The National Taxation Bureau of Kaohsiung, Ministry of Finance stated that the computation of salary and wages income could adopt the better of Fixed Amount Deduction or Necessary Expense Deduction as announced by the President on July 24, 2019. Starting from May next year (2020), income earners can adopt the most advantageous option for the filing of 2019 Individual Income Tax.
The Bureau stated that, apart from subtracting NT$200,000 from the 2019 salary income as the special deduction for salary or wages, income earners may choose to deduct the actual necessary expenses from the salary income with the burden of proof for verification. The subtractable expenses shall be deemed necessary for and directly related to the services; be borne directly by the income earners; be material; and be with commonality requirements. The three types of necessary expenses are as follows:
1. Vocational clothing expenses: The expenses of purchase, rental, cleaning, and maintenance of special clothing which must be worn for performing an occupation or performance costumes. The annual deduction for each person is limited to 3% of the total salaries and wages in performance of his (her) vocation.
2. Upgrading training expenses: The training expenses of participating in courses at specified institutions for the specific skills or expertise which is required to perform duties, do work or follow legal requirements. The annual deduction for each person is limited to 3% of the total salaries and wages.
3. Vocational tool expenses: The expenses incurred in purchasing books, periodicals, and tools for performing duties or doing work. If the efficiency of vocational tools is not exhausted within two years and the expenditure exceeds a certain amount, such tool shall be depreciated or amortized. The annual deduction for each person is limited to 3% of the total salaries and wages in performance of his (her) vocation.
For example, the Bureau said that, Mr. Li who was a professional manager of a fund company earned NT$8 million in 2019. In order to understand the latest regulations and the operation of financial products to enhance his professional skills, Mr. Li takes professional courses at vocational training institutions approved by the government at his own expense. The amount paid thereby is NT$300,000 and it already exceeds his upper limit of training expenses, which is NT$240,000 (NT$8 million x 3%). Therefore, Mr. Li may deduct NT$240,000 from the salary income of NT$8 million, claiming the salary income of NT$7.76 million.
The Bureau reminded that, when filing the individual income tax with the necessary expense deduction, income earners shall fill in the Necessary Expenses Form and submit related proof(s) for the verification of tax authority. Where the total of necessary expense deduction is lower than the special deduction for salary or wages, income earners may file the special deduction without proof. If the balance is negative, the income amount shall be deemed as zero. In case of having any questions, income earners can dial the Bureau’s free service hotline (0800-000-321) for detailed information.
Contact: Miss Chang, the Revenue Officer of the Second Examination Division
TEL: 07-7256600 ext. 7256