To welcome the Year of the Snake (Year of the Little Dragon), Taiwan's new tax system was officially launched in 2025. Both individuals and businesses are facing a number of important tax changes. KPMG Taiwan has sorted out the key points of the withholding system, comprehensive income tax deduction adjustments, electronic invoice regulations and the new housing tax system, as well as relevant policies that need attention, to help you deal with tax declaration operations.
2025 4 new tax filing systems are on the way! Things to pay attention to during tax filing season in the Year of the Snake
1. Withholding obligation system: The scope of withholding agents has been revised, and time limits must be paid attention to.
Starting from January 1, 2025, the new withholding system of the Income Tax Law revised the withholding agent to "the legal person paying the income itself", including companies, cooperatives, sole proprietorships or partnerships, etc. In addition, the processing period for tax withholding by non-residents is similar to the withholding practice for residents. If there are more than 3 consecutive days of holidays, the period for payment of withheld taxes, declaration, verification and issuance of withholding vouchers can be extended by 5 days.
Shi Shuhui, deputy general manager of the tax department of KPMG Taiwan, reminded that withholding agents need to be familiar with the scope of withholding and relevant operating standards, especially the tax withholding procedures for non-residents. Enterprises should carefully review their internal operating procedures to ensure that they do not suffer fines due to operational errors.
2. Comprehensive income tax: The cost of basic living necessities has increased, and renters should also pay attention
When filing the 2024 comprehensive income tax in May 2025, the applicable personal basic living expenses will be increased to NT$ 210,000, an increase of NT$ 8,000 from the previous year. The personal minimum tax exemption amount in 2024 will also be increased from NT$ 6.7 million to NT$ 7.5 million, and other tax exemptions and deductions have also been increased. Including preschool deductions for young children, the applicable age is expanded to 6 years old, the deduction limit is increased to NT$ 150,000 for each child, and the deduction limit for the second and above children is increased to NT$ 225,000, and the original wealth exclusion clause is cancelled.
For renters, the upper limit of the deduction for house rental expenses has been increased to NT$ 180,000, and the itemized deduction has been changed to a special deduction. However, those who are subject to the wealth exclusion clause: those who are subject to a comprehensive income tax rate of 20% or above, those who calculate the tax payable separately based on the total amount of dividends and surplus of the reporting household at a tax rate of 28%, and those who are subject to the minimum tax burden system, will not be able to enjoy this discount.
3. Business tax: Adjustment of business tax threshold and tightened control of electronic invoices
There are two key amendments to the business tax-related regulations that have been implemented since January 1, 2025:
First, the threshold for business tax collection for small-scale business operators has been adjusted. The threshold for sales of goods (such as trading and manufacturing industries) is raised to NT$ 100,000 in monthly sales, and the monthly sales of services (such as decoration and advertising industries) is NT$ 50,000. If small-scale business operators do not reach this sales volume, they can be exempted from paying business tax and reduce their tax burden.
Second, the management regulations for electronic invoices are more stringent. Business operators are required to transmit the electronic invoices they issue and related necessary information (such as invoice corrections, cancellations, sales returns, purchase withdrawals or discounts) to the Ministry of Finance's electronic invoice integration service platform within the specified time limit. For those who fail to comply with the regulations, the IRS will notify them to make corrections within a time limit and impose a certain amount of fines; if the corrections are untrue or the corrections are not completed within the time limit, penalties may be imposed on a case-by-case basis.
The information storage time limit for electronic invoices has also been strengthened:
- If the buyer is a non-business person: the transfer must be completed within 2 days.
- If the buyer is a business person: the transfer must be completed within 7 days.
- The blank and unused electronic invoice track numbers and head office and branch number allocation files should be deposited within 10 days after the start of the next period.
Regarding the division of responsibilities for sales discount operations, the new system stipulates that the seller's business person is responsible for uploading relevant information in accordance with the limits and delivering it to the buyer for receipt. Since new regulations require business operators to update their information systems and accounting processing procedures, the Ministry of Finance has designated a counseling period from January 1 to June 30, 2025. During this period, those who fail to truthfully transfer and deposit certificates within the prescribed time limit will be exempted from penalties. , but this penalty exemption only applies to discount order operations.
4. House tax 2.0: For non-owner-occupied residences in higher education, a household registration is required for owner-occupied houses.
The housing tax differential rate 2.0 was launched in July 2024 and is applicable to housing tax bills received in May 2025. The tax rate is calculated progressively based on the total number of households nationwide, and the target is high-grade non-owner-occupied residences and light-grade residential buildings for residential use. The housing tax will be levied on an annual basis, and the base date of tax liability will be the end of February each year. If the purpose or use of the house changes (such as renting or converting to owner-occupation), the taxpayer must report to the local competent authority 40 days (March 22) before the start of each period of housing tax.
In addition, there is a new requirement to establish household registration for self-occupied houses, and the applicable tax rate is 1.2%. If the person, spouse and minor children only hold a single self-occupied house in the country and the current value is below a certain amount, the tax rate is reduced to 1. %. Because March 22, 2025, fell on a holiday, it was postponed to March 24.
As the pace of tax reform accelerates, the implementation of the new tax system in 2025 will have a profound impact on individuals and enterprises. KPMG recommends that people should understand the new regulations in advance and properly plan their tax returns to avoid being punished for not paying attention to relevant regulations. At the same time, business owners are reminded to pay close attention to the dynamics of domestic and foreign tax policies in order to formulate response strategies as early as possible to ensure compliance operations and maximize benefits.
Source: KPMG
