Taiwan’s Ministry of Finance (MOF) announced on Thursday that the annual tax-deductible allowance for basic living expenses will increase by NT$8,000 (approximately US$245) to NT$210,000 per person for the year 2025. This adjustment, which aims to ease the financial burden on households, is set to benefit approximately 2.08 million households across the island.
The increase in the tax-deductible allowance is part of the Taiwanese government’s ongoing effort to improve the taxpayer rights system and provide further financial relief to citizens. The change is also expected to result in a reduction of government revenue by approximately NT$2.6 billion.
Understanding the Tax-Deductible Allowance Increase
Under the Taxpayer Rights Protection Act of 2017, Taiwan established that individuals should not be taxed on the amount they require to meet basic living expenses. These expenses are defined as 60% of the median per capita disposable income from the previous year. For 2023, the median annual income was set at NT$349,000, and the allowance for basic living expenses is now being adjusted to reflect this.
By raising the tax-deductible allowance to NT$210,000, the government aims to shield a larger portion of a taxpayer’s income from taxation, helping to reduce their overall tax liability.
Additional Changes to Tax Exemptions and Deductions
In addition to the increase in the living expenses allowance, the MOF has also announced other key changes to Taiwan’s individual income tax structure:
- Individual Income Tax Exemptions: The income tax exemption for individuals will rise from NT$92,000 to NT$97,000.
- Standard Tax Deductions: The standard tax deductions for individuals will increase from NT$124,000 to NT$131,000.
These changes are designed to provide greater tax relief to individuals and ensure that the tax system reflects current economic conditions and supports households across Taiwan.
Government’s Revenue Adjustment and Impact
The government’s NT$2.6 billion reduction in revenue, resulting from the adjustments to the living expenses allowance and tax exemptions, will be absorbed through changes to the national budget. Despite the decrease in tax revenue, the government emphasized that the move is crucial for supporting public welfare and improving the financial conditions of Taiwanese citizens.
These measures are in line with the government’s broader goals to boost consumer spending and alleviate financial pressures, especially for middle-income and lower-income households, amid the rising cost of living.
Key Details of the Tax Changes in Taiwan
| Category | Details |
|---|---|
| Tax-Deductible Allowance Increase | Raised by NT$8,000 to NT$210,000 per person for 2025 |
| Beneficiaries | Approximately 2.08 million households |
| Revenue Impact | Reduction of government revenue by NT$2.6 billion |
| Individual Income Tax Exemption | Increased from NT$92,000 to NT$97,000 |
| Standard Tax Deductions | Increased from NT$124,000 to NT$131,000 |
| Median Annual Income (2023) | NT$349,000 (used for determining living expense allowance) |
| Implementation Year | Changes to take effect in 2025 |
Frequently Asked Questions (FAQs)
Q1: What is the new tax-deductible allowance for living expenses in 2025?
The new tax-deductible allowance for basic living expenses will be NT$210,000 per person, an increase of NT$8,000 from the previous amount.
Q2: How will this change affect taxpayers?
The increase in the tax-deductible allowance is expected to reduce the taxable income of individuals, lowering their tax burden. This change will benefit around 2.08 million households in Taiwan.
Q3: How does Taiwan determine the tax-deductible living expenses?
According to the 2017 Taxpayer Rights Protection Act, basic living expenses are set at 60% of the median per capita disposable income from the previous year. For 2023, the median income was NT$349,000.
Q4: Will other tax exemptions and deductions also increase?
Yes, individual income tax exemptions will increase from NT$92,000 to NT$97,000, and standard tax deductions will rise from NT$124,000 to NT$131,000.
Q5: How much will the government’s revenue decrease due to these changes?
The adjustment in living expenses and tax exemptions will result in a NT$2.6 billion decrease in government revenue, but the government believes this will benefit the public.
