Contents
Why I took the class
Have you ever wondered why so many wealthy people choose to set up a company?
After this CFP (Certified Financial Planner) class, I realized: companies really do pay much less tax than individuals!
Today I'll share the three key things I learned.
This was my third session. The teacher was CPA Lo Tse-Yu (羅澤鈺),
and the topic was Taiwan's “profit-seeking enterprise income tax” — business income tax for short.
I signed up mainly because I want this certification.
The program has six subjects of 40 hours each.
My existing certifications exempt me from four of them,
so I have two subjects left — 80 hours of class in total.
Classes run 8 hours a day for 10 days,
spread across weekends.
For me, earning the CFP isn't just a professional upgrade;
it's also a personal challenge.
It's been several years since I earned my RFC certification,
and I'd been thinking about how to go further in financial planning.
After a lot of research, I decided the CFP was worth the time and effort,
and I plan to spend a year preparing for the exam.
Three key things I learned
1. Companies pay far less tax than individuals
I already knew business income tax was lower than personal income tax,
but in class the teacher's examples showed just how big the difference is.
It helped me understand why people say:
“A job won't make you rich. Only starting a company — owning your own business — will.”
The point isn't only that a company can generate more income and profit;
more importantly, the tax rate is much lower!
Company vs. individual: the tax difference
- Company revenue:
- NT$10 million × 6% net profit margin × 20% business income tax = NT$120,000
- Salary income:
- NT$10 million, after exemptions and deductions, income tax of about NT$2.9 million
- Difference in tax: 24 times!
This comparison made it clear why entrepreneurs always stress “be your own boss.”
You get flexibility in income, and a much lighter tax bill too.
2. Companies can deduct many expenses
I learned that business income tax isn't only lower than personal tax;
even more important, a company can deduct many expenses to reduce its taxable income.
Deductible expenses include, among others:
- transportation
- travel
- advertising
- entertainment
- depreciation on passenger cars
Take car depreciation: a company can buy a NT$2.5 million car,
depreciate about NT$410,000 a year, and replace it after five years.
An ordinary employee simply has to absorb their car's depreciation themselves.
That's why many company cars are replaced every five years — the boss always has a new car to drive.
3. A company has limited liability; a sole proprietorship has unlimited liability
A company and a sole proprietorship (行號) may look similar on the surface,
but they differ greatly in legal status, liability and tax.
Sole proprietorship: unlimited liability
- simpler and cheaper to set up
- if something goes wrong and causes injury or property damage,
the owner must pay with personal assets — “unlimited liability”
Company: limited liability
- more paperwork to set up, but the owner is liable only up to the company's assets
- even if the company goes bankrupt, personal assets are protected
How banks see them
Compared with a sole proprietorship, a company looks more professional to financial institutions
and finds it easier to get funding.
So the teacher suggested that if you run a high-risk business,
such as food or anything with safety risks, you should set up a company
to keep your personal assets safe.
What I can do after the class
I already knew a fair amount about personal income tax and estate and gift tax,
but my knowledge of business income tax was limited.
This class gave me a much deeper understanding of running a company and planning its taxes.
When I talk with business owners in the future, I'll have more to offer —
raising my professional level and letting me give more valuable advice.
Many thanks to CPA Lo Tse-Yu for helping me improve on business income tax!
Over to you
If you're studying for the CFP or interested in tax and financial planning,
I'd love to hear about your experience!
Let's keep improving on the path of financial expertise together.
Further reading: Course Notes: CFP Certification — Trusts
