The Legislative Yuan adopted the amendments to the Income Tax Law (hereinafter, the “Law”) during the 2nd Meeting of the 1st Extraordinary Session of the 4th Session of the 9th Term Legislative Yuan on January 18, 2018. The amendments came into effect on January 1, 2018. The amendments are highlighted below:
1. The upper limits on various deduction items in consolidated income taxes are raised to reduce the burdens on salary earners.
Article 17 of the Law as amended increases the standard deduction for consolidated income taxes from NT$90,000 to NT$120,000. If there is a spouse, the deduction is doubled. In addition, the special deduction on salary income and the mentally and physically handicapped is increased from NT$128,000 to NT$200,000. The special deduction on preschool children is increased from NT$25,000 to NT$120,000 per child. As a result, income taxes are exempt if an individual’s annual salary is less than NT$408,000, or the annual salary of a double income family is less than NT$816,000, or the annual salary of a double income family with two children below the age of five is less than NT$1,232,000.
2. The maximum tax rate on individual income taxes is reduced to 40%.
Article 5 of the Law as amended deletes the requirement that the part of the net consolidated income in excess of NT$10 million shall be subject to a tax rate of 45% and reduces the maximum tax rate of consolidated income taxes to 40%.
3. The manners in which income taxes on dividends earned by domestic shareholders are levied are adjusted.
Article 15, Paragraph 4 of the Law as amended provides that if taxpayers, their spouses and their dependents eligible to apply for exemptions for dependents receive the distribution of profit-seeking income under Article 14, Paragraph 1, Category 1, which is a dividend or earning distributed by their invested companies, cooperatives and other juristic persons for fiscal year 1998 or subsequent years, the deductible may be calculated by 8.5% of the dividend and the earning combined and applied against the taxable amount of the consolidated income tax return assessed under Paragraph 2 for the year. The deductible for each tax filing household shall be limited to NT$80,000.
4. The integrated income tax imputation system and the imputation credit account of a profit-seeking enterprise are abolished.
These amendments also abolish the integrated tax imputation system and delete the imputation credit accounts for shareholders which are set up by a profit-seeking enterprises, as well as relevant records, calculation and penal provisions, to reduce taxation disputes and streamline the tax regime and tax administration.