US Company from Taiwan: Foreign Income and the Income Basic Tax

0:00Can a Taiwan resident own a US LLC?

It's nearly midnight in Hsinchu, and Yu-ting's checkout page still can't take a card. The big card processor doesn't take Taiwanese businesses, so a US company is often how founders here get it. Can she form one from Taiwan? As far as America goes, yes. No social security number, and no trip to the US. It all happens online and in writing, so she never has to be awake in American hours.

We're BaseAcross. We set up US companies for founders outside America, so we'll be straight with you. The American side is simple. The Taiwan side runs on a tax most guides skip. Let's trace it across the board.

0:42Does running it from Taiwan make it Taiwanese?

Here's what founders here type in. If I run a US company from my desk in Taiwan, does that make it Taiwanese? Not today. A company is Taiwan-resident only if it's incorporated in Taiwan. There is a rule on the books that looks at where a company is really managed. But the government hasn't set a date for it to start. So it sits on the board, written but switched off. Ask your accountant whether it would reach your company once it starts.

1:12How is foreign income from the company taxed in Taiwan?

So how does money from the company reach Yu-ting's tax return? Taiwan's regular income tax reaches income from Taiwan. Foreign income takes a separate path, called the income basic tax. It's counted once it reaches a set amount in a year. The basic tax then takes a flat rate on everything above a much higher allowance. And you pay it only where it comes to more than your regular tax.

That's why the guide's first step is to decide how the company will pay you.

1:44Wyoming LLC or Delaware C-Corp from Taiwan?

Setting up the company itself takes less thought. A Wyoming LLC suits a business you run yourself, taking card payments or selling to US customers. A Delaware C-Corp suits raising from US investors. The company needs a registered agent, an address in that state for legal papers, not where you work. Then the EIN, the company's US tax number. Without a social security number, it's a paper form to the IRS.

You'll pay in US dollars, so check your card's exchange rate and fees.

2:19Can I use Stripe from Taiwan?

Banking from Taiwan is the easy part. One of the US fintech banks takes applications from founders here, and a multi-currency account can give the company US account details. With a US bank account, the company can apply to the card processor's US side. It reviews you, and it can decline. Each provider decides for itself, so use the same names, addresses and description everywhere.

2:46Is pay for work I do in Taiwan foreign income?

Now the catch: where Yu-ting sits. Pay for work done in Taiwan is taxed in Taiwan, wherever it's paid from. So pay from her US company, for work she does in Hsinchu, may fall under the regular tax instead. Here's the guide's own illustration, and it assumes the pay is foreign income. Say her LLC pays her eight million New Taiwan dollars in a year, and she has one million of taxable income in Taiwan.

Regular tax on the Taiwan income is seventy-eight thousand seven hundred. The basic tax comes to three hundred thousand. She pays the higher of the two, so two hundred and twenty-one thousand three hundred more, before any credit for US tax. That's an illustration, not a quote. Whether her pay is foreign income at all is for her accountant.

3:38Do the CFC rules reach me? And no US–Taiwan treaty

Two more rules sit on the board. The newer one: Taiwan can count the profit of a controlled company in a low-tax place, without commercial substance, as your foreign income for the basic tax, paid out or not. Ask your accountant whether it reaches yours. The other is the treaty, and there isn't one in force. So US dividends, interest and royalties paid to you are withheld at the full rate, unless a US exemption applies.

Work you do in Taiwan generally isn't US income, so nothing is withheld on that. The company still files a report with the IRS every year, even without sales, and missing it is expensive. It's usually due in the spring, and there's a form to ask for more time, filed before the deadline.

4:28What order do I do it in?

Put it in this order. Your accountant first: how the company will pay you, and which path that money takes. Then form, then bank. Keep the books with income split by type, and put the IRS report and your Taiwan return on one calendar. The full guide, with every source and a checklist for your accountant in English and Traditional Chinese, is linked below. And Yu-ting? She left the checkout page for the morning, and asked her accountant which path her pay would take.