To encourage small and medium-sized enterprises (SMEs) to raise employee salaries to retain talent, the government amended Paragraph 2 Article 36-2,of the Act for Development of Small and Medium Enterprises on August 7, 2024. If SMEs raise the average salary paid to the domestic junior employees, the SMEs can deduct up to 175% of the incremental annual gross salary payments, excluding statutory minimum wage adjustment, to the junior employees from its current year profit-seeking enterprise income. This policy applies retroactively from January 1, 2024, and will remain in effect until December 31, 2033.

The Beidou Office of NTBCA (National Taxation Bureau of the Central Area) indicated that the basic requirement for this tax incentive is to raise salaries for "junior employees." The term "junior employees" refers to local employees who sign an indefinite-term contract with an SME and whose salaries do not exceed a specified amount. According to the Ministry of Economic Affairs, the "specified amount" for junior employee salaries in the years 2024 and 2025 is: (1) For full-time employees, the monthly average regular salary is NT$63,000; (2) For part-time employees, their monthly average regular salary or monthly cumulative salary for hourly/daily wage employees must not exceed NT$63,000, and the average hourly wage for monthly-paid employees or hourly-paid employees must not exceed NT$394, and the daily wage must not exceed NT$3,152.

The Bureau provided an example. If Company X (which meets the SME criteria) increases its average salary in 2024 compared to 2023 and raises the salaries of four domestic junior employees (A, B, C, and D) who earn less than NT$63,000 per month by NT$2,000 each per month starting from January 2024, then the total increase in salary costs for 2024 would be NT$96,000 (NT$2,000 x 4 employees x 12 months). This increased salary cost can be fully reported as salary expenses and also applies to the salary increment deduction benefit, which would reduce the business income by NT$72,000 (NT$96,000 × 75%) when filing the 2024 profit-seeking enterprise income tax.

The Bureau specifically reminds that businesses that meet the SME criteria and wish to apply for the salary expense increment deduction tax benefit should follow the required format when filing their final tax return, and ensure that the deduction amount is included in the company's basic income. If not reported before the filing deadline, the deduction benefit will not be applicable.

If you have any questions, please call our toll-free service number 0800-000321 for consultation, and we will do our best to serve you.

Contact person: Profit-Seeking Enterprise Income Tax Section, Ms. Wen
Tel: (04)8871204 ext. 102.