Taiwan Tax Treaties with China
E-mail: tpe4ww@evershinecpa.com
or
Contact us during office hours (Taipei and China Time Zone)
Director Jerry Chu, USA Graduate School Alumni and a well-English speaker
Mobile: +886-939-357-735
Tel No.: +886-2-2717-0515 ext. 103
CN-Q-10:
China Parent Company, can apply for zero tax rate without PE under DTA in Taiwan?
CN-A-10:
Yes, but not effective.
China and Taiwan have concluded Cross-Strait Agreement on Avoidance of Double Taxation and Enhancement of Tax Cooperation (Cross-strait Tax Agreement) on 25 August 2015.
Not in effective.
CN-Q-20:
When China Parent Company as an Investor, setup a Taiwan subsidiary, and provide services from China to Taiwan Subsidiary, can apply for zero tax rate without PE under DTA in Taiwan?
CN-A-20:
Not in effective.
CN-Q-30:
What is the procedure for Taiwan to apply for zero tax rate under DTAA without PE?
CN-A-30:
Not in effective.
CN-Q-40:
When China Resident company having Taiwan domestic sourced income, what are the withholding tax rates for various incomes in Taiwan?
CN-A-40:
Generally, a Taiwanese resident making payments for services to a nonresident service provider (whether corporate or individual) is required to withhold income tax at the rate of 20% where the payments constitute TSI.
Article 8 of Income Tax Law and Article 15-1 of Taiwan Sourced Income (TSI) Guidance, foreign companies without permanent establishment (PE) derived income in Taiwan are subject to WHT.
Amendment for Article 15-1 has applied deemed profit ratio method to calculate the WHT rate.
WHT rate = Deemed profit ratio (*) X Contribution ratio (**) X 20%
* Deemed profit ratio can be obtained from accounting record or similar contract or industry comparable.
** Contribution ratio has to be certified by COA or from similar approved contract or 100%.
Article 25-1 of Income Tax Law, any profit-seeking enterprise engaging the stipulated business and having its head office outside the territory of the Republic of China (R.O.C), can instead apply the following deemed profit ratio to calculate the WHT rate.
| Business of foreign enterprise | Deemed profit ratio (A) | WHT rate (B) | Effective WHT rate (A X B) |
| International transport business | 10% | 20% | 2% |
| Construction contracting | 15% | 20% | 3% |
| Technical services | 15% | 20% | 3% |
| Machinery and equipment leasing | 15% | 20% | 3% |
Upon approval from tax authority, for example, technical service fee of NTD 2 million would yield deemed profit of NTD 300,000 (NTD 2 million X 15%), hence the WHT amount would be NTD 60,000 (NTD 300,000 X 20%) or (NTD 2 million X 3%).
WHT would have been NTD 400,000 (NTD 2 million X 20%) if no approval was obtained, or the application was rejected from tax authority.
Generally, these are the withholding tax rates and are applicable to concerning countries with whom Taiwan does not have a Double Taxation Agreement (DTA).
| No. | Type of Payments | Taiwan rates | Remarks |
| 1 | Business profits (with PE) | 20% (Max) | Can apply deemed profit ratio as in Article 15-1 or Article 25-1 |
| 2 | Dividends | 21% | |
| 3 | Interest (General) | 20% | |
| 4 | Royalties fee | 20%/0% | |
| 5 | Technical services | 3% | Apply deemed profit ratio 10% or 15% as in Article 25-1 |
| 6 | Professional services (Individual) | 20% (Max) | Can apply deemed profit ratio as in Article 15-1 or Article 25-1 |
Summary of TAX TREATY between Taiwan and CHINA
China and Taiwan have concluded Cross-Strait Agreement on Avoidance of Double Taxation and Enhancement of Tax Cooperation (Cross-strait Tax Agreement) on 25 August 2015.
Permanent Establishment
Permanent establishment (PE) means a fixed place of business which generally includes the followings:
*Management offices
*Branches
*Offices
*Factories
*Workplaces
*The undertaking of construction exceeding 12 months, or labor services for a duration exceeding 183 days in China constitute permanent establishments.
Withholding Tax
| No. | Type of Payments | Taiwan Rates | Applicable Rates |
| 1 | Business profits (without PE) | 0% | 0% |
| 2 | Business profits (with PE) | 20% (Max) | 20% (Max) |
| 3 | Dividends | 21% | 21% |
| 4 | Interest (General) | 20% | 20% |
| 5 | Royalties fee | 20%/0% | 20%/ 0% |
| 6 | Technical services | 3% | 3% |
| 7 | Professional services (Individual) | 20% (Max) | 20% (Max) |
*Article 2(2) of Cross-Strait Agreement, Taiwan may not tax payments on business profits rendered by China corporations unless it is attributable to the permanent establishment situated in the relevant territory.
*In Article 5(1) of Cross-Strait Agreement, dividends paid by a Taiwanese Resident enterprise to China Resident enterprise, the tax charged shall not exceed 5% (for shareholdings more than 25%) or 10% (for others) of the gross dividends.
*Article 5(2) of Cross-Strait Agreement states that where the beneficial owner of the interest (exclude exempted interest) is a non-resident, shall be taxed in the territory in which it arises at the rate not exceeding 7% of the gross interest.
*Article 5(3) of the Cross-Strait Agreement explained royalties means payment for the use or right to use the copyrights, patent rights, and the right to use literary, artistic, or scientific works.
Trademark rights, designs, or models, plans, secret formulas or manufacturing procedures, or information related to industrial, commercial, and scientific experience.
It does not include payments for use or right to use any industrial, commercial, or scientific equipment.
*Article 5(7)(1) professional services or other activities provided by individuals of an independent character. Taiwanese corporations may not tax payments for professional service rendered by a China resident unless the China resident has a fixed place or stay in Taiwan for 183 days or more. An independent profession includes physicians, lawyers, engineers, architects, dentists, and accountants.
Elimination of Double Taxation
Article 9 of Cross-Strait Agreement states that double taxation shall be eliminated by allowing tax credit to be made available to the home resident territory. It shall be credited against the tax levied in the first-mentioned territory on that resident. However, the amount of credit shall not exceed the amount of the tax in the first-mentioned territory.
Exchange of Information
Article 12(1) states that the any information obtained by a party in accordance with this agreement shall be treated confidentially in accordance with the information obtained by the party in accordance with relevant regulations, and can only be provided to the verification, collection, execution, and administrative relief of the tax categories (tax items) specified in this agreement.
Please be aware of below Warning:
The above contents are digested by Evershine R&D and Education Center in October 2021.
Regulations might be changed as time goes forward and different scenarios will adopt different options.
Before choosing options, please contact us or consult with your trusted professionals in this area.
Contact us:
E-mail: tpe4ww@evershinecpa.com
or
Contact us during office hours (Taipei and China Time Zone)
Director Jerry Chu, USA Graduate School Alumni and a well-English speaker
Mobile: +886-939-357-735
Tel No.: +886-2-2717-0515 ext. 103
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