How to pay international contractors in Taiwan


Aug 17, 2023

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:



High level of worker autonomy.
Contractors are generally given more autonomy, with the freedom to dictate their work schedules and methods of task completion.

More direction from the employer. Employees receive more guidance and direction from their employer on how to perform their work and specific working hours.

Contractors usually own their tools and equipment.

The company provides tools and equipment to employees.

Less integrated. Contractors often work remotely.

Highly integrated. Employees are more integrated, often working on-site.

No entitlement to benefits. Contractors are not entitled to benefits and protections under Taiwanese law. They also pay their own taxes.

Entitled to benefits. Employees are entitled to employment benefits and protections from their employer. This includes minimum wage, overtime pay, vacation pay, health insurance, retirement plans, and so on.

Time-bound engagement. Contractors are normally engaged for a specific project or time period.

Indefinite engagement. Employees tend to be hired for indefinite periods of time.

Risk of loss. Contractors usually assume more risk and liability for their work.

No risk of loss. Employees are sheltered from liability for work-related problems by their employer.

Subcontracting. Contractors can assign work to be completed by another individual or entity.

No subcontracting. Employees are expected to complete their work themselves. They can only delegate responsibilities with official approval from the company.

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, TransferWise, 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. But with Rippling, you can pay Taiwanese employees and contractors in a single pay run.

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. It handles the intricacies of the Taiwanese payment system, including payments in New Taiwan Dollars (TWD), to ensure that your contractors receive their salaries promptly and accurately.

With software like Rippling, you can pay employees and contractors, across the world, in a single pay run. 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

Do you need to withhold taxes when paying contractors in Taiwan?

Generally, you don't have to withhold taxes when paying contractors in Taiwan. This is because independent contractors are responsible for their own tax payments. However, certain exceptions may apply, and it's always best to consult with a tax professional or refer to the local tax laws to ensure compliance.

Does the Taiwanese minimum wage apply to independent contractors in Taiwan?

The Taiwanese minimum wage does not apply to independent contractors. Minimum wage laws in Taiwan, like many other jurisdictions, typically apply only to full-time employees. As independent contractors are considered self-employed, they negotiate their own payment terms and rates.

Do Taiwanese contractors get benefits?

Generally, Taiwanese contractors do not receive the same benefits as employees. While an employee's benefits can include labor insurance, a monthly salary, and paid annual leave, contractors are typically responsible for their own insurance and may negotiate their own rates.

Can you pay contractors in Taiwan in your home currency?

Yes, you can pay contractors in Taiwan in your home currency. However, be mindful of the exchange rate and any potential foreign transaction fees. It might be more convenient for the contractor to receive payment in New Taiwan Dollars (TWD).

Can you manually pay contractors in Taiwan?

Yes, it's possible to manually pay contractors in Taiwan. However, the process can be cumbersome and may require intricate knowledge of local laws and tax systems. For instance, you'll need to factor in Taiwan's National Health Insurance contributions, adhere to the Labor Standards Act (LSA) regulations where applicable, and consider any notice period stipulations in the employment contract. If you're operating from a different time zone like China or the Philippines, the logistics could become even more complex. 

Additionally, manual payment processes may also encounter issues with international wire transfers or currency conversions. Therefore, to simplify the process, minimize errors, and ensure compliance with Taiwanese laws, many businesses prefer using global payroll software or an Employer of Record (EOR) like Rippling.

How do you turn a contractor into an employee in Taiwan?

Turning a contractor into an employee in Taiwan involves changes to the employment agreement and ensuring compliance with Taiwan's labor laws. This includes offering the necessary employee benefits and contributions to social security and labor insurance. It's recommended to consult with a local employment law specialist or use an Employer of Record service to ensure a seamless transition.

Are there public holidays and annual leave considerations when paying contractors in Taiwan?

While independent contractors in Taiwan are not legally entitled to paid public holidays or annual leave under the Labor Standards Act, these terms can be stipulated in the individual employment contract. Contractors may negotiate higher rates to compensate for the lack of traditional employee benefits.

What are the considerations regarding maternity and parental leave for contractors in Taiwan?

Contractors in Taiwan are not typically entitled to maternity or parental leave benefits provided to full-time employees. However, these considerations can be negotiated and included in the employment contract.

What is the legal entity's responsibility when paying contractors in Taiwan?

The legal entity hiring the contractor is responsible for ensuring payments are made accurately and on time, based on the terms specified in the employment contract. However, unlike with employees, they typically don't withhold taxes or make social security contributions for contractors.

How does the misclassification of employees and contractors affect payment in Taiwan?

Misclassification can lead to legal complications in Taiwan. If an employee is misclassified as a contractor, the employer could be liable for back payments of benefits, such as labor insurance, severance pay, and other benefits stipulated under the Labor Standards Act. Therefore, it's crucial to correctly classify workers.

Can you hire and pay contractors in Taiwan without a local legal entity or work permit?

Yes, foreign companies without a legal entity in Taiwan can hire and pay contractors. However, the contractors must have the necessary work permits to legally provide their services. Utilizing an Employer of Record can simplify this process.

What are the guidelines for termination notices for contractors in Taiwan?

Unlike employees who usually require a day’s notice for termination, the terms for dismissing a contractor can vary. It is often specified in the contract, which could state a one-year engagement with a particular notice period for dismissal.

With Rippling, you can effortlessly manage contractors—as well as quickly transition contractors to full-time employees—with legally compliant paperwork, benefits administration, payroll, and more. Rippling handles it all, so you stay compliant from onboarding to offboarding.

Rippling and its affiliates do not provide tax, legal, or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal, or accounting advice. You should consult your own tax, legal, and accounting advisors before engaging in any related activities or transactions.

last edited: August 17, 2023

The Author

Carissa Tham

A British Columbia-based tech content strategist and writer, Carissa has lived and worked in Singapore, Taiwan, and Canada. Carissa lends her unique global perspectives to growing Rippling’s brand in the Asia-Pacific region and beyond.