Payroll in Taiwan

Mercans is your trusted partner for premier payroll (Managed & SaaS) services in Taiwan. Our dedication to providing exceptional payroll solutions in Taiwan is unmatched. With extensive expertise in the payroll sector, Mercans delivers precise and compliant payroll services in Taiwan, positioning us as the preferred provider for businesses of all sizes. Rely on Mercans for punctual and accurate payroll processing, coupled with the convenience of multi-currency payments in the Taiwanese market. As your reliable local payroll provider in Taiwan, we feature a team of in-country payroll specialists with profound understanding of local regulations, delivering comprehensive assistance for a seamless payroll experience tailored to your specific business requirements.

Everything you need to know before running payroll in Taiwan

Payroll Cycle, Working Hours and Overtime

Payroll Cycle

Employees’ salaries are deposited directly into their bank accounts, typically on the last day of the pay period, unless otherwise agreed upon. For pay periods shorter than two weeks, wages must be paid at least twice a month; otherwise, they are paid once a month.

Employers are required to provide employees with payslips, which must include specific information, although the format can be flexible.

Final Pay and Termination

Upon termination of employment, the pay period ends, and the final pay must be provided either on the employee’s regular payday or within 30 days of the end of the service year. If employment is terminated, the final pay must be given immediately.

Calculation and Timeliness

Employers are responsible for accurately calculating and timely payment of employees’ wages. Employees must provide all necessary information, such as work hour records, for accurate payroll calculation.

Late payments can result in orders from the competent authority for the employer to pay within a specified period, as per Article 27.

Time Limits and Sick Pay

There are time limits for both unpaid wages and lawsuits related to unpaid wages.

Employees are entitled to 30 days of paid sick leave per year, with half-pay. Hospitalized employees are entitled to unpaid sick leave of up to one year. If Labor Insurance payments do not cover at least fifty percent of salary, the employer must compensate for the difference.

Working Hours

Typically, office workers adhere to a schedule from 9:00 am to 5:30 pm, while factory employees work from 8:00 am to 5:00 pm, both with an hour designated for lunch. Banks operate from 9:00 am to 3:30 pm without interruption. Most retail establishments and shops maintain hours from 11:00 am to 10:00 pm daily, while restaurants generally serve customers between 11:00 am and 10:00 pm.

Overtime

Employers are required to grant employees one regular day off per 7-day work week, in addition to a designated rest day. Previously, Taiwanese workers were accustomed to toiling through a 7-day week, but the shift towards a 5-day week is becoming increasingly common. Under these updated regulations, employers are obligated to compensate employees at a higher rate for overtime work.

Employees are allowed to work up to 54 hours of overtime per month, capped at 138 hours over a three-month span. Employers may alternatively offer extra leave as remuneration for overtime hours worked.

Wage Rates on Workdays

Hours Tax Rate

• 8-10 hours 134% of the normal wage
• 10-12 hours 167% of the normal wage

Minimum Wages and 13th Month Salary

Minimum Wages

As of January 1, 2024, Taiwan has adjusted its minimum wage. The new minimum wage has been raised from NTS26,400.00 to NTS27,470.00 per month.

13th Salary

It is a tradition in Taiwan to provide a 13th-month salary, typically disbursed during the Lunar New Year festivities.

Company Formation in Taiwan

Many foreign companies entering Taiwan opt to utilize a local agent or distributor initially to establish a presence in the business community. Incorporating a branch office, representative office, or locally incorporated company is more suitable for markets of considerable size or for foreign firms seeking to establish a lasting market presence. Taiwanese investment policy permits foreigners to invest in most business sectors, except those listed on the Negative List. Foreign companies can incorporate only after obtaining approval from the Ministry of Economic Affairs’ Investment Commission (MOEAIC). The Taiwan Company Act allows for the establishment of four types of companies:

• Subsidiary
• Partnership
• Foreign Branch
• Representative Office

Business Establishment Steps

• Selecting a company name and conducting a search to ensure its availability.
• Registering the company.
• Registering a virtual address.
• Opening a bank account.
• Registering trademarks.
• Applying for work permits.
• Applying for tax and incorporation registration.
• Applying to the Bureau of Labour Insurance for labor insurance, national health insurance, and a pension plan report.
• Steps 1 to 3 can be completed online via the Taiwanese government’s Company and Business One-stop Service Request website, typically taking two days: one for searching, making reservations, and applications, and a second for government officials to review.
• If the application is approved, it can be collected on the second day from the Ministry of Economic Affairs (MOEA). Alternatively, if not collected in person, confirmation will be sent by mail, which may take up to four days.

Subsidiary

Establishing a subsidiary in Taiwan is typically favored by foreign entities seeking to create a limited company in the country. This method of incorporation is more complex compared to representative offices and branches due to the extensive incorporation procedure and requirements. There are several forms of subsidiaries available to foreign companies, including unlimited companies, unlimited companies with limited liability shareholders, limited companies, and companies limited by shares. Most subsidiaries are incorporated through a company limited by shares, while unlimited companies and companies with limited liability shareholders are less common.

Companies incorporated in this manner are generally unrestricted by the Company Act regarding their activities, except for general limitations on investments, capital loans, and guarantees. Each shareholder is liable for the company up to the amount of capital contributed. A foreign company can be the sole corporate shareholder of a limited company or a company limited by shares, except in certain restricted sectors. The company must have at least one shareholder.

There are no minimum capital requirements for a limited company or company limited by shares unless it operates in a sector requiring special permits or approvals. However, a minimum startup capital of NT$5 million is necessary if the company intends to employ foreign professionals in Taiwan within the first year. Typically, the paid-in capital should be adequate to cover setup costs.

The incorporation procedure involves several steps:

Apply for Search and Reservation of Company Name:

• Submit an application to search for and reserve a company name, either online or in person at the Department of Commerce of the Ministry of Economic Affairs (MOEA).

Apply for Foreign Investment Approval

• Foreign investors must obtain approval from the Investment Commission of the MOEA, usually submitted by a local agent elected by the foreign company. Documents must be authenticated or notarized and include a Chinese translation.

Apply for Examination of Investment Capital

• The components of investment capital for foreign companies must be examined by the Investment Commission after obtaining approval and remitting the investment capital in Taiwan.

Apply for Company Registration

• Submit the articles of incorporation and required documents for company registration within 15 days of approval date.

Apply for Importer/Exporter English Name and Registration

• Reserve a trading name for importing and exporting through the Bureau of Foreign Trade of the MOEA and register the company under this English name.

Apply for Business Registration

• Usually completed automatically by a local agency of the national tax authority after company registration.

Apply for Factory Registration in Industrial Parks

• A longer and more comprehensive registration procedure may be required for companies conducting large-scale manufacturing processes if needed.

Payroll Taxes

Social Security in Taiwan

In Taiwan, there are mandatory social security programs that necessitate contributions from both employers and employees, calculated based on the monthly insured salary, which is subject to various caps. These programs encompass the Labor Insurance Program (LIP), National Health Insurance Program (NHIP), and Labor Pension Program (LPP), though foreign individuals are not eligible to participate in the LPP.

Personal Income Tax in Taiwan

Individual Income Tax (IIT)

Income tax is imposed on income sourced in Taiwan for both residents and non-residents, unless exempted under the provisions of the Income Tax Act and other applicable laws.

A non-resident alien staying in Taiwan for less than 90 days in a calendar year is subject to a 18% withholding tax (WHT) on salary remuneration received from a Taiwan-registered entity. However, remuneration received from an entity registered outside of Taiwan is exempt from tax.

For non-resident aliens residing in Taiwan for more than 90 days but less than 183 days in a calendar year, a flat rate of 18% is applied to taxable salary income sourced in Taiwan, irrespective of where the remuneration is paid.

Resident aliens are subject to progressive tax rates for their IIT return filing, as follows:

Income Basic Tax (IBT)

In addition to regular income tax under the Income Tax Act, Taiwan imposes IBT at a flat rate of 20% on individuals who are tax residents in Taiwan (including expatriates staying in Taiwan for 183 days or more in a tax year). Foreign-sourced income is included in the IBT calculation if the following conditions are met:

• The individual is a tax resident of Taiwan.
• Foreign-sourced income equals or exceeds TWD 1 million with basic income exceeding TWD 6.7 million.

Under the IBT Act, taxpayers must calculate the IBT due on income subject to IBT after adding back certain items and compare it with the regular income tax payable. If IBT payable exceeds regular income tax payable, taxpayers must calculate and pay IBT using the following formula:

• Income subject to IBT = Regular taxable income + add-back items
• IBT = (Income subject to IBT – TWD 6.7 million) x 20%

Add-back items include qualified insurance benefits, income from the transaction of beneficiary certificates of privately-placed securities investment trust funds, non-cash charitable donations, and foreign-sourced income totaling TWD 1 million or more.

While the inclusion of foreign-sourced income increases the IBT burden, foreign taxes paid on foreign-sourced income may be credited against IBT payable, subject to certain limitations.

Payroll Compliance in Taiwan

Mercans ensures payroll is processed compliantly as per the Taiwanese labor laws. 

Government Requirements

• Registration necessities
• Social Insurance: Includes labor insurance and national health insurance. Labor insurance is mandatory for workers earning through employment, offering comprehensive coverage. National health insurance (NHI) provides medical coverage for childbirth, illness, or injury, with participants paying monthly premiums.

Pension Requirements

• Registration needs: Employers must contribute to superannuation support as per the Labor Standards Act or the Labor Pension Act. A pension number (new scheme) must be obtained for new businesses to enroll employees in the pension program.
• Ongoing Compliance: Employers contribute a minimum of 6% of monthly wages to the labor pension fund. Employees may voluntarily contribute up to 6% of their monthly wages. Contributions may be deducted from taxable income. Different schemes apply to local and foreign workers.

Employment Obligations

• Employment Law: Governed by the Labor Standards Act, stipulating basic wages, working hours, holidays, and other working conditions. Minimum monthly and hourly wages are set. Regulations cover national holidays, leaves, and annual leave entitlements. Gender equality in employment and rights to parental leave are ensured by relevant laws.

Payroll Requirements

• Payroll Payments: Wages must be paid at least twice a month unless agreed otherwise. Piecework wages are included. Employers must maintain a worker payroll roster for record-keeping purposes for at least five years.

Banking Requirements Related to Payroll

• Payment Methods: Payroll payments can be made via cash, check, or electronic funds transfer (EFT). When paying in cash, both employer and employee must sign a record. Withholding tax for foreign currency payments is based on the payment date’s foreign exchange rate. Subsidiaries or branch offices have remittance limits under foreign exchange controls, except with special approval.

Statutory Reports

Mercans assists you with the following statutory reports in Taiwan. 

• LI & NHI Certificate
• New Labor Pension Certificate
• New Pension Contribution Statement
• Supplementary NHI Report
• Supplementary NHI Cost Breakdown Report
• Demand Notice for Tax Withheld on Salary Income
• Demand Notice For Tax Withheld on Various Income
• Employee Withholding and Non-Withholding Tax Statement
• Company Tax Statement
• Monthly WH Report
• Entry Reports for Both Tax and Social security
• Exit Reports for Both Tax and Social Security

Employee Benefits in Taiwan

Mandatory Benefits

• Labor Insurance (LI): Provides coverage for maternity, injury, sickness, disability, old age, and death benefits.
• Employment Insurance (EI): Offers separate unemployment benefits from LI, governed by its own legal framework.
• National Health Insurance (NHI): Comprehensive coverage for medically necessary services, including inpatient, outpatient, dental, traditional Chinese medicine, and prescription drugs. Contributions from employees, employers, and the government.
• Labor Pension Act (LPA): Employers contribute to a central labor pension fund, which remains portable when employees change jobs.

Supplementary Benefits

Common group benefits include:

• Death Benefit: Typically term life or accidental death and dismemberment coverage.
• Critical Illness: Covers seven types of critical illnesses.
• Medical Insurance: Coverage options may include accidental medical, hospital, surgical, and cancer indemnity.
• Occupational Hazard: Bridges the gap between the Labor Standard Act (LSA) and labor insurance (LI), addressing liabilities when work-related incidents occur.

Perks

Taiwanese employers often provide additional perks such as:

• Car and transportation allowances
• Meal allowances or subsidized eating facilities
• Mobile phone allowances
• Employee loans (less common)
• Service awards
• Education allowances
• Shopping discounts

These benefits and perks contribute to the overall well-being and satisfaction of employees in Taiwan’s workforce.

Leave Entitlements in Taiwan

Public Holidays

Taiwan observes between 10 and 15 public holidays, some on fixed dates and others based on the lunar calendar. Public holidays are paid and may include:

• New Year
• Republic Day
• Chinese New Year
• 228 Peace Memorial Day
• Children’s Day
• Qing Ming Festival
• Worker’s Day
• Dragon Boat Festival
• Mid-Autumn Festival
• ROC National Day

Accruals:

Employees are entitled to Paid Time Off (PTO) or annual leave based on their years of service:

• 3 days for over six months but less than one year
• 7 days for over one year but less than two years
• 10 days for over two years but less than three years
• 14 days for over three years but less than five years
• 15 days for over five years but less than ten years
• Additional day for each year over ten (up to 30 days)

Employers must inform employees of their annual leave entitlements within 30 days of eligibility.

Rollovers and Payouts:

Unused vacation can be carried over, but any remaining must be converted to wages at the end of the second year or contract completion. PTO payout at termination includes converting unused vacation to wages.

Maternity Leave and Others:

• Maternity leave: 8 weeks for employees with at least 6 months of consecutive service.
• Miscarriage leave based on pregnancy duration.
• Paternity leave: 5 days for employees whose spouse is in labor.
• Adoption leave: Unpaid leave during the cohabitation period until the child is three.
• Parental leave: Unpaid leave if the employee has worked for the employer for at least six months, the child is under three, and the employee’s spouse is employed.

Sick Leave and Family Care Leave:

• 30 days of paid sick leave per year if not hospitalized.
• One year of sick leave within a two-year period if hospitalized.
• Family care leave: Up to 7 days of paid leave to care for family members.

Jury Duty, Voting, and Bereavement Leave:

• Leave for public duties is granted, and bereavement leave is provided for different family relationships.

All leaves, except some public duty leaves, are paid.

Benefits of Payroll Outsourcing in Taiwan

In Taiwan, Mercans prioritizes data security and privacy in our payroll services. Our approach integrates industry-leading security measures, aligning with international standards such as ISO 27001, ISAE3402, GDPR, SOC, and OWASP. This ensures robust protection of sensitive data throughout our operations.

Key Highlights of Our Payroll Services

• High Safety Standards:
  • Our payroll tool incorporates stringent security measures to safeguard sensitive data.
  • ISO 27001 and ISAE3402 certifications ensure adherence to the highest information security protocols.
• Adequate and Sustainable Performance:
  • We guarantee consistent and sustainable performance to meet the dynamic demands of payroll services.
• Flexibility and Scalability:
  • Our services offer flexibility and scalability to adapt to evolving client needs and changing business environments.
• Collaborative Cloud Tool:
  • Utilizing a Cloud-based platform facilitates collaborative work, promoting

    efficiency and accessibility across teams.

Key Features of Our Electronic Payroll Support:

• Full Traceability: Our process ensures traceability from generation to transmission and validation, meticulously validated by our expert team.
• Efficiency in Human Resources: Streamlining the payroll settlement process enhances efficiency in the human resources area, resulting in significant time savings.
• Certified Suppliers: Partnering with ISO 27001-certified suppliers ensures secure data transmission processes, bolstering the integrity of our services.

With adherence to ISO 27001 and ISAE3402 certifications, Mercans assures clients of top-tier information security standards, providing peace of mind alongside state-of-the-art payroll solutions.

Payroll Solutions in Taiwan

Unlock the potential of seamless payroll processing in Taiwan with Mercans’ Global Payroll Solutions. Our adaptable models ensure local compliance, support multi-currency transactions, and integrate seamlessly with global Human Capital Management (HCM) and Enterprise Resource Planning (ERP) systems. Ensuring accurate payments has never been easier.

Discover Our Adaptable Models:

• Software as a Service (SaaS): Tailored for enterprise businesses managing payroll across multiple countries, our SaaS model simplifies operations amid diverse data points, locations, currencies, and languages, enhancing overall efficiency.
• Managed Services: Designed for mid-sized and large enterprise businesses, our Managed Services model caters to those handling multi-country payroll, providing on-demand HR expertise to ensure security, reliability, and compliance.
• Human Resource Management System (HRMS): Ideal for mid to large businesses expanding their operations, our HRMS model offers a comprehensive suite of functionalities, including payroll and benefits management. Businesses can select specific features as needed, ensuring a customized and efficient solution.

Experience payroll solutions tailored to the unique requirements of your business in Taiwan and beyond, with Mercans leading the way.

Streamline Payroll with Mercans’ Technology and Integrations

• Technology: Explore the forefront of innovation with Mercans’ cutting-edge technology that powers our global payroll solutions. Learn more about our technological prowesshere
• Integrations: Seamlessly integrate your Human Capital Management (HCM) systems with Mercans’ solutions, enhancing efficiency and connectivity. Discover the power of integrationhere.
• Recognitions: Join a partner recognized for excellence. Mercans has earned accolades for its commitment to delivering exceptional payroll services. Explore our awards and recognitions here.