Complete Guide to Payroll Management and Compliance in Taiwan

Taiwan is a high-income economy with well-developed infrastructure and human resources. The eighth-largest economy in terms of purchasing power parity in Asia is leveraging its highly skilled workforce and prowess in semiconductor manufacturing to accelerate global business investments in the near future. 

In doing so, employers must perform government functions of withholding taxes, facilitating social security premiums, and reporting for the sake of simplicity. This Taiwan payroll guide will help you navigate the complexities involving employer obligations in ensuring labor welfare in the country. 

How is Payroll Calculated in Taiwan?

Employers shall calculate payroll in Taiwan using the following formula:

Net salary in Taiwan = Gross Salary – Gross Deductions

The payroll rules in Taiwan prescribe employers to include all types of regular income, allowances, and any one-time payments or benefits under gross salary calculations. Gross payroll deductions in Taiwan shall include withholding taxes, statutory social security deductions, and any one-time employee deductions.

Important Elements of Salary Structure in Taiwan

Employers may take note of the following essential elements of HR payroll in Taiwan: 

Base income:

• This fixed income is a regular salary received under the negotiated employment contract. 

Allowances: 

• Payroll regulations in Taiwan allow employers to offer several allowances as part of regular salary income. Some of these common allowances are

1. 1. Housing allowance
   2. Travel allowance
   3. Phone services allowance
   4. Meal allowance
   5. Children’s education expense allowance
   6. Language training allowance, particularly for foreign residents employed in Taiwan

Annual bonus: 

• Employers may provide yearly bonuses and increments in base income upon employee appraisal. Payroll procedures in Taiwan allow employers to pay bonuses annually or add them periodically to the monthly income. 

Social Security deductions: 

• Payroll policies and procedures in Taiwan oblige employers to make mandatory contributions proportional to a predetermined rate of an employee’s fixed income. 
• Mandatory payroll deductions in Taiwan are made towards Labor Insurance, Health Insurance, Employment Insurance, and Pension Funds.  

Other elements of payroll in Taiwan

Flexible income: 

• Employers must make suitable adjustments for overtime payments, commission, and performance incentives that are variable under the payroll process in Taiwan. 

13th-month pay

• Employers must make the “13th-month” pay or bonus yearly on the Lunar New Year or Spring holiday. 
• The 13th month’s pay is an extra month’s salary, not to be mistaken, with a bonus or commission. 

Payroll tax: 

• Taiwan employer payroll taxes are proportional to employees’ income. The current income tax deduction rate in Taiwan varies between 5% – 40%. 
• Payroll rules in Taiwan require employers to withhold locally paid salaries. Further, the tax due must be paid before 31 May of the following year. 

Employee investment declarations: 

• Payroll policies and procedures in Taiwan mandate employers to seek an investment declaration from employees at the beginning of every financial year.  
• Employers must use the employee-declared tax savings investments to calculate payroll deductions in Taiwan for the year other than mandatory social security costs. 

Payslip: 

• Employers must provide payslips to employees as proof of payroll payments in Taiwan. 
• Payslips can be free-form but require employers to disclose the following details:

1. 1. Taxable income
   2. Social security details, including insurance number
   3. Payment made for unused leaves 
   4. Employer details (Tax assessment ID, Registered Address)
   5. Identity of the employee (Name, Tax ID, Address, Workplace ID)

How to Set Up a Payroll in Taiwan?

Employers must ensure the following to set up payroll in Taiwan: 

• Establish a subsidiary or find an alternative for registering a local entity in Taiwan.
• Arrange for work permits (if required) and set up a local bank account in Taiwan to pay employees. 
• Registration for both employer and employee to participate in mandatory social security schemes 
• A written employment contract is the best practice to fulfill Taiwan payroll requirements and safeguard employer interests.

A Step-by-step Process of Payroll Processing in Taiwan

Listed below are the steps taken to process the payroll in Taiwan. It also serves as a payroll compliance checklist in Taiwan.  

Pre-payroll stage:

• Step 1: Employers may first register a local entity. You may need at least $500,000 New Taiwan Dollars (NTD) to register a subsidiary in Taiwan. 
• Step 2: Employers may then set up payroll policies in Taiwan in compliance with labor law. For instance, policies on work hours, attendance, payment cycle, leave, and job benefits ensure greater transparency in the Taiwan payroll process.
• Step 3: Register all active employees to social security schemes and record their bank account details, identity documents, Tax ID, etc. 

Payroll processing stage:

• Step 1: Gather inputs from various departments, like attendance records, work shifts from leave and attendance systems, applicable salary structure and entitled benefits from the HR department, or tax-saving investments declared by employees. 
• Step 2: Once the data is verified, feed the required input into the payroll calculation system to arrive at the payable amount to employees in compliance with payroll policies and procedures in Taiwan. 
• Step 3: Hand out payslips to employees upon salary disbursement. 

Post-payroll activities:

• Step 1: Employers must notify the respective authorities and duly file all the payroll deductions in Taiwan made for employee income taxes, social security premiums, or any other. 
• Employers must file all payroll taxes in Taiwan to the National Taxation Bureau by May 31st of the following year.
• Step 2: Employers must make appropriate entries into the ledger for payroll in Taiwan. 

Payroll Contributions

Several payroll contributions play an essential part in the payroll in Taiwan. Some of these contributions are: 

Mandatory employer contribution

Mandatory employee contribution

Payroll tax in Taiwan includes withholding of income tax as per current income slabs: 

Payroll Cycle

Employers may align their payroll process in Taiwan with the Taiwanese tax year running from January 1st to December 31st. The monthly payroll cycle in Taiwan is the most common, and salaries are usually disbursed on the 15th of each month.

Taiwan Payroll Options for Companies

Some of the recommended options for payroll in Taiwan include: 

Remote payroll solutions: 

• Contemporary businesses have switched to third-party Employer-Of-Record (EOR) or Professional Employer Organizations (PEO) to outsource HR payroll in Taiwan. 
• Remote payroll solutions like Multiplier assure entrepreneurs and global companies of a compliant global expansion. 

Local payroll administrator: 

• Even if companies establish a local entity, they can outsource the payroll process in Taiwan to a local payroll administrator. However, the local entity remains the Employer of Record, so the companies are still fully responsible for payroll compliance in Taiwan. 
• A payroll administrator follows payroll policies and procedures in Taiwan for computations, payments, and filing purposes, thereby reducing the administrative burden on the newly expanded global company. 

Internal payroll team:

• A traditional choice among enterprises is to develop an internal team of accounting and legal experts in framing payroll policies in Taiwan. 
• Companies must finish the incorporation process, register the entity and hire dedicated personnel to manage payroll. 

Entitlement and Termination Terms

Payroll rules in Taiwan prescribe employers to extend the following entitlements to their employees: 

• 3-30 days of annual vacation leave based on years of service with the same employer
• Eight weeks of maternity leave in Taiwan for foreigners and citizens
• Medical leave for non-work-related injuries lasting anywhere between 1-12 months
• Suitable time-off for weddings, bereavement, menstruation, and other personal reasons

Taiwan laws allow employers to terminate the employment contract with or without a notice period and severance pay. However, in most cases, employers must provide 10-30 days of advance notice period for termination of employment contracts. Specific terms of employment will differ depending on the employment contract. 

Taiwan Payroll Processing Company

Global PEO-EOR solutions are the way forward for businesses, from startups to enterprises, in HR payroll management. For instance, a EOR platform can manage HR payroll, file payroll taxes, calculate payroll deductions, foreign employee management, and other compliance requirements.

Various payroll processing companies offer remote payroll in Taiwan, suitable for compliant global expansion. You may explore and compare the services of such payroll processing companies online and pick the most suitable one that matches your business needs.

How Can Multiplier Help With Global Payroll?

Multiplier is the leading partner for companies looking for SaaS-based solutions to streamline their payroll processing in Taiwan. Amongst fulfilling a wide range of Taiwan payroll requirements, Multiplier is adept at 

• Offering payment solutions in New Taiwan Dollars (NTD)
• Salary disbursements directly to employee bank accounts 
• One-click payroll for global teams in Taiwan
• Generating payslips and single invoices for all employees 
• Calculating gross wages
• Subtracting necessary taxes, deductions, and benefits 
• Preparing employee tax filings
• Filing remittances to the government, and other necessary paperwork

Our presence in 150+ countries, including Taiwan, makes us the preferred choice for remote payroll solutions.