Taiwan's National Health Insurance reform: Dividends exceeding NT$20,000 will incur an additional 2.11% tax. Experts warn that retail investors may shift their investments to U.S. stocks or cryptocurrencies.

Taiwan’s Ministry of Health and Welfare (MOHW) has announced a draft plan to switch the supplemental health insurance premium calculation for the second-generation National Health Insurance (NHI) to an annual settlement system, expected to take effect in 2027. This change directly impacts middle-class, retirees, and investors’ wallets. The new system adopts an “annual settlement, unified account” approach: if the total interest, dividends, and rental income for the year exceed NT$20,000, a 2.11% supplemental premium will be levied. Additionally, the cap on single withholding payments will be raised from NT$10 million to NT$50 million. The government estimates this reform could inject NT$10 to NT$20 billion into the national health fund annually.

Details of the Healthcare Reform

Currently, the supplemental premium is calculated based on “point-based” withholding, which only considers large single income events, allowing many to split income to lower thresholds. The MOHW states that the new system will switch to a “line-based” settlement, aggregating all non-wage income over the year into one bill, closing the loophole of splitting income. According to the draft, if six specific income types combined exceed NT$20,000, or if bonuses surpass four times the minimum wage (about NT$114,000), an additional supplemental premium of approximately 2.11% will be levied. While the rate remains flat and non-progressive, the scope of taxation will expand significantly.

The policy aims to increase funding for the NHI and promote fairness in contributions but also poses challenges for tax reporting and administrative systems. The six specific income types include:

• Bonuses paid by affiliated insurance units exceeding four times the monthly insured amount.
• Part-time income paid by non-affiliated units.
• Business income not included in insured amounts.
• Cash dividends and stock dividends received from stocks.
• Interest income.
• Rental income.

Public Backlash from Small Investors

With the NT$20,000 threshold, many see this as a “fine net,” especially affecting retirees and long-term stock investors who rely on dividends. Many investors who build cash flow through dividend ETFs now face having this income included in the calculation, potentially reducing their cash flow.

For example, depositors with over NT$1 million in savings have complained on PTT (a popular online forum) that if their interest just exceeds NT$20,000, the 2.11% supplemental premium could be higher than the interest earned from the bank, effectively making their savings “lose money” by sitting in the bank. Similarly, investors holding high-dividend ETFs worth over NT$400,000 risk hitting the threshold, leading to criticism that “even a NT$10,000 payout isn’t enough to avoid the tax.”

Opposition parties, including the Kuomintang (KMT) and the Taiwan People’s Party (TPP), criticize this as a “de facto tax increase on the middle class.” For salaried workers with multiple income streams but relatively low amounts, the supplemental premium could directly cut into disposable income. Retirees, who often face combined expenses from dividends, rent, and medical costs, will feel the double pressure more acutely.

Experts warn that small investors with limited financial tools are most vulnerable to passive impacts. The next three years are crucial for rebalancing assets. While the MOHW has successfully closed loopholes for tax evasion, balancing tax expansion with protecting vulnerable groups remains a key challenge.

MOHW Explanation

Chen Zhenhui, Acting Director of the MOHW’s Social Insurance Department, confirmed on May 5 that Minister Shih Chong-liang has instructed to review whether there is room to raise the supplemental premium while maintaining the current health insurance rate of 5.17%. This involves reforming the collection formula and ensuring the sustainability of the insurance system under Article 31 of the National Health Insurance Act.

Chen emphasized that adjustments aim to be generally fair and to support vulnerable populations—those with lower incomes will pay less, while higher earners will contribute more. She explained that taxing capital gains was not initially chosen due to the broader scope and higher administrative costs. Instead, the government is starting with more manageable income types for pilot testing, with gradual reform as the goal.

Expert Recommendations and Future Outlook

Taiwan’s NHI faces dual pressures from an aging population and rising medical costs, making reform inevitable. However, the annual settlement system could increase reporting complexity and administrative costs. If the government provides transparent calculation tools, clearly explains impacts across income groups, and develops support mechanisms for vulnerable populations, social backlash might be mitigated. Conversely, poor communication and lack of support could turn this reform into another contentious wealth redistribution debate.

Financial expert Eric from the industry predicts that after the new supplemental premium system is implemented, many stock and deposit investors may seek to “legally avoid” paying the premium by moving assets elsewhere. Banks and asset management firms will likely develop new funds and products to attract these investors, preventing capital flight. Whether this reform effectively addresses Taiwan’s long-term healthcare funding crisis remains to be seen.

Currently announced healthcare premium hikes contrast sharply with mainstream expectations of investing in Taiwan stocks and ETFs. Even if the government avoids splitting accounts, some citizens may look for loopholes, such as investing in non-dividend-paying ETFs or overseas markets like the US, where foreign income up to NT$7.5 million remains tax-exempt.

Cryptocurrency Taxation in Taiwan

Currently, cryptocurrencies in Taiwan are classified under Article 14, Paragraph 1, Item 7 as “property transaction income,” which must be reported with personal comprehensive income tax. This classification is not affected by the proposed amendments to the supplemental health insurance premium.

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• An article titled “Taiwan’s health insurance reform: dividends over NT$20,000 pay an extra 2.11%, experts warn retail investors may shift to US stocks or crypto” was first published by BlockTempo, Taiwan’s leading blockchain news outlet.