Global Tax Alert | 12 March 2014

Taiwan’s Ministry of Finance introduces measures to raise tax revenues

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On 24 February 2014, Taiwan's Ministry of Finance (MOF) proposed tax reforms to increase tax revenues from NT$70 to NT$ 80 billion (US$2.3 billion to US$ 2.6 billion).

Proposed tax reforms

Increase in business tax for banking and insurance industries

Business taxes imposed on banking and insurance industries are proposed to be increased from the current 2% to 5%. The 2% business tax for other financial industries, such as the investment trust industry, will remain unchanged

Surtax Credit

Under the current law, a 10% surtax is assessed on a Taiwanese company's current year earnings if the earnings are not distributed to shareholders in the following year. However, the total surtax paid by the company may be used as a credit against a withholding tax on dividends distributed to nonresident shareholders in a subsequent period. The proposal would limit the amount of the credit to 50% of the surtax paid by the distributing company.


The proposed tax reforms have not been submitted to the Legislative Yuan for first review; accordingly it is still early to assess the full impact of the proposed tax reforms. However, a proposed 50% limitation on the surtax credit would increase nonresident shareholders' withholding tax liabilities. To minimize the effect, nonresident shareholders may consider receiving distributions from their subsidiaries of prior year's undistributed earnings before implementation of the proposal. Due to the complexities of creditable surtax calculations, seeking professional advice is recommended.

For additional information with respect to this Alert, please contact the following:

Ernst & Young (Taiwan), Taipei
  • Heidi Liu
    +886 2 2757 8888 ext 2705
  • Sophie Chou
    +886 2 2720 4000 ext 1610
  • Alice Chung
    +886 2 2720 4000 ext 2712
  • Anna Tsai
    +886 2 2757 8888 ext 1615
  • Michael Lin
    +886 2 2720 4000 ext 1608
Ernst & Young LLP, Asia Pacific Business Group, New York
  • Chris Finnerty
    +1 212 773 7479
  • Kaz Parsch
    +1 212 773 7201
  • Bee-Khun Yap
    +1 212 773 1816

EYG no. CM4250