New rule to cut married couples' tax payments
By John Liu ,The China PostTAIPEI, Taiwan -- The Legislature's Finance Committee yesterday preliminarily passed an amendment to the Income Tax Act, allowing married couples to separate their non-salary earnings in their tax calculations and consequently cut their tax payments.
October 17, 2013, 12:03 am TWN
Professionals including doctors, attorneys and accountants, as well as investors who make substantial profits from stock investments, are expected to benefit substantially from the new tax measure.
After the revision of the tax, married couples may separate their non-salary incomes in tax calculation. The revision, which is scheduled to take effect in May next year, is more likely to benefit high-income earners. It was estimated that the government will lose a total of NT$16.9 billion in tax revenue as a result of the revision.
The revision followed the Justice of the Constitutional Court's ruling that the current Income Tax Act as exacting taxes on married couples was unfair. The current act dictates that married couples should total their non-salary incomes in their tax filing, resulting in disparate tax rates applied to singles and couples. Such “punitive” measures often result in married couples paying higher tax rates due to their higher income bracket, and therefore is regarded unconstitutional. The Ministry of Finance (MOF) therefore requested an amendment to the Income Tax Act.
The amendment was preliminarily approved by the Legislature's Finance Committee.
Finance Minister Chang Sheng-ford (張盛和) stressed that the rationale behind the amendment was not to cut tax, but to realize justice in taxation. In the future, couples' non-salary incomes such as stock dividends, interest earnings and contract work earnings may be filed separately. However, couples will still need to file tax as a household unit.
For those who are “separated” from the other half due to domestic violence or marriage quarrels, the government may relax its application of the law, allowing couples living apart to file taxes individually instead of as a household unit, Chang said. Those who can provide a restraining order or evidence showing their being separated from the other half for more than six months will qualify as being “separated” in a marriage, and be allowed to file tax separately instead of a marriage unit.
Under the current tax law, married couples may file tax in two different ways. They may consolidate all their incomes in their calculation to file tax. Alternatively, they may consolidate their non-salary incomes, and separate salary incomes in their calculation to file tax. With the amendment, a third way is added, which allows married couples to separate both their salary and non-salary incomes to file taxes. Married couples are free to choose whichever method suits them the most.