Residents of the R.O.C. are entitled to have the following exemptions and deductions:
(1) Exemption: There is an NT$88,000 exemption for each taxpayer, spouse, and dependent. In the case that the taxpayer, his/her spouse, or their lineal ascendants have attained seventy years of age, the exemption will be NT$132,000. The dependents must be:
- Lineal ascendants of the taxpayer or his/her spouse having attained sixty years of age or being incapable of earning a livelihood and being supported by the taxpayer.
- Children of the taxpayer under twenty years of age, or although having attained twenty years of age, who are supported by the taxpayer by reason of school attendance or are by reason of physical or mental disability incapable of earning a livelihood.
- Brothers and sisters of the taxpayer or his/her spouse under twenty years of age, or although having attained twenty years of age, who are supported by the taxpayer by reason of school attendance or are by reason of physical or mental disability incapable of earning a livelihood.
- Other relatives or members of the family of the taxpayer within the meaning of Subparagraph 4, Article 1114, or Paragraph 3, Article 1123 of the Civil Code under twenty years of age or although having attained twenty years of age, who are supported by the taxpayer by reason of school attendance or are by reason of physical or mental disability incapable of earning a livelihood, and live together with and depend on the taxpayer.
To claim exemption for the spouse or the dependent (excluding other dependents, i.e., aunt or uncle, cousin, grandchild, and nephew or niece) who does not reside with the taxpayer in the R.O.C., the household registration or the official certificates of the dependent should be submitted.
(2) Deductions: A taxpayer may select either the “Standard Deduction” or “Itemized Deductions” and may, in addition thereto, declare special deductions:
- Standard Deduction: There is an NT$120,000 deduction for a single person and an NT$240,000 deduction for a married couple filing a joint return (even if only one of the couple had income).
- Itemized Deductions: Original receipts for (a) to (f) deductions below must be attached.
- Donation: Donation made to officially-registered educational, cultural, or public welfare and charitable organizations or agencies is deductible. The deduction should not be more than 20% of the gross consolidated income. However, donation made to national defense, for troop morale, to the government, or for the maintenance and repair of antiquities or historic constructions under Article 101 of the Cultural Heritage Preservation Act is fully deductible. The taxpayer should provide evidence of official registration.
- Insurance Premiums: Premiums paid for life insurance, labor insurance, national annuity insurance, employment insurance and insurance for military personnel, public functionaries and teachers, of the taxpayer, his/her spouse, and their lineal dependents filing jointly are deductible. However, the deductions, excluding those for national health insurance, shall not exceed NT$24,000 for each person per year; premiums paid for national health insurance are fully deductible.
- Medical and Maternity Expenses: Medical and maternity expenses incurred by the taxpayer, his/her spouse, and their dependents filing jointly and supported by the taxpayer are deductible, provided that the payment so made is limited to public hospitals, specially contracted hospitals or clinics for the National Health Insurance, or those hospitals having complete and correct accounting records as recognized by the Ministry of Finance. However, no deduction shall be allowed for the portion covered by insurance payments. Claims for deductions of fees paid to foreign hospitals must be supported by evidence of the officially registered status of the hospital concerned. From July 6th, 2012, a taxpayer, his/her spouse, or any dependent in a joint return, who needs long-term nursing services due to lack of capacity to take care of themselves, may submit the medical payment receipts from the hospitals or clinics mentioned above for the deduction.
- Losses from Disasters: Losses from disasters or force majeure inflicted on the taxpayer, his/her spouse, and their dependents filing jointly are deductible. However, no deduction may be made for the portion of losses where insurance benefits and/or relief have been received. To claim a deduction, the taxpayer should apply to the tax authorities for an investigator to appraise the losses within 30 days after the occurrence of the disaster.
- Mortgage Interest Paid on a Loan for an Owner-Occupied Residence: A taxpayer, his/her spouse, and their dependents filing jointly borrowing money from a financial organization to purchase a house or other property in the R.O.C. for use as an owner-occupied residence may deduct the interest paid on the loan from the gross income on one filing unit per year up to a limit of NT$300,000. Such a deduction is limited to one house or other property only. However, if the taxpayer also claims a special deduction for savings and investment (please refer to item (b) of C. of (2) of Article 12), the special deduction should be subtracted from the above-mentioned interest.
- Rental Expense: Rent for housing in the R.O.C. paid by a taxpayer, his/her spouse, and their lineal dependents filing jointly and used as their own residence rather than for business or performing professional services, may be deducted from their consolidated income up to and within a limit of not more than NT$120,000; however, no deduction can be claimed if he/she also claims the deduction for mortgage interest paid on a loan for an owner-occupied residence. To deduct the rental expense, the following documents must be attached:
i. Copy of the lease contract and payment receipt (such as receipt from landlord, ATM receipt, or remittance paper).
ii. The certificate of a family member who has registered residence in the Household Registration Office or registered residence on the ARC for the related fiscal year, or the taxpayer’s written statement to state that the house is for self-used residence only.
- Special Deductions:
- Special Deduction for Property Transaction Losses: Losses from property transactions may be deducted from the gains from property transactions for the same year. However, losses arising from the sale of land or securities are not deductible. If the deductible amount exceeds the gains, the difference may be carried forward for up to three years.
- Special Deduction for Savings and Investment: Interest derived from deposits made in financial institutions and profits accrued from trust funds with the nature of savings, as well as dividends occurred from the transaction, gift, or inheritance of the tax-deferred stocks divided before December 31st, 1998 received by a taxpayer, his/her spouse, and the dependents filing jointly listed in his/her gross income return for taxation may be exempt from income tax in full, if the total amount of such income for the whole year does not exceed NT$270,000. If the amount exceeds NT$270,000, the deduction shall be limited to NT$270,000. However, the following kinds of interest are excluded from the special deduction for savings and investment:
i. The interest accrued from postal passbook savings under the provisions of the Post Savings and Remittances Act;
ii. The interest derived or accrued from government bonds, corporate bonds, financial bonds, and short-term commercial papers;
iii. The interest derived from asset-backed securities issued in accordance with the Financial Asset Securitization Act and the Real Estate Securitization Act;
iv. The interest derived from repo (RP/RS) trade whereby an individual purchases securities or short-term commercial papers as listed in preceding items ii. and iii from January 1st, 2010.
- Special Deduction for Disability:
There is an NT$200,000 deduction for each taxpayer, spouse, and dependent who is a mental patient or a disabled person. A copy of the disability identification issued by the relevant authority of the R.O.C. in accordance with the provision of applicable laws should be attached when claiming this deduction.
- Special Deduction for Tuition:
The taxpayer may claim a maximum deduction of NT$25,000 for each child attending college/university (the student certificate and tuition receipt should be attached when claiming the deduction). However, no deduction can be claimed for a child who is attending an open university, an open junior college, or a five-year junior college for the first three years, as well as collecting a government subsidy.
- Special Deduction for Pre-School Children: A taxpayer who has children under or equal to 5 years of age may claim the special deduction of NT$120,000 per child per year if his/her circumstances do not fall under any of the conditions. (see Notes)
- Special Deduction for Long-Term Care: From 2019, the taxpayer, his/her spouse or any dependent who has a physical or mental disability and requires long term care services, as announced by the Ministry of Health and Welfare, shall submit the relevant documents to claim the special deduction of NT$120,000 per person per year if his/her circumstances do not fall under any of the conditions. (see Notes)
i. After deducting the pre-school deduction and long-term care deduction, the taxpayer’s tax rate is equal to or greater than 20% or the tax rate of the taxpayer’s or his/her spouse’s separately computed salary or categorized income is equal to or greater than 20% (opting for the single tax rate of 28% on the total amount of the dividends and earnings computed separately is also included).
ii. The amount of the basic income of the taxpayer is greater than NT$6,700,000.
(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$182,000 announced by the Central Authority in 2020, 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), special deduction for savings and investment, special deduction for disability, special deduction for tuition, special deduction for pre-school children, and special deduction for long-term care, the difference can be used as an additional deduction from the gross consolidated income.
If a resident of the R.O.C. intends to depart and will not return within the same calendar year, the amounts for exemptions, standard deduction, and basic living expense shall be calculated in proportion to the total number of days he/she stayed in the R.O.C.