Is Overseas Income Under NT$7.5M Tax-Free? The Five Most Common Myths for US Stock Investors, Dismantled

You hear it constantly in investing groups: "overseas income under NT$7.5M is tax-free." That one sentence actually blurs three completely separate ideas, and in practice it easily leads to overpaying tax or failing to file. Below, starting from how Taiwan's alternative minimum tax (AMT) works, I use concrete worked examples to clear up the five tax myths people most often confuse.

Sixty seconds on how the regime works

A Taiwan individual's overseas income (non-ROC-source income, including dividends and capital gains) is not folded into the regular consolidated income tax. It is taxed instead through the AMT:

1. Basic income amount = net consolidated income + overseas income (counted only once the combined full-year total across all household members reaches NT$1M) + certain insurance payouts (for life and annuity policies where the beneficiary is not the policyholder: death benefits count only to the extent they exceed NT$37.4M, while non-death payouts such as maturity proceeds and annuities count in full; older policies written before the statute took effect are excluded) + gains on unlisted share transactions + non-cash charitable donation deductions + other items that the Ministry of Finance has announced must be included under laws granting exemptions enacted after the AMT statute took effect in 2006 (such as the angel-investor tax incentive, which has nothing to do with ordinary investors)
2. Basic tax = (basic income amount − NT$7.5M) × 20%
3. Compare: when the basic tax exceeds the regular consolidated income tax, you top up only the difference; otherwise nothing is due, which in effect leaves the overseas income untaxed

NT$7.5M and NT$37.4M are the adjusted figures applicable from 2024 (ROC year 113).

Myth one: "NT$7.5M is an exemption for overseas income"

The blind spot here is that the NT$7.5M deduction comes off the basic income amount, and the starting point for the basic income amount is your own net consolidated income. Put another way, the higher your domestic salary income, the more of that NT$7.5M of exempt room it eats up, and the less deduction is left for overseas income. So for the same NT$5M of overseas income, a high-earning Hsinchu Science Park engineer and a retiree with no salary income start from different points under the AMT.

Myth two: "Overseas income under NT$1M can be ignored, and you only start paying tax above NT$1M"

Under the tax law this NT$1M is an inclusion threshold (meaning that below NT$1M none of it counts at all, but once it reaches NT$1M, the entire amount counts toward the basic income amount). For example, when overseas income is NT$990,000, the amount counted is 0; but if it rises to NT$1M, the amount counted jumps straight to NT$1M. A difference of just NT$10,000 produces a NT$1M swing in the basic income amount calculation.

In filing practice, three key points deserve attention. First, this inclusion threshold is totaled at the level of the tax filing household (the overseas income of both spouses and of dependents must be combined). Second, the taxable scope covers overseas dividends, realized capital gains, and gains from fund redemptions alike. Third, taxation is determined on a "realized" basis (meaning unrealized paper gains are not taxed).

Myth three: "Once the basic income amount exceeds NT$7.5M, you pay 20% on the excess"

Many people, when they calculate, skip the step of "sizing up" against the regular consolidated income tax. After the basic tax is computed, it must be compared with the regular income tax, and only when the basic tax exceeds the regular income tax do you top up the difference. In practice this leads to a counterintuitive result: people who ordinarily pay more regular income tax, at higher marginal rates, get a larger exempt cushion for their overseas income.

The worked figures above show that although Employee A's total income is higher than Retiree B's, A ends up owing no AMT; conversely, because Retiree B's regular income tax is low, B's overseas income easily becomes taxable. So the claim that "under NT$7.5M is tax-free" is too conservative for A, who has high domestic income (A may well owe no top-up even when the basic income amount is far above NT$7.5M), but too optimistic for B, who has low domestic income. In particular, retirees who mainly draw living expenses from an overseas investment position usually do owe tax on their overseas income.

Myth four: "The US already withheld 30% dividend tax, so Taiwan won't tax it again"

The direction of this reasoning is not wrong, but in administrative practice it does not take effect automatically. Tax already paid overseas can indeed be credited against Taiwan tax, but two conditions must be met. First, the credit cannot exceed "the incremental basic tax caused by adding that overseas income." Second, the rules require you to attach supporting documents such as a same-year tax certificate issued by the tax authority of the source country (in US stock investing, most tax offices may in practice accept the broker's Form 1042-S as evidence, though the tax office can still ask for other additional documentation).

In the vast majority of cases, because the 30% rate withheld by the US is usually higher than the Taiwan tax due (after all, the AMT rate is only 20%), after crediting there is usually no further Taiwan tax to pay. Two key reminders again: first, the credit for tax already paid overseas is a credit only, not a refund (the Taiwan tax authority will not refund tax you overpaid in the US); second, even if no Taiwan tax is due after crediting, that does not remove the filing obligation (we cover this in detail in myth five). One final caution: the 21% withholding on TSM ADR is Taiwan withholding, not foreign tax (see the TSM ADR article), and the two must not be confused.

Myth five: "If I'm under the threshold I don't need to file" + "losses can offset tax"

When the household's basic income amount is at NT$7.5M or below, you are indeed exempt from both filing and payment; but once the basic income amount exceeds NT$7.5M, the law requires you to complete and file the basic tax return, and the filing obligation exists even if the final amount payable is 0. If you underreport and the tax authority catches it, you face back tax plus a penalty. In particular, in recent years the tax authority has been able to see not only the filing data reported by Taiwan sub-brokerage account brokers, but also, through channels such as the automatic exchange of account information under CRS (Taiwan already exchanges non-US account information with treaty partners such as Japan, Australia, and the UK), it keeps improving its grip on overseas income, so I would advise readers not to gamble on going unnoticed.

As for investment losses, overseas property transaction losses may currently only offset overseas property transaction gains in the "same year." They can neither be carried forward across years nor used to offset other kinds of income such as overseas dividends. So this year's loss cannot offset next year's gain. But this also means that arranging a measured offset of gains and losses within the same year (that is, realizing corresponding gains before year-end) is one of the few legal and effective tax-planning moves available when adjusting an overseas investment position.

Checklist

Three common points to add at the end: individual overseas income carries no second-generation NHI supplementary premium; mainland China-source income is not overseas income (it is folded into the regular consolidated income tax under the law), whereas Hong Kong and Macau-source income does count as overseas income; and "overseas broker vs Taiwan sub-brokerage account" produces the identical tax result.

Conclusion

1. The "under NT$7.5M is tax-free" line we so often hear, stated more precisely: "only when the household's annual basic income amount (including domestic income and certain exempt items) is at NT$7.5M or below are you exempt from filing the basic tax return; above that, whether you top up still depends on sizing it up against the regular income tax."
2. On threshold determination, NT$1M is a whole-household, full-year threshold, counted in full once reached; only realized amounts enter the calculation.
3. Beyond that, high earners who pay large amounts of domestic regular income tax enjoy more exempt room for overseas income; conversely, retirees with low domestic income are the primary target of the AMT, and the tax-planning strategy for the two is entirely different.
4. Finally, remember that although US withholding can be credited back in Taiwan, you must keep the relevant certificates. These practical calculation details directly determine the final tax cost of overseas assets.