Taiwan Small Business Tax 2026: Corporate Income Tax, Business Tax and the Sole Proprietor Option
Taiwan is unusually friendly to micro-businesses: corporate profits up to NT$120,000 a year pay zero income tax, the smallest vendors pay a 1% assessed business tax instead of dealing with invoices, and sole proprietorships skip corporate tax entirely. But the system has three separate taxes that founders constantly confuse โ profit-seeking enterprise income tax (็ๆ็จ ), business tax (็ๆฅญ็จ , the VAT-like sales tax), and the individual income tax on what the owner takes home. This guide untangles all three for 2026.
Profit-seeking enterprise income tax: 20%, with a micro-business shelter
Since the 2020 tax year, the corporate rate is a flat 20% of taxable income, but with a built-in shelter for small profits (Income Tax Act, Article 5):
| Annual taxable income (NT$) | Tax |
|---|---|
| 120,000 or less | Exempt โ NT$0 |
| 120,001 โ 200,000 | (Income โ 120,000) ร 50% (capped so tax never exceeds half the amount over 120,000) |
| Above 200,000 | Income ร 20% |
Example: taxable income of NT$160,000 โ (160,000 โ 120,000) ร 50% = NT$20,000. Taxable income of NT$1,000,000 โ 1,000,000 ร 20% = NT$200,000.
The critical structural point: sole proprietorships and partnerships do not pay this tax at all. Their business profit is computed and then folded directly into the owner's individual comprehensive income tax return. Only companies limited by shares and similar corporate forms pay the 20%. This makes the ็จ่ณ/ๅๅคฅ (sole proprietor/partnership) form the default choice for freelancers and tiny shops โ no separate corporate filing, no 20% layer.
Companies also face a 5% surtax on undistributed earnings (ๆชๅ้ ็้ค็จ ), though it can be reduced or avoided by distributing profits or qualifying reinvestment. Corporate returns are filed each May 1โ31, the same window as individual filing.
Business tax (็ๆฅญ็จ ): 5% standard, 1% for the smallest vendors
Taiwan's business tax works like a value-added tax on sales of goods and services. The standard rate is 5% for businesses that issue uniform invoices (็ตฑไธ็ผ็ฅจ), with input-output offsetting. But vendors below the scale threshold get a much simpler deal:
| Monthly sales | Invoice requirement | Business tax treatment |
|---|---|---|
| Below the registration threshold | None | No business tax at all |
| At/above threshold, below NT$200,000/month | May apply to be exempt from uniform invoices (ๅ ็จ็ตฑไธ็ผ็ฅจ) | 1% of assessed sales, billed quarterly by the tax office (ๆฅๅฎ่ชฒๅพต) |
| NT$200,000/month or more | Must use uniform invoices | 5% VAT-style, filed every two months |
The registration thresholds that trigger tax registration are NT$100,000/month for goods and NT$50,000/month for services (set by Ministry of Finance regulation across industry categories). Below those, you are not even in the system. Between the threshold and NT$200,000/month, you qualify as a ๅฐ่ฆๆจก็ๆฅญไบบ (small-scale business): the tax office assesses your likely sales based on location, floor area, and industry, then mails you a tax bill every quarter (January, April, July, October) at 1% โ no bookkeeping, no invoice headaches.
Note the mobile-payment incentive: assessed small vendors that take mobile payments or kiosk checkout in physical stores can apply for the 1% rate with invoice exemption through the end of 2028.
Choosing a business form
| Sole proprietorship / partnership (่ก่) | Company (ๅ ฌๅธ) | |
|---|---|---|
| Corporate income tax | None โ profit flows to owner's personal return | 20% (with the 120,000 shelter) |
| Business tax | Same 5%/1% rules based on sales scale | Same 5%/1% rules based on sales scale |
| Setup cost and formality | Low; business registration + tax registration | Higher; incorporation, capital verification |
| Liability | Owner personally liable | Limited liability |
| Best for | Freelancers, food stalls, small shops, first-time founders | Fundraising, hiring at scale, contracts requiring a corporate counterparty |
For a freelancer billing NT$150,000/month: register for tax, stay under the NT$200,000 invoice threshold, pay roughly 1% assessed business tax quarterly, and report the net profit on your personal return. No corporate layer, no accountant required for the basics.
A worked example: noodle shop at NT$180,000/month
Take a small noodle shop with steady monthly sales of NT$180,000 (NT$2,160,000/year) and annual costs of NT$1,700,000:
- Business tax: monthly sales are above the NT$100,000 goods threshold but below NT$200,000, so the shop applies for small-scale status. The tax office assesses sales and bills 1% quarterly โ roughly NT$5,400 per quarter, NT$21,600 for the year. No invoices to issue, no input-output bookkeeping.
- Corporate income tax: zero. As a sole proprietorship (่ก่), the shop pays no ็ๆ็จ .
- Owner's personal tax: net profit of NT$460,000 (2,160,000 โ 1,700,000) flows onto the owner's individual return, where it stacks with any other income and is reduced by the NT$97,000 exemption, the NT$131,000 standard deduction, and other applicable deductions before the 5%โ40% brackets apply.
If the same shop incorporated as a company instead, the NT$460,000 profit exceeds the NT$200,000 band, so the full amount faces the 20% rate: 460,000 ร 20% = NT$92,000 at the company level, and the owner would then face personal tax again on any salary or dividends drawn. This double layer is exactly why tiny food businesses overwhelmingly stay as sole proprietorships.
Common mistakes to avoid
- Confusing the two "12่ฌ/20่ฌ" thresholds. The NT$120,000 corporate-tax shelter is about annual profit; the NT$200,000 invoice line is about monthly sales. They measure different things.
- Forgetting business tax registration. Crossing the NT$100,000 (goods) or NT$50,000 (services) monthly threshold without registering is the most common violation among new vendors โ the tax office finds out through supplier records and landlord reports.
- Assuming "small" means "exempt." Below the threshold you owe nothing, but between the threshold and NT$200,000 you still owe the 1% assessed tax. "No invoice" does not mean "no tax."
Filing calendar for small businesses
- Business tax (5% invoice users): filed every two months.
- Business tax (1% assessed vendors): the tax office bills quarterly โ just pay the bill.
- Corporate income tax: May 1โ31 each year (companies only).
- Owner's personal return: May 1โ31, including any sole proprietorship profit.
Next steps
- Estimate monthly sales honestly โ the NT$100,000/50,000 thresholds and the NT$200,000 invoice line decide your whole compliance burden.
- Start as a sole proprietorship unless you need limited liability or outside investors; you can incorporate later.
- Apply for small-scale (ๅ ็จ็ตฑไธ็ผ็ฅจ) status at the tax office if you qualify โ the 1% assessed regime is dramatically simpler.
- Track the 120,000 corporate shelter if you do incorporate โ timing income and expenses around it is legitimate tax planning.
- Revisit the choice annually โ once sales approach NT$200,000/month consistently, budget for the invoice system and its bookkeeping.