Taiwan has a score of 80.1 in economic freedom and is the 6th economic free country. The country has been in continuous economic growth for the past years. The service sector and industrialization are the major contributors to the economic development in Taiwan.

Major Economic Hubs:

Taipei, Kaohsiung, Taichung

Skills in Demand:

Teaching And Academic Jobs, IT Jobs, Finance And Banking Jobs, Sales Jobs

Resident Tax Information

All residents of Taiwan are taxed on their worldwide income; however, foreign nationals and non-residents are taxed on their income derived in Taiwan.

Taiwan follows a progressive tax model for all residents that is as below

The tax rate for non-resident individuals in Taiwan is 18%. However, if they stay over 90 days but less than 183 then this flatrate applies.

Income from foreign sources is taxed at a rate of 20%. As per the Income Tax Regulations, resident and non-resident individuals (residing in Taiwan for more than 183 days) are additionally taxed an additional amount on their income.

A standard deduction for resident employees includes

• TWD 124,000 for single taxpayers and
• TWD 240,000 for married individuals as joint deductions/filings

Social Security

All employers and employees must contribute to social security in Taiwan. The benefits covered by the Taiwanese social security include

• Labour  insurance
• Health  insurance
• Pension fund
• Unemployment insurance

Statutory Benefits

There are certain statutory benefits that an employer must pay their employees as a part of their compensation package. These mandatory benefits include

13th-month pay

The 13th-month pay is a traditional custom in Taiwan. It's common for employers to make this payment during the Lunar New Year, and it must be written into your contract as well.

Social security benefits

The Taiwanese social security covers the following benefits for all resident and nonresident employees

• Maternity benefits
• Unemployment benefits
• Pension benefits
• Health insurance
• Sick pay
• Labour insurance
  

The Taiwanese labor laws require all employers to provide a certain number of leaves, which are outlined in an employee's compensation package. Employers must also make these Statutory Leaves clear through contract negotiations with potential new hires.

Work hours

A workweek in Taiwan consists of 40 hours weekly. An employee can work 8 hours per day, and a workweek can be for five days or six days. Employers must give two days off for every seven days an employee works, which can be divided as

• One day of mandatory leave
• One day of flexible leave

When an employer requires their employees to work additional hours due to business requirements, they must pay the employee overtime.

The overtime pay is as follows:

• First two hours: 34%  of an employee’s regular salary
• Next two hours: 167%  of an employee’s regular salary

Fringe Benefits

Fringe benefits are provided to employees in addition to statutory benefits, statutory leaves, and compensation. Although certain monetary fringe benefits are taxable, certain benefits are exempt from income tax.

• Flexible working hours
• Additional paid annual leave
• Office equipment
• Company vehicles
• Meal vouchers

Exempt Benefits

• Certain exempt benefits in Taiwan include the following
• Insurance premiums up to TWD 24,000 per annum per employee (this is applicable for group life insurance)
• Calamity losses
• Contributions toward charity
• Medical expenses
• Contributions toward social security
• Interest paid on loans

Long-term Incentives

Long-term incentives are a great way to attract and retain top employees. These types of benefits have an horizon over 12 months, so they key people in your organization will be motivated by them.

Commonly provided long-term incentives in Taiwan include

• Employee stock options (most commonly offered as phantom stocks)
• Performance-based incentives, and/or
• Private life insurance, health insurance, and/or dental cover

Termination Process

Dismissal of an employee is permissible for the following reasons:

• Closure of business or transfer of ownership.
• Company operations are suspended for more than one month by force.
• Change of company business nature, requiring a reduction in the number of employees, and there are no suitable job openings for redundant employees.
• The employee is confirmed to be incompetent to carry out the work assigned to him or her.
• A notice and pay severance to the employee is needed; unless an employee misrepresents facts at the time of signing the employment contract, violence against the employer, the employer’s family, or fellow employees, the employee is absent from work for three consecutive days or for six days in a month without justifiable reason, or the employee causes damage purposefully.

Notice Period

Taiwanese employees under their probationary period will have up to 10 days of notice period. After probation, they are entitled to up to 30 days of notice period.

Severance Pay

If the employment began before 2005 under the Labor Standards Act, severance pay is equivalent to 1 month of average wages for each year of employment. Employees who have worked for less than 1 year receive prorated severance pay.

If the employment began after 2005 under the Labor Pension Act, severance pay is calculated based on one month’s average wages for each year of employment. However, the amount paid for each year is equal to 50% of the employee’s average monthly salary.