Taiwan reduces corporate income tax rate

July 9, 2010

On 28 May 2010 Taiwan’s Legislative Yuan further reduced Taiwan’s corporate income tax rate to 17% from 20%, the second rate cut in 12 months, concluding the entire package of the Statute for Industry Innovation (SII).

Taiwan’s lawmakers previously lowered the tax rate to 20% from 25% effective 1 January 2010 in an effort to turn the island into a financial and economic hub in Asia. Due to the passage of SII on 16 April 2010, which removed most of the tax incentives from the expired Statute for Upgrading Industries (SUI), the government felt a further rate reduction was necessary if Taiwan was to strengthen its position as a regional investment destination. The tax cut applies to any corporation earning annual income of more than 120,000 New Taiwan dollars (approximately US$3,745).

The tax rate cut could help boost the international competitiveness of Taiwanese industries. The cut will bring Taiwan’s corporate tax rate in line with Singapore and close to Hong Kong’s 16.5%, while lowering it beyond that of its neighbors, including China, India, South Korea and Malaysia.

Ernst & Young has confirmed that the recent tax rate cut, from 20% to 17%, applies only to corporate income tax, including capital gains, but not to withholding tax, which is currently 20%.

Additionally, there may be a legislative proposal to increase the current 10% surtax rate assessed on undistributed retained earnings, but details have yet to be released.

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