Taiwan has a progressive taxation system, under which individuals are taxed between 6% and 40% of their income. The tax year in Taiwan corresponds to a calendar year.

Any foreign national who is non-resident but who works in Taiwan for more than 90 within a tax year will pay income tax at a rate of 20%, deducted by their employer. They are not required to file a tax return. Non-residents who stay in Japan between 90 and 183 days in a tax year also pay tax at 20% of their income, and must file a tax return. Non-residents can apply for a refund at the end of the tax year if entitled to a lower tax rate.

Foreign nationals who are resident in Taiwan for more than 183 days in a tax year are liable for tax on all sources of income generated in Taiwan but not on income earned outside of Taiwan. There is a personal exemption of TWD72,000 for the taxpayer and each of their dependents.

Taxes are collected centrally and the revenue is distributed to local and regional administrations. There are no local taxes.

All corporations, sole proprietorships and partnerships, including the Taiwan branches of businesses with head offices overseas, who have incomes of TWD50,000 or more, are required to pay tax on their Taiwan-derived income at a rate of 15% (income up to TWD100,000) or 25% (income over TWD100,000). Businesses are also liable to pay VAT, usually at 5%, on all their transactions within Taiwan.

Taiwan currently has double taxation agreements with 16 other countries including the United Kingdom, New Zealand, Australia, Singapore, the Netherlands, Denmark and Belgium, which mean that tax paid in one country can be offset against any tax payable in the other.

Other taxes payable in Taiwan include sales tax, inheritance tax, gift taxes and customs duty. VAT is payable at 5%, and sales taxes in bars and restaurants range from 15% to 25%. There is also a merchandise tax of 60% on petrol.