U.S. taxes for Americans in Taiwan: what to file, and how to catch up.
Teachers, engineers and Taiwanese-American families make up a large community in Taiwan, and all of them still file a U.S. return every year. There is no U.S.-Taiwan tax treaty yet, though a relief bill is pending in Congress, so U.S. law does the work. The traps are savings insurance policies and local funds, which the IRS sees differently. Most people who fell behind can catch up under the Streamlined procedures, with no penalty if they qualify.
Sound familiar?
- You came to Taiwan to teach or work in tech and stayed.
- Your employer pays into the labor pension for you.
- You bought a savings insurance policy through your bank.
- Your Taiwanese bank asked about your U.S. citizenship.
How does the IRS treat Taiwanese pensions and savings?
Every one of these goes on your FBAR. What differs is how the IRS taxes them.
| Account | U.S. treatment | |
|---|---|---|
| Labor pension | Could be treated as social security or as a foreign retirement account the U.S. can tax, and the rules don’t settle which. | Check first |
| Savings insurance | Often an investment in insurance form. It can hold PFICs, and growth may be taxable for the U.S. | Watch out |
| Taiwanese funds | Usually PFICs (Form 8621), with complex reporting and tax rules. | Watch out |
| Bank accounts | Interest is taxable for the U.S., and the accounts count toward your FBAR total. | Taxable |
| Employee stock | Shares from employers in tech, a big part of pay for many engineers, are taxed by the U.S. when they vest or are sold, with a credit for Taiwanese tax. | Check first |
| Property | Rental income goes on your U.S. return, and U.S. tax may apply when you sell. Currency moves can create gains. | Plan ahead |
Which Taiwanese investments are PFICs?
Taiwanese mutual funds and ETFs listed in Taiwan, including the hugely popular index and high-dividend ETFs. For U.S. tax they’re passive foreign investment companies, or PFICs, with their own reporting and harsh default tax rules.
- Each fund needs its own Form 8621 in most years, and gains can be taxed at the top U.S. rate plus an interest charge, unless an election was made in time.
- Investment-linked savings insurance often holds funds too, which can bring the same rules in through the back door.
- Not PFICs: shares of individual companies on the Taiwan exchange, government bonds, and bank deposits.
Is there a U.S.–Taiwan tax treaty?
No. A bill to give Taiwan treaty-like relief passed the House in 2025 and is waiting in the Senate. Even if it passes, the U.S. would still tax its citizens. Until then, U.S. law does the work:
- The foreign tax credit doesn’t need a treaty. Taiwanese income tax on your salary can be credited against U.S. tax on the same income.
- The foreign earned income exclusion works the same with or without a treaty.
- No social security agreement means a self-employed American owes U.S. self-employment tax, and working for a U.S. company usually means U.S. Social Security withholding.
Taiwan’s own basic income tax can reach foreign income, U.S. income included, for higher earners. When it applies, U.S. tax on the same income can usually reduce it.
When are Taiwanese and U.S. taxes due?
Both tax years run January to December, so each Taiwanese year lines up with one U.S. return.
| Taiwan | United States | |
|---|---|---|
| Tax year | January to December | January to December |
| Annual return | Filed May 1 to May 31 | April 15, moved to June 15 automatically when you live abroad, or October 15 with an extension |
| Paying the tax | Withheld from your salary, with any balance due with the return in May | April 15, even if you file later |
| Foreign accounts | No separate report | The FBAR, due October 15, filed online |
Foreign tax credit or exclusion: which wins in Taiwan?
It depends on your salary. Taiwanese rates run from 5% to 40%:
- Teachers and others on modest salaries usually use the foreign earned income exclusion, up to $130,000 for 2025. Taiwanese tax at that level is often lower than the U.S. tax would be.
- Engineers with large bonuses and stock can earn well past the exclusion, and the foreign tax credit on the Taiwanese tax picks up much of the rest.
- Families with children often keep the credit, because it allows the refundable part of the U.S. child tax credit, up to $1,700 per child for 2025.
We run your returns both ways before choosing. How we compare the exclusion and the credit.
A worked example: an engineer in Hsinchu
Ben moved to Hsinchu in 2017 for a semiconductor company. With bonuses and stock he earns about $150,000 a year, his employer pays into the labor pension, he bought a savings insurance policy through his bank, and he holds a Taiwanese index ETF.
| Item | How it’s handled |
|---|---|
| Salary, bonuses and stock | The exclusion covers the first $130,000 for 2025, and the credit covers what Taiwanese tax it can on the rest. |
| Labor pension | Reported; how it’s treated is unsettled, so we explain the options before filing. |
| Savings insurance | On the FBAR, and we check whether growth inside is taxable for the U.S. |
| Index ETF | A PFIC: a Form 8621 in each year filed. |
| Catching up | Three years of returns and six FBARs under the Streamlined procedures, with no penalty if he qualifies. |
Catching up from Taiwan
Most Americans in Taiwan who fell behind without meaning to can catch up under the Streamlined Foreign Offshore Procedures: three years of returns, six years of FBARs and, if you qualify, no penalties. If only FBARs are missing, or you’ve moved back to the U.S., another route may fit better. See every IRS catch-up option for expats, compared.
Common questions
Do I pay U.S. Social Security tax in Taiwan?
Usually not if you work for a local employer. There’s no U.S.-Taiwan social security agreement, though, so self-employment tax can still apply if you work for yourself, and FICA if you work for a U.S. company.
Is a U.S.-Taiwan tax treaty coming?
A bill to give Taiwan treaty-like relief passed the House in 2025 and is waiting in the Senate. Even if it passes, the U.S. would still tax its citizens, so your U.S. filing wouldn’t change much.
How do you handle NT dollar amounts?
We convert using the correct IRS exchange rates for each year and account. It’s routine for us.
Without a treaty, will I be taxed twice?
Usually not. The U.S. foreign tax credit works without a treaty, so Taiwanese income tax you pay generally reduces your U.S. tax on the same income.
Is my savings insurance policy a problem?
It can be. Many are investments wrapped in insurance, and growth inside may be taxable for the U.S., with funds that count as PFICs. We look at your policy before reporting it.
I teach English in Taiwan. Will I owe U.S. tax?
Usually not on your salary: the foreign earned income exclusion normally covers it. You still have to file to claim it, and an FBAR if your accounts topped $10,000.
American in Taiwan? Let's get you caught up.
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