Establishing an EWC (Employees Welfare Committee) in Taiwan, what will be tax impact ?
We help you setup Taiwan EWC(=employees welfare committee), and provide you after-EWC-setup services including of tax and labor law compliance.
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tw-ewc-010
Under what circumstances must Taiwanese companies set up employee welfare committees?
Answer:
The full name of the Welfare Committee is the Employee Welfare Committee.
The purpose of setting up the Welfare Committee is mainly to enhance the relationship between labor and management by providing employee welfare activities, or to provide subsidies when encountering special circumstances. , improve employee welfare.
Under what circumstances do we usually need to set up a welfare committee? According to the “Employee Welfare Fund Ordinance Article 1, Paragraph 1 stipulates: “All public and private factories, mines, or other business organizations shall allocate employee welfare funds to handle employee welfare undertakings.”
According to Lao Fu Yi Zi No. 0920016167 , companies, banks, agriculture, fishery, ranches, etc. that usually employ more than 50 employees.
In other words, if a general company employs more than 50 employees, it must establish a company welfare committee in accordance with regulations.
It is also worth noting that because all employees in the company enjoy the welfare measures provided by the company’s welfare committee, employees must participate in the welfare committee!
tw-ewc-020
Taiwan companies set up employee welfare committees, What is the burden on the company?
Answer:
According to the provisions of Article 81 of the Examination and Approval
Requirements for the first establishment:
When the Employees Welfare Committee is established for the first time, the employer needs to pay a certain proportion of the company’s capital contribution.
This can be anywhere from 1% to 5% of total capital
Monthly Contribution:
Monthly contribution is usually based on the company’s total revenue.
The typical range is 0.05% to 0.15% of the total monthly incomeThe above-mentioned capital amount related to the provision of welfare funds refers to the total capital when the enterprise was founded, not when the Employees Welfare Committee was established.
Future capital increases can be made voluntarily, but capital reductions cannot be refunded.
The Gross income refers to sales excluding VAT (according to the provisions of proviso 16-1 of the Business Tax Law).
4 Sources of Welfare Funds for the Welfare Committee
According to ＂Article 2 of the “Employee Welfare Fund Regulations”, employee welfare funds can mainly be allocated from the following items:
1% to 5% of its total capital at the time of establishment %.
0.05%~0.15% of total monthly operating income.
20% to 40% of the value of scraps: Scraps refer to the residue and waste materials left in the operation process. Such items that the enterprise cannot use for its own use can still be changed in value (for example: what is retained when sawing logs into wooden boards The company must allocate 20% to 40% of the income from the sale of these items to the Welfare Committee.
The above-mentioned capital amount related to the provision of welfare funds refers to the total capital when the enterprise was founded, not when the welfare committee was established.
Future capital increases can be made voluntarily, but capital reductions cannot be refunded.
The Gross income refers to sales excluding VAT (according to the provisions of proviso 16-1 of the Business Tax Law).
tw-ewc-025
If a Taiwanese company sets up an employee welfare committee, what is the definition of total monthly operating income?
answer:
Gross Income and Net Income are two different financial concepts:
Gross Income
Gross revenue is a company’s total revenue before any expenses are deducted.
This includes all sales income, interest income, investment income, etc.
Total revenue is the starting point in a company’s financial statements and reflects a company’s total revenue capabilities before costs and expenses.
Net Income
Net income is the income remaining after all expenses, taxes, interest and other obligations have been deducted.
This is a company’s actual profit and reflects the company’s financial health after all financial obligations have been paid.
The difference between gross income and net income
Gross Revenue: This is the total revenue of a company before any expenses are deducted.
Net income: is the income remaining after deducting all expenses.
Total revenue provides an overall picture of a company’s revenue, while net income provides details of a company’s actual profitability.
0.05% to 0.15% of total monthly income refers to Gross income.
The relevant business income part refers to sales excluding VAT (according to the provisions of proviso 16-1 of the Business Tax Law).
tw-ewc-030
When establishing employee welfare committees, what is the employee burden?
What payroll items will be included in calculating employee salary?
Answer:
After the establishment of the Employee Welfare Committee, each The amount of burden borne by individual employees is 0.5% of the employee’s salary.
The 0.5% of each employee’s salary allowance every month:
If an employee’s monthly salary is NT$50,000, the company will allocate 0.5% of it, that is, NT$250 will be deducted from the salary every month.
Being paid to For use by Employees Welfare Committee.
The content of employee salary usually includes basic salary, bonuses, sales incentives and allowances, etc.
The above 0.5% is must paid by Employees.
Many foreign-owned companies choose not to let employees pay any money. Therefore they raise employee’s salary around 0.5%. That means EWC Fee of Employees finally is paid by Employer.
tw-ewc-040
When establishing employee welfare committees, what are tax impact to employer?
Answer:
For employers: to employees Benefit committee‘s expenses may be considered business expenses and may be deducted, thereby reducing the company’s overall taxable income.
As enterprises pay more and more attention to the competitiveness of happiness, sometimes enterprises increase their welfare activities and exceed the aforementioned limit.
According to the provisions of Article 81 of the Examination, relevant welfare activities should be disbursed before the welfare funds of the Employees Welfare Committee.
If there is insufficient Only then can the enterprise make up for other expenses.
Special attention should be paid to the fact that in practice, the tax bureau may require the company to present the Employees Welfare Committee passbook to confirm that the welfare funds have been used up. Otherwise, part of the employee welfare expenses may not be allowed to be listed within the balance of the Employees Welfare Committee special account.
For example, Company A actually appropriated NTD 10 million for employee welfare funds in 2023, and spent a total of NTD 12 million on related activities that year.
At this time, if Company A only used the special account of the Employees Welfare Committee to disburse NTD 5 million of it, The remaining 7 million NTD will be borne by Company A.
Since the Employees Welfare Committee still has a balance of 5 million that can be paid and should be paid as a priority, 5 million NTD of the 7 million NTD borne by Company A may be adjusted and eliminated by the tax bureau, and it can only be recognized as a job benefit.
The special account of the Employees Welfare Committee is less than 2 million NTD.
Therefore, when planning welfare activities, companies may need to pay attention to the source and sequence of spending funds, and in compliance with the relevant regulations of the Ministry of Labor, evaluate whether to give priority to the use of funds from the special account of the Employees Welfare Committee, and the company will pay the shortfall. , to ensure that the expenses are fully deductible when filing tax returns.
However, if there is a relative withdrawal from the employee’s salary, tax disputes may arise over how to determine the aforementioned amount.
For employees: Obtained from Employee Benefits Committee Benefits, such as travel allowance or health check-ups, may be considered taxable salary income depending on the nature of the benefit.
tw-ewc-050
After a Taiwanese company establishes an employee welfare committee, what impact will it have on employee salary withholding operations?
Answer:
Related Employees welfare measures should pay attention to the standards for reporting or exempting employee income
According to the provisions of Article 81 of the Examination
Employee welfare measures may involve the withholding and declaration of employee income. Enterprises should pay attention to distinguishing the circumstances under which employee income should be withheld and declared and the type of income to declare. Take the following three common welfare items as examples:
*Tourism Activities
Non-group tourism such as fixed-amount cash subsidies, uniform issuance of travel tickets (such as tickets or accommodation vouchers), or only entertaining specific employees (such as those who have reached a certain number of years of service):
belong to employees of enterprises or Employee Welfare Committee Subsidies issued by the enterprise should be included in the withholding declaration of employees’ salary income.
Subsidies issued by the Employees Welfare Committee are exempt from withholding, but other income of the employees should be reported separately at the end of the year; if it is a group tourism and it is obtained by the Employees Welfare Committee or the enterprise, Documents and vouchers on the letterhead are not considered as employee income.
*Health examination fee
Health examination expenses that enterprises should bear in accordance with labor safety and health regulations, such as “regular health examinations” for on-the-job workers and “health examinations for specific items” for workers engaged in operations that are particularly hazardous to health, are exempted. Income of employees; health check-up fees provided by enterprises out of compassion for employees that are not in accordance with labor safety and health regulations are subsidies to employees.
The enterprise should incorporate them into the withholding declaration of employees’ salary income. The Workers’ Welfare Council is exempt from withholding but should list it.
Report to be other income.
*Dinner party and lottery bonus gifts
The end-of-year party is organized by business owners to show appreciation to employees for their hard work.
According to regulations, employers are not allowed to use the Employees Welfare Committee welfare funds.
The cost of the end-of-year party can be paid for by other expenses and is not regarded as employee income; lottery activities Whether cash or in-kind gifts are provided by profit-making enterprises or Employees Welfare Committee, they are prizes or gifts from competitions, competitions and opportunities, and should be withheld and reported.
**Please note the following:
The above content is a summary of Evershine R&D and Education Center in October 2022.
But regulations may change as times go by and different options may be adopted in different situations.
So before choosing an option, contact us or consult with a professional you trust in the field.
Contact us:
E-mail: HQ4TPE@evershinecpa.com
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contact by phone in working hours of China time zone:
Director Jerry Chu, well-English speaker, USA Graduate School Alumni
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(version: 2024/07)
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