How do “residents of the R.O.C.” file income taxes? What exemptions and deductions can residents claim when calculating their income tax?
his or her net consolidated income which shall be the annual gross consolidated income
minus the exemptions and deductions. The exemptions and deductions for the fiscal year
of 2017 and 2018 are stated as follows:
1. Exemptions: There is an NT$88,000 exemption for each person (including taxpayer, his/her spouse and dependents) in the filing of income tax return of 2017 and 2018. If the taxpayer, his/her spouse and their lineal ascendants have attained 70 years of age, the exemption is NT$132,000 in the filing of income tax return of 2017 and 2018.
2. Deductions: Foreigners can claim either standard deduction or itemized deductions and special deductions.
(1) Standard deduction:
There is a NT$90,000 deduction for a single person in the filing of income tax returns and an NT$180,000 deduction for a married couple filing a joint return of 2017.(For 2018, there is a NT$120,000 deduction for a single person in the filing of income tax returns and an NT$240,000 deduction for a married couple filing a joint return)
(2) Itemized deductions (original receipts or documents should be attached according to the tax law). There are 6 items included:
a. Donation: The deduction shall not exceed 20% of the taxpayer’s consolidated gross income. However, donations made to national defense, military or to the government and ancients are fully deductible.
b. Personal insurance premiums: The insurance premiums for life insurance of the taxpayer, his/her spouse and lineal dependents could be claimed. Both the insured and the applicant shall file the return jointly, and the deduction shall not exceed NT$24,000 for each insured per year. (No limitation for National Health Insurance payments.)
c. Medical and maternity expenses: Deductions can be claimed following the related law or regulations.
d. Losses from disaster: Deductions can be claimed following the stipulated law or regulations.
e. Mortgage interest paid on a loan for an owner-occupied residence: Under the conditions that the residential house entitled for the deduction is to be located within the territory of the R.O.C., and that the deduction shall not exceed NT$300,000 for only one house each year. However, in the case that the taxpayer also claims his/her interests as a special deduction for savings and investment, such special deduction shall be subtracted from the above-mentioned interests.
f. Rental expense: Rental for houses in the R.O.C. paid by the taxpayer, his or her spouse and lineal dependents filing jointly and used as their own residence rather than used for business or performing professional services can be claimed. The maximum deduction for rental expense is NT$120,000 for each tax return. There is no deduction can be claimed if he or she also claim the deduction of “Mortgage interest paid on a loan for an owner-occupied residence”.
(3) Special deductions:
a. Losses from property transactions: Deductions shall not exceed the gains from property transaction filed for the same year.
b. Special deduction for salary or wages: Each person may claim a deduction for his or her salary only up to a maximum of NT$128,000 for 2017(maximum of NT$200,000 for 2018), and he or she may claim a full deduction of the amount of the salary if it is less than the above maximum.
c. Special deductions for savings and investment: Deductions for each tax return shall not exceed NT$270,000 per year.
d. Special deduction for disability: Deductions for each disabled person (R.O.C. authority registration required) is NT$128,000 for 2017 (NT$200,000 for 2018).
e. Special deduction for tuition: For each tax return, the maximum deduction for tuition fee is NT$25,000 for each child attending college or university.
f. Special deduction for pre-school children: Starting from 2012, for a taxpayer who has children under or equal to 5 years of age, and his or her circumstances is in compliance with applicable laws, deduction for pre-school children is NT$25,000 per child for 2017 (NT$120,000 per child for 2018).
3.Basic Living Expense Difference: The total basic living expense shall be calculated in accordance with the expense of basic living for each person, NT$166,000 announced by the Central Authority in 2017, multiplied by the number of taxpayer, spouse, and dependents in one tax return. If the amount of basic living expense is higher than the sum of exemptions, standard deduction (or itemized deduction), and special deduction for salaries or wages, the difference can be used as an additional deduction from the gross consolidated income.
In the case that a resident of the R.O.C. departed and did not return during a taxable year, the amounts for exemptions, standard deduction and basic living expense shall be calculated in proportion to the length of his or her stay in the R.O.C. during that year.