A Taiwan subsidiary pays corporate income tax at 20% and settles it on a fixed calendar: the annual return in May, a provisional payment in September. Neither date moves to suit the parent's own reporting cycle.
A US finance team therefore sees two Taiwan cash outflows a year that have nothing to do with the US filing calendar, plus two further items that can add tax: a 5% charge on earnings left undistributed, and an alternative minimum tax. How the Taiwan tax, and any tax withheld on dividends, is treated on the US side, for example under the foreign tax credit rules, is a question for a US tax adviser.
The 20% rate and the NT$120,000 exemption
Paragraph 5 of Article 5 of the Income Tax Act exempts a profit-seeking enterprise whose taxable income for the year is NT$120,000 or less. Above that, the whole taxable income is taxed at 20%, but the tax may not exceed half of the amount by which taxable income exceeds NT$120,000. The 18% and 19% brackets that still appear in the article applied only to tax years 2018 and 2019.
The cap only matters for small profits. From NT$200,000 of taxable income upward, the cap no longer reduces the tax and the flat 20% applies in full (a simple calculation from the article, not an official example).
May: the annual return and two filings that come with it
Article 71 requires the return for the previous year to be filed between May 1 and May 31. The company pays the balance itself before filing: the full-year tax less the provisional payment and any withholding credits not yet used. In 2026, May 31 fell on a holiday, so the deadline for tax year 2025 moved to June 1, 2026 (Ministry of Finance, April 19, 2026).
Two other returns close on the same day. The ministry's press briefing materials of April 23, 2026 list the tax year 2025 alternative minimum tax return and the tax year 2024 undistributed earnings return as also due by June 1. So the May window carries numbers from two different years.
Timing also protects loss carryforwards. Under Article 39, a company with complete books may deduct losses from the previous ten years only if both the loss year and the deduction year were filed on time using the blue return or a CPA tax certification. The Taipei tax bureau has warned that a CPA certification report uploaded late turns the filing into an ordinary return, and the loss deduction is lost (National Taxation Bureau of Taipei, June 8, 2026).
September: half of last year's tax, paid in advance
September brings the provisional payment under Article 67. Between September 1 and September 30, the company pays half of the tax shown on the previous year's annual return and files a provisional return. If it pays the full amount without offsetting investment credits, credits held over from administrative appeals or withholding credits, it may skip the form (paragraph 2).
There is a second method. A company with complete books that uses the blue return or CPA tax certification, and files the provisional return on time, may instead estimate its first-half income from the first six months' revenue and apply the current year's rate (paragraph 3). That helps in a year when business has dropped well below last year's level.
Some companies owe nothing. A company that had no tax payable for the previous year, or that started business this year, is outside the provisional payment. So is one whose computed amount, half of last year's tax, is NT$2,000 or less (National Taxation Bureau of the Southern Area, August 13, 2026; Article 69).
What if September slips by? A company that computes and pays by October 31 owes interest from October 1 to the payment date (Article 68, paragraph 1). After October 31, the tax office assesses the provisional tax, adds one month of interest and gives the company 15 days to pay. As of October 6, 2026, the first of those deadlines is still open.
The 5% charge on earnings left in Taiwan
From tax year 2018, Article 66-9 adds a 5% corporate income tax on the year's undistributed earnings. The rate was 10% for tax years 1998 through 2017.
"Undistributed" has a defined meaning. The starting point is after-tax net income for the year as reported under the financial reporting rules, plus other gains recorded in retained earnings. From that the company subtracts items such as amounts used to cover prior years' losses, dividends distributed out of the year's earnings and the legal reserve set aside from them. Dividends, reserves and the other listed deductions count only if they actually occur before the end of the following fiscal year (paragraph 3).
The return comes a year later. Article 102-2 requires it in May of the year after the annual return for that income year is filed, so the return for tax year 2025 earnings is due in May 2027. A company must file even when the figure is zero or negative.
This turns into a dividend deadline for the parent. If the subsidiary distributes its 2025 earnings during 2026, the dividend comes off the 2025 base; whatever stays in Taiwan bears the 5%. A dividend to the parent carries its own Taiwan withholding, so the parent will want to weigh the two taxes together.
Branches sit outside this charge. The Ministry of Finance's eTax FAQ 2814 excludes enterprises whose head office is outside Taiwan from the undistributed earnings computation and return. The wider trade-offs are covered in Entering the Taiwan Market: Key Differences Between a Subsidiary and a Branch.
When the alternative minimum tax comes into play
Article 8 of the Income Basic Tax Act computes a company's basic tax by deducting a fixed amount from its basic income and applying a rate set by the Executive Yuan, within a range of 12% to 15%. For tax year 2026, a release of May 8, 2026 by the National Taxation Bureau of the Central Area puts the deduction at NT$600,000 and describes the current rate as 12%. Where the regular income tax is lower than the basic tax, the company pays the difference.
Some companies are outside it altogether. Item 7 of Article 3, paragraph 1, leaves out a company that claimed no statutory investment credits and has none of the income listed in Article 7, paragraph 1. A company whose basic income does not exceed the deduction amount is also out (item 9). Article 7 adds back items such as securities transaction gains, on which income tax is suspended under Article 4-1 of the Income Tax Act, and exempt income of science park enterprises.
On August 28, 2024, the Ministry of Finance announced a draft that would apply a 15% rate from tax year 2025 to Taiwan enterprises of multinational groups whose consolidated revenue reached, in principle, EUR 750 million in any two of the four preceding fiscal years. The announcement referred to the OECD Pillar Two rules (Ministry of Finance, August 28, 2024). A group of that size should confirm which rate applies to its year.
If the subsidiary uses a different fiscal year
Taiwan's default fiscal year runs from January 1 to December 31. A company may change it only with the local tax office's approval, and only on grounds of established custom or the seasonal nature of its business (Article 23). Every deadline then shifts by the same logic (Article 101). The ministry's own example is a fiscal year starting in July: the annual return falls in November and the provisional payment in March (eTax FAQ 2006, FAQ 2712).
If a dividend decision or a change of fiscal year raises legal questions, you can write to Hovering International Law Firm at wei@hoveringlaw.com.tw with the subsidiary's fiscal year and its most recent annual return.
Two dates remain open for a calendar-year subsidiary as of October 6, 2026. October 31 is the last day to make up a missed provisional payment and owe only daily interest from October 1. December 31, 2026 is the last day on which a dividend out of 2025 earnings can still reduce the 2025 undistributed earnings base.
Official sources
- Income Tax Act (所得稅法, last amended September 11, 2026), Art. 4-1, Art. 5, Art. 23, Art. 39, Art. 66-9, Art. 67, Art. 68, Art. 69, Art. 71, Art. 101, Art. 102-2
- Income Basic Tax Act (所得基本稅額條例, last amended January 27, 2021), Art. 3, Art. 7, Art. 8
- Ministry of Finance releases: tax year 2025 filing deadline June 1 (April 19, 2026), press briefing materials on the 2025 income tax filing (April 23, 2026), National Taxation Bureau of the Central Area on the 2026 minimum tax deduction (May 8, 2026), National Taxation Bureau of Taipei on CPA reports (June 8, 2026), National Taxation Bureau of the Southern Area on the 2026 provisional payment (August 13, 2026), draft minimum tax rate (August 28, 2024)
- Ministry of Finance eTax Portal FAQ 2006, 2712, 2814
Checked: October 6, 2026
Frequently Asked Questions
- Our Taiwan subsidiary missed the September provisional payment. What now?
- Under Article 68 of the Income Tax Act, a company that computes and pays the provisional tax by October 31 owes interest from October 1 to the payment date. After October 31 the tax office assesses the provisional tax itself, adds one month of interest, and the company has 15 days to pay.
- Does Taiwan tax earnings that the subsidiary keeps instead of paying out?
- Yes. From tax year 2018, Article 66-9 of the Income Tax Act adds a 5% corporate income tax on the year's undistributed earnings. Dividends paid out of that year's earnings reduce the base only if they actually occur before the end of the following fiscal year. A Taiwan branch of a foreign company does not file this return.
- Has Taiwan's corporate minimum tax rate gone up to 15%?
- The statute allows a rate between 12% and 15%, set by the Executive Yuan. A National Taxation Bureau release of May 8, 2026 gives the tax year 2026 deduction as NT$600,000 and the current rate as 12%. The Ministry of Finance announced a draft 15% rate for members of large multinational groups on August 28, 2024, so groups of that size should confirm the rate for their year.
This article provides general information and is not legal advice on any individual matter.
