TAIPEI (Taiwan News) – The government has chosen a stock dividend tax which will benefit stock market investors while maintaining tax rebates for middle and low incomes, reports said Thursday.
Just before leaving office last month, Premier Lin Chuan (林全) announced plans for an overhaul of the tax system.
At a meeting with lawmakers from the ruling Democratic Progressive Party Thursday noon, his successor, Premier William Lai (賴清德), decided to choose what has become known as option B for the payment of taxes on stock dividends, the Central News Agency reported.
The package of proposals, which is expected to be determined at the regular Cabinet meeting next Thursday, offers taxpayers a choice between two ways of handling dividends from stocks.
If the taxpayer wants to have the income from stock dividends taxed separately, the dividends will be subject to a tax rate of 26 percent, reports said.
However, if he picks the other option and wants the income from dividends to be counted as part of general income, the dividends will be subject to a tax rate of 8.5 percent up to a maximum limit of NT$80,000 (US$2,600) per taxpayer, reports said.
Officials said the public should not be afraid that the new system would be too complicated, as the Taxation Administration (國稅局) would offer specialized software to compute the taxes.
If a taxpayer chose to have NT$100,000 in income from stock dividends taxed separately as stock dividends, he would have to pay NT$26,000, according to an example from the Ministry of Finance mentioned by CNA.
However, if he chose the second option and listed the NT$100,000 in stock dividends with his other taxable income, it would fall under a tax exemption of 8.5 percent or NT$8,500. If his income tax fell under a rate of 5 percent, it would mean he would have to pay NT$5,000 in tax on the dividend, but as the amount comes in lower than the NT$8,500 exemption, the taxpayer will be eligible for a rebate of NT$3,500, the report said.