Payroll and Employment Taxes in Taiwan

Overview of Payroll Taxes in Taiwan

Understanding Taiwan's payroll tax system is essential for both small businesses and large enterprises operating in this dynamic East Asian economy. Employers in Taiwan must navigate several key tax obligations, including income tax withholding, labor insurance contributions, national health insurance, employment insurance, and pension fund contributions. The complexity of Taiwan's payroll system presents unique challenges, particularly for international businesses unfamiliar with local regulations. Non-compliance can result in significant penalties, damage to your company's reputation, and strained relationships with employees and authorities.

This article aims to provide a clear roadmap for understanding and managing payroll taxes in Taiwan, covering everything from calculation methods to filing deadlines, helping you maintain compliance while operating efficiently in Taiwan's business environment.

Fiscal Year in Taiwan

1 January - 31 December is the 12-month accounting period that businesses in Taiwan use for financial and tax reporting purposes.

Payroll Cycle in Taiwan

The payroll cycle in Taiwan is usually monthly, with employees being paid by the 15th of each month.

Minimum Wage in Taiwan

As of 1 January 2025, the minimum wage rate in Taiwan is:

• Monthly minimum wage: TWD 28,590
• Hourly minimum wage: TWD 190

This is a modest increase from the previous minimum wage rates of TWD 27,470 monthly and TWD 183 hourly.  The minimum wage in Taiwan is governed by the Labor Standards Act – it’s typically reviewed annually by the government, taking into account economic conditions, inflation rates, and social factors.

Bonus Payments in Taiwan

Though not obligatory, employees in Taiwan often receive a 13-month and 14th month salary, which is typically paid before Chinese New Year. Additionally, festival bonuses are often given before the Dragon Boat Festival and Mid-Autumn Festival.

How is Payroll Calculated in Taiwan?

Payroll calculation in Taiwan involves several components that affect employee salaries. The process begins with determining the employee's gross salary, which includes base pay, allowances, bonuses, and other compensation. From this amount, employers must calculate and deduct mandatory contributions for both the employer and employee.

The calculation process includes:

1. Determining the gross salary based on contractual working hours and agreed compensation.

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2Calculating mandatory deductions including:            

           
• Labor Insurance (employer: 8.05%, employee: 2.3%)
           
• National Health Insurance (employer: 4.84%, employee: 1.55%)
           
• Employment Insurance (employer: 0.7%, employee: 0.2%)
           
• Income tax withholding (based on residency status and progressive tax rates)
         

3Computing employer contributions such as:            

           
• Labor Pension (minimum 6% of monthly wage)
           
• Occupational Accident Insurance (0.11% to 0.93% depending on industry risk)
           

4. Determining net pay by subtracting all employee deductions from gross salary

All calculations must adhere to Taiwan's salary classification tiers and contribution caps established by the government.

Types of Payroll Taxes in Taiwan

Taiwan has several distinct payroll taxes, each with specific regulations that employers must follow. These taxes fund various social welfare programs and government services. Understanding each tax type is crucial for proper payroll management and compliance.

Labor Insurance

Labor Insurance (勞工保險) is a mandatory social security program in Taiwan that provides coverage for disability, death, and retirement pensions. The total contribution rate is approximately 11.5%, with employers responsible for 8.05% (about 70% of the total). Employee contributions account for 2.3% (20%), with the government covering the remaining 10%. Contributions are capped at NTD 45,800 monthly and are calculated based on the employee's salary tier. Employers must remit these contributions monthly, with penalties for late payment ranging from fines to potential criminal charges for severe non-compliance.

National Health Insurance

National Health Insurance (全民健康保險) provides universal healthcare coverage for residents in Taiwan. The total contribution rate is approximately 5.17%, with employers covering 4.84% (60% of the premium). Employee contributions are about 1.55% (30%), with the government subsidizing the remaining 10%. Contributions are capped at NTD 313,000 monthly.

This insurance covers comprehensive medical services, including hospitalization, outpatient care, and prescription medications. Payments must be made monthly, and failure to contribute can result in fines and interest charges, as well as potential coverage issues for employees.

Labor Pension

The Labor Pension system (勞工退休金) requires employers to contribute a minimum of 6% of an employee's monthly salary to their individual pension account. This contribution is capped at NTD 150,000 monthly and is fully paid by the employer. The system aims to provide retirement security for workers in Taiwan. Foreign individuals typically cannot participate in this program.

Employers must make timely monthly contributions, with penalties for non-compliance including fines and potential legal action. The pension funds are managed by the Bureau of Labor Insurance and accrue interest over time to support employees in retirement.

How to Set Up a Payroll in Taiwan?

Registering with Taiwan Authorities

To establish a payroll system in Taiwan, businesses must first register with several government authorities. Begin by registering your company with the Ministry of Economic Affairs to obtain a business registration certificate. Next, register with the National Taxation Bureau to receive a tax ID number for tax filing purposes. You'll also need to register with the Bureau of Labor Insurance for labor insurance and pension contributions, and with the National Health Insurance Administration for health insurance coverage.

Each registration requires specific documentation, including company incorporation papers, director identification, and business operation details. These registrations must be completed before hiring employees to ensure compliance with Taiwan's employment regulations.

Choosing a Payroll System

Selecting the right payroll system is crucial for efficient operations in Taiwan. Consider these options:

   
• In-house processing - Suitable for small businesses with simple payroll needs
   
• Outsourced payroll services - Ideal for companies wanting to focus on core business activities
   
• Cloud-based payroll software - Offers flexibility and accessibility
   
• Playroll - Provides comprehensive payroll management with Taiwan-specific compliance features
   
• Local accounting firms - Offer expertise in Taiwan's tax regulations
   
• Enterprise resource planning (ERP) systems - Integrate payroll with other business functions

When choosing a system, consider factors like the size of your workforce, budget constraints, compliance requirements, and integration needs with existing systems. Ensure the solution can handle Taiwan's specific tax calculations, contribution rates, and reporting requirements.

Onboarding Employees for Payroll

Proper employee onboarding is essential for accurate payroll processing in Taiwan. When hiring new employees, collect all necessary documentation including their national ID or ARC (for foreigners), tax code number, bank account details for salary deposits, and personal information such as address and contact details.

You'll need to register new employees with the Bureau of Labor Insurance within 5 days of employment and with the National Health Insurance Administration. Create individual employee records in your payroll system with accurate salary information, tax status (resident or non-resident), and any applicable allowances or deductions. Ensure employees understand their payslip components and the various statutory deductions that will apply to their salaries.

Step-by-Step Payroll Processing in Taiwan

Collecting Timesheets and Attendance Data

Accurate time tracking is the foundation of compliant payroll processing in Taiwan. Employers must maintain detailed records of employee working hours, including regular hours, overtime, and leave days. Taiwan's labor laws specify strict overtime calculations and maximum working hours, making precise time tracking essential.

Companies typically use electronic time-tracking systems, biometric scanners, or digital attendance apps to record employee hours. For remote workers, specialized software can track login times and activity. All attendance records should be reviewed and approved by supervisors before payroll processing begins, and these records must be maintained for at least five years to comply with Taiwan's labor inspection requirements.

Calculating Salaries and Deductions

Once attendance data is verified, the next step is calculating salaries and mandatory deductions. Start with the employee's gross salary based on their contractual rate and actual hours worked. Calculate overtime pay according to Taiwan's Labor Standards Act, which requires 1.33x regular pay for the first two hours and 1.66x for additional hours.

Then compute statutory deductions including Labor Insurance (employee portion: 2.3%), National Health Insurance (employee portion: 1.55%), Employment Insurance (employee portion: 0.2%), and income tax withholding based on the employee's tax residency status. For residents, apply progressive tax rates ranging from 5% to 40%; for non-residents, apply a flat 18% rate. Remember to account for any additional voluntary deductions such as employee pension contributions.

Generating and Distributing Payslips

After calculating salaries and deductions, generate detailed payslips for each employee. Taiwan's regulations require payslips to include specific information: gross salary, itemized deductions, net pay, overtime calculations, and contribution details for social insurance programs. Most payroll systems can automatically generate compliant payslips.

Distribute these to employees either electronically through secure portals or email, or in physical form if preferred. Ensure that distribution methods protect employee privacy and confidentiality of salary information. Many companies in Taiwan are transitioning to electronic payslips to reduce paper waste and streamline distribution, but regardless of format, payslips should be provided to employees on or before payday each month.

Submitting Payroll to Authorities

Employers in Taiwan must submit various payroll reports to government authorities according to strict schedules. Monthly tax withholdings must be remitted to the National Taxation Bureau by the 10th day of the following month. Labor Insurance, National Health Insurance, and Employment Insurance contributions should be paid to their respective agencies by similar deadlines.

For the Labor Pension fund, contributions must be remitted to the Bureau of Labor Insurance by the end of each month. Each submission requires specific forms and may be completed online through the respective government portals or through authorized financial institutions. Maintain detailed records of all submissions and payment receipts, as these may be required during tax audits or labor inspections.

Paying Employees

In Taiwan, salaries must be paid at least once per month, with payment typically occurring within 10 days after the end of the salary period. Most employers use direct bank transfers as the primary payment method, which requires collecting and verifying employee bank account information. Some companies, particularly smaller businesses, may still use cash payments, though this is becoming less common. Regardless of payment method, employers must provide clear documentation of payment and ensure funds are transferred on the designated payday.

Taiwan's banking system facilitates efficient transfers, with most employees receiving their salaries within 24 hours of processing. For foreign employees, consider options that minimize currency conversion fees if they prefer receiving funds in currencies other than New Taiwan Dollars.

How to Submit Payroll Tax in Taiwan

   
• Online Filing System - The National Taxation Bureau offers an e-filing platform for tax submissions, allowing employers to submit withholding tax returns electronically. This is the most efficient method and provides immediate confirmation of submission.
   
• Bank Transfer - Employers can remit tax payments through authorized financial institutions. The payment slip must include the company's tax ID number and the relevant tax period.
   
• In-Person Filing - For smaller businesses, tax returns can be submitted in person at local tax offices. This requires completing paper forms and may involve longer processing times.
   
• Authorized Accounting Services - Many businesses use certified accounting firms to handle tax submissions, ensuring compliance with current regulations.
   
• Mobile Applications - The Taiwan government has introduced mobile apps for certain tax filings, though these are more commonly used for individual rather than corporate tax submissions.

Payroll Tax Due Dates in Taiwan

Payroll Contributions in Taiwan

Understanding the tax obligations for both employers and employees is crucial when operating in Taiwan's business landscape. This section explains how taxes and statutory fees affect payroll and individual earnings in Taiwan.

Employer Tax Contributions

Employer payroll contributions are generally estimated at an additional 32.85% on top of the employee salary in Taiwan.

Employee Payroll Tax Contributions

In Taiwan , the typical estimation for employee payroll contributions cost is around 26.78%.

Individual Income Tax Contributions

In Taiwan, individual tax rates are progressive, and tax residents are also subject to a flat-rate Income Basic Tax (IBT) of 20%, applicable to both locals and expats staying in Taiwan for 183 days or more in the tax year.

Pension in Taiwan

A Taiwanese company contributes 6% of Taiwanese employees' earnings to pension funds. Employees can voluntarily contribute 5.1% to National Pension Programs. Labor insurance premiums at 11% cover disability, old-age, and survivor annuities, with employees contributing 6% of monthly earnings to a mandatory individual account.

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Managing Common Payroll Challenges in Taiwan

Global employers operating in Taiwan often encounter unique payroll challenges that can affect compliance and efficiency, like navigating evolving tax laws and managing employee data. With a need for real-time accuracy, modern organizations must develop strategies to overcome these challenges effectively. Below, we explore some of the most common payroll hurdles and provide actionable solutions to streamline payroll processes in Taiwan.

Maintaining Accurate and Detailed Payroll Reports

Maintaining accurate global payroll reports is often challenging due to currency exchange complexities, data integration issues, and the need to keep employee information up-to-date – including tax information, hours worked, leave balances, and any changes in salary or job status. Generating accurate reports is easy with a comprehensive payroll automation tool that consolidates fragmented data sources, and can keep track of employee payments and deductions.

Keeping Up With Ever-Changing Tax Laws & Compliance Laws

In Taiwan, tax laws and compliance regulations can change frequently, presenting a significant challenge for global employers. Monitoring updates to federal, state, and local tax codes is crucial to avoid non-compliance and costly penalties, but requires significant time and resources. Partnering with local experts or a reputable global HR platform is an effective way to maintain compliance. These services can help employers stay compliant with evolving regulations while freeing up time for more strategic work.

Consolidating Multi-Vendor Payroll Analytics

Managing payroll across multiple vendors often leads to fragmented data and inefficiencies, making it difficult to consolidate analytics. These challenges can hinder decision-making, especially when trying to gain a clear view of workforce costs and trends. To address this, organizations can invest in a centralized payroll management system that unifies data from multiple vendors. A consolidated platform simplifies payroll tracking, ensures data accuracy, and provides actionable insights into payroll expenditures.

Integrating Multiple HR & Payroll Systems

Global companies are prone to using multiple HR or payroll systems across regions, which can easily lead to fragmented payroll data, increasing the risk of delays and errors in employee compensation. To combat this, seamless integration between payroll and other systems is critical.

Payroll management systems that connect with existing HR and financial platforms can help streamline workflows by reducing manual inputs and ensuring that all departments operate with up-to-date, accurate information. In turn, this helps guarantee on-time, accurate payroll, boosting employee satisfaction.

What Does a Global Payroll Management Platform Cover?

A global payroll management platform is a software solution designed to streamline and automate the payroll processes for organizations with employees across multiple countries. It helps ensure accurate and timely payment while maintaining compliance with legal and regulatory requirements in Taiwan.

Key functions of a payroll management platform can include:

   
• Consolidate payroll data: Streamline fragmented payroll data into one source of truth when you’re operating in multiple regions.
   
• Analytics and reporting: Advanced capabilities to analyze payroll data and generate automated reports per region.
   
• Monitor and standardize payroll: Get an accurate view of employee costs, bonuses, and taxes per region, catch variances, and standardize payroll processes across regions to minimize errors.
   
• Compliance and record-keeping: Maintains accurate payroll records and ensures adherence to labor laws and regulations, reducing the risk of legal issues.
   
• Employee self-service: Provides portals where employees can access pay stubs, update personal information, and manage benefits selections.

How Playroll Can Streamline Payroll & Taxes in Taiwan

Expanding globally is an exciting milestone for any company, but it comes coupled with complex payroll challenges. It doesn’t have to be complicated. At Playroll, our easy-to-implement global payroll management software combines automation with hands-on support to make global payroll truly simple. Here's how Playroll helps:

   
• Multi-Vendor Integration: Our platform syncs seamlessly with your providers and in-house systems to unify global payroll services in one platform.
   
• Standardize Payroll Processes: Unify your operations in one dashboard to ensure payroll is running smoothly globally, with advanced approval flows and reports.
   
• Improve Governance & Compliance: Improve compliance by centralizing all your compliance tasks and processes. Easily track your payment obligations, with digitized audit trails.
   
• Advanced Reporting: Access and configure your data, your way, with a comprehensive suite of payroll analytics and reporting tools.