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Q9:What applicable deductions can a resident of the R.O.C. claim when calculating his/her income tax?

Answer:

The individual income tax for a resident of the R.O.C. shall be computed by a progressive rate on his/her net consolidated income which shall be the annual gross consolidated income minus the exemptions, deductions, and basic living expense difference. The exemptions, deductions, and basic living expense difference for the fiscal year of 2022 are stated as follows:

1. Exemptions: There is an NT$92,000 exemption for each person (including taxpayer, his/her spouse, and dependents) in the filing of income tax return of 2022. If the taxpayer, his/her spouse, and their lineal ascendants have attained 70 years of age, the exemption is NT$138,000 in the filing of income tax return of 2022.

2. Deductions: A resident of the R.O.C. can claim either the standard deduction or itemized deductions and special deductions.

(1) Standard deduction:

There is an NT$124,000 deduction for a single person in the filing of income tax returns and an NT$248,000 deduction for a married couple filing a joint return.

(2) Itemized deductions (original receipts or documents should be attached according to the tax law). There are 6 items included:

  1. Donation: This deduction shall not exceed 20% of the taxpayer’s consolidated gross income. However, donations made to national defense, military, or to the government are fully deductible.
  2. Personal insurance premiums: Premiums paid for life insurance, labor insurance, employment insurance, national pension and insurance for military personnel, public functionaries and teachers, by the taxpayer, his/her spouse, and their lineal dependents 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.
  3. Medical and maternity expenses: Deductions can be claimed following the related law or regulations.
  4. Losses from disaster: Deductions can be claimed following the stipulated law or regulations.
  5. Interest paid on a loan for an owner-occupied residence: Under the conditions that the residential house entitled for the deduction is to be located within the territory of the R.O.C., and that the deduction shall not exceed NT$300,000 for only one house each year. However, in the case that the taxpayer also claims his/her interests as a special deduction for savings and investment, such special deduction shall be subtracted from the above-mentioned interests.
  6. Rental expense: Rental paid for houses in the R.O.C., purely for the taxpayer, his/her spouse, and lineal dependents residence, rather than those used by business for profit, are deductible. The maximum deduction for rental expense is NT$120,000 for each annual tax return. There is no deduction for individuals who have filed “Mortgage interest paid on a loan for an owner-occupied residence.”

(3) Special deductions:

  1. Losses from property transactions: Deductions shall not exceed the gains from property transaction filed for the same year.
  2. Special deductions for savings and investment: Deductions for each household shall not exceed NT$270,000 per year.
  3. Special deduction for disability: Deductions for each disabled person (R.O.C. authority registration required) is NT$207,000 in filing the tax return.
  4. Special deduction for tuition: For each annual return, the maximum deduction for tuition fee is NT$25,000 for each child attending college or university.
  5. Special Deduction for Pre-School Children: For a taxpayer who has children under or equal to 5 years of age, and his/her circumstances are in compliance with applicable laws, the amount of the deduction for pre-school children is NT$120,000 per child per year if his/her circumstances do not fall under any of the conditions. (see Notes)
  6. Special Deduction for Long-Term Care: From 2019, the taxpayer, his or 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, must be in compliance with applicable laws and 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)

Notes:

  1. 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).(This i. must be rewritten. The grammar is not correct, nor is the idea complete.)
  2. The amount of the basic income of the taxpayer is greater than NT$6,700,000.

(4) Basic Living Expense Difference: The total basic living expense shall be calculated in accordance with the expense of basic living for each person, NT$196,000 announced by the Central Authority in2022, 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 deductions), and 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.

In the case that a resident of the R.O.C. departed and did not return during a taxable year, the amounts for exemptions, standard deduction, and basic living expense shall be calculated in proportion to the length of stay in the R.O.C. during that year.

Table of progressive tax rates for the year of  2022 (Unit: NT$)

The Table of Progressive Tax Rates for the Year 2022
Net Taxable Income × Rate Progressive difference = Tax Payable
0~560,000 × 5% 0 = Tax Payable
560,001~1,260,000 × 12% 39,200 = Tax Payable
1,260,001~2,520,000 × 20% 140,000 = Tax Payable
2,520,001~4,720,000 × 30% 392,000 = Tax Payable
4,720,001 and above × 40% 864,000 = Tax Payable

 

Last updated:2023-07-06