Do You Need to Pay Tax on Your Pension in Taiwan?

Del Sol CPA
Jun 19
3 min read

After settling down and living in Taiwan for many years, you’ve finally decided it’s time to map out your retirement lifestyle and long-term investment strategy. One of the most common questions we hear from clients is: “Do I need to pay tax on my pension in Taiwan?” It’s a crucial topic to understand as you plan for financial peace of mind in your later years.

In this article, we’ll break down Taiwan’s pension system—which consists of three main types—and explore how each one is taxed.

1. Labor Pension (勞工退休金)

Taiwan’s labor pension comprises two components:

New System of Labor Pension (勞退新制) – This portion is employer-funded and regarded as retirement income, which must be reported as “severance income” and taxed accordingly.
Old-Age Benefits of Labor Insurance (勞保老年給付) – This is a type of social insurance and is fully tax-exempt.

2. Civil Servants & Teachers’ Pension (公教退休金)

Taiwan's Civil Servants and education employees contribute to a pension fund managed by the government. The pension amount is calculated based on years of service and final salary before retirement. Upon retirement, recipients can choose to receive payments monthly or as a lump sum. Tax treatment depends on the amount received and how it’s withdrawn—explained further below.

3. Personal Retirement Savings (個人儲蓄退休金)

This refers to individual retirement plans, often funded through personal savings or investment portfolios. While these are flexible and individually managed, interest income exceeding NTD 270,000 annually is subject to interest income tax, even if it's from personal savings.

How Is Pension Income Taxed?

The way pension income is taxed depends on how the pension is received—either monthly or as a lump sum—and how it aligns with the tax-free threshold set by Taiwan’s Ministry of Finance.

▼ Lump-Sum Pension Withdrawal

For 2025, the updated tax-exempt threshold is calculated based on your years of service (YOS):

Amount Received	Tax Rate
Below NTD 198,000 × YOS	Fully tax-exempt
NTD 198,000~NTD 398,000 × YOS	50% taxable
Above NTD 398,000 × YOS	Fully taxable

Note: These thresholds reflect adjustments made for inflation beginning in 2025.

💡 Example: Lily’s Retirement Payout

Lily worked for 20 years and opted to receive her retirement as a lump sum, totaling NTD 8.5 million.

NTD 198,000 × 20 years = NTD 3.96 million
NTD 398,000 × 20 years = NTD 7.96 million

Tax Breakdown:

The first NTD 3.96 million is fully tax-exempt
The next NTD 4 million (NTD 7.96M - NTD 3.96M) is 50% taxable → NTD 2 million taxable income
The remaining NTD 540,000 (NTD 8.5M - NTD 7.96M) is fully taxable

🔍 Total taxable income: NTD 2 million + NTD 540,000 = NTD 2.54 million

This amount must be declared as retirement income in Lily’s personal income tax filing for that year.

▼ Monthly Pension Payments

If you opt to receive your pension monthly, and your total annual pension income is less than NTD 859,000, it is tax-free. Any amount exceeding that threshold will be included in your total income and taxed under individual income tax rules.

Special Cases: Foreign-Sourced Pensions

If your pension is received from outside Taiwan, it may still be taxable depending on:

Whether Taiwan has a tax treaty with the country of origin
The classification of the payment (e.g., employer-funded or insurance-based)

We recommend consulting a local and English-speaking accountant for country-specific guidance.

Planning for a Tax-Efficient Retirement

Retirement is more than just receiving a monthly payment—it’s a shift in your financial lifestyle. Because Taiwan’s pension amounts are primarily based on years of service and final salary, they may not be sufficient for long-term living or medical costs.

At DelSol CPA, we encourage clients to take a holistic approach to retirement planning—balancing pension income with personal savings, investments, and tax strategies. A well-thought-out financial plan helps ensure your retirement years are not only comfortable but also financially secure.