After the obvious questions that most foreigners get, one question that always comes up around tax time is "do you have to pay taxes back home?" Well the answer to that is "yes" and "no." Yes I have to file my US taxes every year, but no I don't have to pay taxes.
Essentially since I live abroad the government says you don't have to pay American income tax if you make under 90 thousand usd. Which in Taiwan is pretty much impossible to make over that much money. Granted being the IRS it's not so simple and there are different rules for if you work for a US company, get paid in the US while living abroad, how long you've been abroad each year, etc. But for me and most Americans over here, we don't owe any money. That or the IRS just hasn't gotten to us yet for all misinterpreting the rules. Perhaps you can look forward to a new daily blog from prison.
The next question people will then ask is about Taiwanese taxes. Yep foreigners have to pay income tax in Taiwan, and the rate is both comparatively horrible and wonderful. Foreigners pay both 20% tax and 6% tax. For the first six months foreigners are here, they are taxed at 20%, and for the rest of they are taxed at 6%. So this means that if you here in January, than for half the year you are taxed at 20% and for the other half you are taxed at 6%. But if you arrive in June than for six months you are taxed at 20% and for only one month you are taxed at 6%. And if you arrive in July than you are are just out of luck and taxed at 20% for the whole time that year.
The good news is that actually once you have been here for six months and one day, you tax rate retroactively goes to 6% as well. What this means is that each year most foreigners get a big fat check from the tax office. Let me give the scenario. From January through June you are taxed at 20%, then from July through December you are taxed at 6%. When you go to file your taxes the next year (before the end of May) because you were here for over six months, your tax rate for the whole year is changed to 6%. This means they give you back the 14% extra they charged you the first half of the year. So usually in August your bank gets a nice direct deposit from the tax office.
What this means is that foreigners pay close attention to their six months. For example if somebody was planning to leave Taiwan for good, in April, they will probably decide to stay until July 1st and then leave. Also foreigners will think about this when deciding to go on vacations as your six months pause whenever you leave the country. So if you took a one week vacation in May, than your six months ends the second week in July. Essentially if you are here less than six months, your tax rate is 20% and you're not getting any of that back, so it's worth it to at least be here six months so you can get 14% back.
The picture above is the top part of the tax certificate that foreigners have to get to prove that they filed their income tax. It's one of the many documents that foreigners need to renew their visa. Also a good document to have when filing your US taxes.
Before I go, I want to say one thing. The tax office workers have always treated me extremely well. They are extremely friendly and patient, and they even will fill out the forms for you, you just give them your documents and they do it for you. And yes they haven't cheated me, since i already know what the result will be before I go, so there's never been any disparity. Oh yes I forgot to mention that in Taiwan you have to go in person to your local tax branch to file your Taxes. In america that probably sounds like a punishment, but here in Taiwan it's one of the few places I don't dread having to go. Kudos to all the helpful workers at the various tax offices I have been to over the years.
