Taiwanese working in the US |
Capital gains tax: 20% Individual income tax: 37% max |
Capital gains tax: 25% Individual income tax: 39.6% max |
|
| Taiwanese with a green card or dual nationalities, and taking roots in the US |
Lifetime tax exemption for bequest: US$11.7 million |
Lifetime tax exemption for bequest: US$5 million |
Higher tax burden on future asset transfers |
News Source：【Commercial Times 2021/09/17｜林昱均】
