How to pay international contractors in Taiwan [2024]

Global companies are increasingly leveraging the power of contractors to drive their businesses. For companies looking to access the talent pool in Taiwan, understanding the nuances of compensation is crucial. With its robust technology sector, highly skilled workforce, and complex labor laws, Taiwan presents a unique set of challenges and opportunities. 

With the Taiwanese job market remaining short of full-time candidates in 2023, it will likely consist of an increasing number of contractors, reflecting the shifts in work culture globally. This step-by-step guide will show you how to effectively navigate these complexities when paying international contractors in Taiwan.

Step #1: Classify your workers in Taiwan

Misclassification of workers in Taiwan can lead to hefty penalties. Accordingly, understanding the employment relationship between your company and the worker is crucial. Employees are subject to the Labor Insurance Act and have more protections, like severance pay and notice periods for termination. They typically have an indefinite engagement and may work full-time at your office in Taipei, for instance. However, their risk of loss is lower as they are generally protected from liability for work-related issues.

Here’s a breakdown of the most important distinctions between Taiwanese employees and contractors:

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Step #2: Determine the best way to pay your contractors in Taiwan

When it comes to compensating your Taiwanese contractors, there are several viable options to consider:

• Bank transfers: One of the most widely adopted payment methods, wire transfers directly deposit the payment into your contractor's bank account. This ensures a swift and secure transfer but may incur international transaction fees. It's also crucial to be mindful of the exchange rate, particularly if you're paying from an American or other non-TWD account.

• Digital payment platforms: Services like PayPal, Wise, or Payoneer can be used for international payments. These platforms are typically easy to use and quick for transferring funds. However, they may come with their own fees and exchange rate considerations.

• Check: Although less common in today's digital age, sending a check can be an option. However, this can be time-consuming and might not be the most efficient method, especially for international transactions.

• Global payroll services. Generally, contractors aren't included in payroll. Since they aren't subject to tax withholdings the way employees are, they invoice for their services—which goes through accounts payable at most companies. With Rippling, you can pay Taiwanese contractors alongside the rest of your global workforce.

Step #3: Use global payroll software to process payments for Taiwanese contractors 

Although there are several different ways you can pay Taiwanese contractors, leveraging a global payroll software like Rippling can significantly simplify your payment process.

With software like Rippling, you can pay contractors across the world in a single system. Here’s a preview of how Rippling’s global payroll system works:

Step #4: Ensure your Taiwanese contractors have the right tax information 

Taiwan has its unique tax laws and regulations, and contractors need to understand these to correctly file their taxes. Taiwan's income tax rates, for instance, are progressive and can range from 5% to 40% depending on the contractor’s income.

To file taxes in Taiwan, contractors generally need:

• Income details: This includes all sources of income, not just what they earn from your company.

• Expenses and deductions: Taiwanese contractors may be eligible for certain deductions, which can reduce their taxable income.

• Taxpayer Identification Number (TIN): Contractors must have their Taiwanese TIN to file taxes.

• Tax withholding statement: If tax was withheld at the source, contractors would need this statement for their records and to avoid double taxation.

Frequently asked questions about running payroll for contractors in Taiwan