As mentioned in section 1, labor and health insurance premiums are partly contributed by the employee, and therefore the employer should deduct these portions when paying salary. Besides, withholding tax on salaries should also be deducted. From column (g), we can observe that the employee receive 90~95% of the salary.
|Monthly Regular Salary in TWD (a)||Monthly Regular Salary in USD (b=a/31)||Labor Insurance Premiums Paid by the Employee (c)||NHI Premium Paid by the Employee (d)||Withholding Tax 5% (e)||Net Salary (f=a-c-d-e)||Net Salary Rate (g=f/a)|
Withholding tax on salary
The wage withholding system requires withholding for income taxes on payments by employers to employees. Income tax for the employee for the year is generally determined upon filing a tax return after the end of the year. The amount withheld and paid by the employer to the government is applied as the employee’s prepayment of income taxes and is refundable if it exceeds the income tax liability determined on the employee’s filing the tax return.
Most Taiwanese company includes an item of “food allowance” as much as TWD 2,400 in their salary. The reason is that, for the employee, the definition of taxable salary income covers all kinds of payment received from the employer. They include base salaries, stipends, wages, allowances, annuities, cash awards, bonuses and all kinds of subsidies. However, the food allowance as much as TWD 2,400 per month is an exception and can be exempted from the taxable salaries. Therefore, most Taiwanese companies provide employees with such food allowance.