The National Taxation Bureau of the Northern Area（NTBNA）, Ministry of Finance, indicated that interest income received by individuals from loan relationships is classified as Interest Income under Category 4, Paragraph 1, Article 14 of the Income Tax Act. This income must be included in the total income of the year of actual receipt and filed under the individual income tax return.

The Bureau provides the following example：In March 2021, Mr. A lent NT$15 million（NTD, same below） to Mr. B for an agreed period of 3 years, with interest calculated at an annual rate of 3% and payable in a lump sum upon repayment. Mr. B repaid the principal of NT$15 million on schedule in March 2024 and paid Mr. A interest of NT$1.35 million as agreed. However, Mr. A failed to declare this interest income in his individual income tax return for the year 2024. The Bureau investigated the omission and assessed the under-declared tax amount, along with a penalty.

The Bureau further states that the interest paid on private fund loans is not within the scope of income requiring withholding and filing as prescribed by Article 88 of the Income Tax Act. As such, no withholding or non-withholding certificates are issued. Nevertheless, individuals must still file the individual income tax return for received interest. Furthermore, because this interest is not derived from a financial institution, it does not apply as the “Special deduction for savings and investment” under Subparagraph 2, Paragraph 1, Article 17 of the same Act, and therefore may not be deducted from the gross consolidated income.

The Bureau specifically emphasizes, for interest income obtained from private loans, if taxpayers under-declared or failed to pay income tax due to temporary oversight or unfamiliarity with legal provisions, they can be exempt from punishment. This applies if the taxpayer voluntarily files a supplementary tax declaration with the tax authorities and makes supplementary payment covering the tax amount plus interest, as long as it is neither a case brought about by an informant, nor a case under investigation by the tax authorities, pursuant to Article 48-1 of the Tax Collection Act. If there are any questions, please visit the official website for relevant regulations or call the toll-free service number 0800-000321.

〔Contact person：Ms. Chung, Section Head of Individual Income, Estate and Gift Tax Division; Tel：（03）3396789, ext. 1420〕