Americans working in Taipei, Hsinchu, or Kaohsiung often discover that moving to Taiwan does not simplify their tax life, it adds a second filing obligation on top of the one they already have. Taiwan's National Taxation Bureau, operating under the Ministry of Finance of the Republic of China, taxes income earned or sourced in Taiwan, while the United States imposes tax on its citizens and green card holders wherever in the world they actually live, a rule tied to status rather than geography. Because Taiwan's unique diplomatic status has kept it outside the normal channel other countries use to negotiate income tax treaties with the United States, there is no US-Taiwan tax treaty in force today, which means the Foreign Earned Income Exclusion and Foreign Tax Credit have to do all the work that a treaty would otherwise share. Getting that choice right, and staying current on the reporting rules layered on top of it, is the difference between a clean filing and a costly one.
Do US Citizens Living in Taiwan Have to File Both Taiwan and US Tax Returns?
Yes, and the trigger for each government is different, which is exactly why both obligations stack instead of canceling out. The National Taxation Bureau looks at how many days someone has actually spent inside Taiwan during the year to decide residence, then taxes income earned or sourced there. The IRS does not care about days in the country at all, it taxes on citizenship and green card status, so a US passport or green card keeps someone inside the US tax net no matter how long they have lived in Taipei, Hsinchu, or anywhere else abroad.
Once an American has crossed into Taiwan tax residency under the local day-count rules and still holds US citizenship or a green card, both a Taiwan individual income tax return and a US Form 1040 are typically due for the same year. Having already paid Taiwan tax does not cancel the US filing requirement, and with no treaty available to sort out which country gets first claim, the Foreign Earned Income Exclusion and Foreign Tax Credit covered next are what actually keep the same dollar of income from being taxed twice.
How Does Taiwan Tax Residents on Their Income?
Taiwan operates on a largely territorial basis, reaching Taiwan-source income under its regular progressive individual income tax. Foreign-source income is treated differently: it is generally brought into the Taiwan tax base only through the Income Basic Tax, a form of alternative minimum tax that applies once a taxpayer's foreign-source income and certain other preferential items exceed a set threshold for the year.
This structure matters for planning because it means a typical American employee working a Taiwan-based job is taxed by Taiwan largely the same way a local resident is, on ordinary progressive rates against Taiwan-source wages, while income sourced outside Taiwan is generally shielded from regular Taiwan income tax unless the Income Basic Tax is triggered. Because specific rates, brackets, and the Income Basic Tax threshold change and depend heavily on individual facts, they should always be confirmed with a Taiwan-licensed adviser rather than assumed from a US perspective; what matters for the US analysis is simply that Taiwan wage income tax is a real, often meaningful liability that has to be coordinated with the US return.
Should You Claim the FEIE or the Foreign Tax Credit on Taiwan Income?
For most Americans earning a Taiwan salary, the Foreign Tax Credit on Form 1116 tends to outperform the Foreign Earned Income Exclusion, because Taiwan income tax on wages can run comparable to or higher than the equivalent US tax, which lets the credit offset US liability dollar for dollar under IRC Sections 901 and 904, with any leftover credit carrying forward under Schedule B rather than going to waste. That matters in Taiwan specifically, where the tax withheld in a high-earning year can run past what is needed to zero out the US bill for that same year.
The Foreign Earned Income Exclusion on Form 2555 still earns its keep for an English teacher, junior engineer, or anyone else whose Taiwan salary sits comfortably under the exclusion's annually indexed ceiling, $130,000 for 2025 under IRC Section 911, or for a family that needs the refundable Additional Child Tax Credit to stay intact, since claiming the exclusion can knock that credit out while the credit route usually leaves it alone. Neither tool touches self-employment tax, and because dropping an FEIE election means a five-year wait before re-electing it without IRS sign-off, it is worth thinking through rather than defaulting into. Our FEIE versus Foreign Tax Credit comparison walks through the full tradeoff, and many Taiwan-based filers end up using the credit as the default with the exclusion layered in for income under the cap.
Is There a US-Taiwan Tax Treaty, and What If There Isn't?
No. There is currently no income tax treaty between the United States and Taiwan. Taiwan's diplomatic status has kept it outside the normal process the United States uses to negotiate and ratify a standard Article II-style tax treaty with another country, so the treaty network that most other expat destinations rely on simply does not exist here. Congress has taken notice of the gap: the United States-Taiwan Expedited Double-Tax Relief Act, introduced as H.R. 33, passed the US House of Representatives in January 2025, but as of August 2026 it had not been enacted into law, so it remains pending legislation rather than current relief.
Until any relief legislation is actually signed into law, an American in Taiwan has no treaty-based residency tie-breaker, no treaty saving clause to interpret, and no treaty article assigning taxing rights between the two countries. Everything that would normally be resolved by treaty language instead runs entirely through the domestic Foreign Tax Credit and Foreign Earned Income Exclusion, which is also why there is no US-Taiwan totalization agreement to protect a self-employed American in Taiwan from paying into two social insurance systems on the same self-employment earnings. Our guide to totalization agreements and self-employment tax abroad explains how that certificate process works in countries where an agreement does exist, and by contrast why Taiwan-based self-employment income gets no such relief today.
Are Taiwan Investment Funds Taxed as PFICs?
Fund products bought through a Taiwan bank or a local brokerage, the default way most Taiwan-based Americans end up investing their salary, generally check every box in the passive foreign investment company definition at IRC Section 1297, with Sections 1291 and 1298 setting the default US tax result once that label applies. None of this turns on how the fund is treated under Taiwan law, it is purely a US tax-code classification layered on top of an ordinary Taiwan investment.
The default result is not a light one. Absent a timely qualifying electing fund or mark-to-market election, gains and certain distributions get spread across the holding period, taxed at the highest rate that applied in each of those years, and charged interest on top, and each Taiwanese fund needs its own Form 8621, due even in a year the fund produces no US tax at all. It is why Americans in Taiwan are typically steered toward opening a US-domiciled brokerage account for new money instead of adding more local mutual funds through a Taiwan bank.
How Are Taiwan Pensions and Retirement Accounts Taxed by the US?
Employers in Taiwan are required to fund an individual labor pension account for most staff, and that account, along with the separate labor insurance program, gets favorable tax treatment under Taiwan law. It is easy to assume that favorable status travels with the account to the US return, but it does not.
IRC Sections 401(a) and 402(b) set the default US rule: income building up inside a foreign retirement arrangement counts as currently taxable to the US person who owns it, unless a treaty provision specifically overrides that, and since no US-Taiwan treaty exists, there is no override available here. Growth inside a Taiwan labor pension account can be taxed currently on the US side even though Taiwan itself lets it build up tax-free, and whatever the account is invested in may separately land in the PFIC analysis above. The same four questions decide the outcome for any country's plan, whether growth is taxed as it accrues, whether a treaty defers it, what has to be reported, and how distributions are eventually taxed, and our foreign pension US tax treatment guide walks through all four.
What Else Do You Have to Report to the IRS?
Beyond the income tax return itself, Taiwan financial accounts and investments carry separate information-reporting obligations that apply whether or not any US tax is owed for the year. Penalties for missing these filings are typically far larger than any tax that would have been due in the first place.
The Taiwan Reporting Stack
Reference- FBAR (FinCEN Form 114): triggered once the combined high balance across your Taiwan checking, brokerage, and labor pension related accounts tops $10,000 at any single point in the year. See our FBAR filing guide.
- Form 8938 (FATCA, IRC Section 6038D): runs on its own, higher threshold for Americans abroad and lands the same Taiwan accounts on your federal return a second time, this time attached to Form 1040 itself. See our Form 8938 guide.
- Form 8621 (PFIC): generally required for each Taiwanese mutual fund or pooled investment vehicle that qualifies as a passive foreign investment company. See our PFIC and Form 8621 guide.
An American who has not yet obtained a Social Security number for a Taiwan-born dependent, or who needs an identifying number for a nonresident spouse, may also need an ITIN through Form W-7 before certain credits or filing statuses can be claimed.
Bottom Line
The single biggest trap for an American in Taiwan is assuming a tax treaty exists somewhere in the background the way it does almost everywhere else Americans relocate; it does not, and every dollar of double-tax relief here runs through the Foreign Tax Credit and Foreign Earned Income Exclusion instead. The National Taxation Bureau taxes Taiwan-source income under a largely territorial system while the IRS taxes on citizenship regardless of residence, and with no totalization agreement either, those two domestic tools are carrying weight that a treaty and a totalization agreement would normally share, with the credit usually the stronger pick given how real Taiwan's wage tax bite is. Taiwanese investment funds and the labor pension system each need their own separate reporting look, and pending legislation like H.R. 33 is not a substitute for planning under today's law.
Have questions about US expat taxes in Taiwan? Contact TS CPA for a free consultation. We respond within the same day.
Official IRS and Government Sources
- IRS, Foreign Earned Income Exclusion
- IRS, Foreign Tax Credit
- IRS, US Citizens and Resident Aliens Abroad
- IRS, United States Income Tax Treaties A to Z
- Social Security Administration, Totalization Agreements
- FinCEN, Report of Foreign Bank and Financial Accounts (FBAR)
- IRS, About Form 8621
- IRC Section 911, Citizens or Residents Living Abroad
- Congress.gov, H.R. 33, United States-Taiwan Expedited Double-Tax Relief Act