Based on the approved amendments, the standard tax deduction from personal income for each unmarried taxpayer will be boosted to NT$73,000 from NT$46,000, and for a married couple will be raised to NT$146,000 from NT$92,000.

A special salary tax deduction will be increased to NT$100,000 from NT$78,000 per salary or wage earner, and the deduction for the disabled will also rise to NT$100,000 from NT$77,000 per person.

In addition, a tax deduction of NT$25,000 will be allowed per student in each household for higher education expenses, instead of the current NT$25,000 per household.

The Ministry of Finance estimates that as many as 3.71 million households out of the island’s 5.18 million households filing tax returns each year will benefit from the four additional deductions.

Finance Minister Lee Shu-der said the national coffers will suffer a shrinkage of NT$2.16 billion in tax revenues after the four deductions go into effect in May 2008.

Lee said each taxpaying household can also enjoy a tax cut of NT$3,800 to NT$50,000 after the four new tax deductions take effect, and national coffers will suffer a shrinkage of NT$2.16 billion in annual tax revenues as a result.

Lee continued that although the government’s tax revenue will decrease, citizens will have more money to spend, which in turn will help stimulate domestic demand and boost employment.

According to law, the amendments adopted in 2008 should be implemented only in 2010, making them good for the 2009 income tax returns. But legislators of the ruling Kuomintang said this will not be a problem, because they will introduce another amendment to allow the newly increased deductions to be applied in the 2008 tax year.

It is expected that lawmakers of both the ruling Kuomintang and opposition Democratic Progressive Party will join forces to pass the amendments to the Income Tax Act smoothly.

The individual income tax is levied on Taiwan-sourced income of both residents and non-resident individuals per calendar year, starting Jan. 1.

Individuals are considered residents in Taiwan for tax purposes if they are Republic of China citizens or if they are foreign nationals who reside in Taiwan for at least 183 days within a calendar year.

They are subject to income tax on all their incomes which originate in Taiwan and must file income tax returns and pay taxes between May 1 and 31 of the following year.

The incomes of the taxpayer, taxpayer’s spouse, and dependents must be consolidated and reported on one income tax return. Resident taxpayers are allowed to claim personal exemptions and deductions on their tax returns.

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