Taiwan Tax Treaties with Japan

Interchange Association in Japan and The Association of East Asian Relations in Taiwan concluded and signed an Agreement for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income (Double Taxation Agreements, DTA), on 26 November 2015 and takes effect from 01 January 2017.

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

 

JP-Q-10:
日本母公司在台灣是否可以依DTA申請沒有常設機構(PE)下零稅率?
Japan Parent Company, can apply for zero tax rate without PE under DTA in Taiwan?

JP-A-10:
Yes.
Japan has DTA with Taiwan, and if Japan Legal Resident company is without PE (Permanent Establishment), it will be redeemed as “non-Taiwan Domestic Sourced Income”.
That means Taiwan will levy zero-tax.
However, Japan Legal Resident company still need to send zero-tax application to Taiwan Tax Bureau for being approved.

JP-Q-20:
日本母公司在台灣設立了日本子公司, 日本母公司替子公司服務收入能否申請零稅率?
When Japan Parent Company as an Investor, setup a Taiwan subsidiary, and provide services from Japan to Taiwan Subsidiary, can apply for zero tax rate without PE under DTA in Taiwan?

JP-A-20:
According DTA Article 5 item 7, A Taiwan subsidiary will not be treated as PE of Japan Parent company as an investor because it is a separate legal entity.
That means if a Taiwan Subsidiary pay service fee to Japan Parent Company through service contract signed between subsidiary and Japan Parent company.
As an investor, Japan Parent Company can apply zero tax.
As for if paid amount being reasonable, it will get involved TP (Transfer Pricing) judgement by Taiwan Tax Bureau.

JP-Q-30
日本依DTA沒有PE下零稅率申請的程序為何?
What is the procedure for Taiwan to apply for zero tax rate under DTA without PE?

JP-A-30
Non-resident in Taiwan who wishes to avail treaty benefits are require furnishing the following to the Taiwan Company (Tax deductor) and they will file to the tax bureau.

  1. Tax Residency certificate (TRC) from the country in which the non-resident is the resident.
  2. A No PE declaration letter (prescribed format), to proof the Foreign Company does not have a “PE” in Taiwan.
  3. Relevant documents providing information of the income (eg. Billing statement, invoice, service procedures, the evidence of service).
  4. Original application form for a Foreign Profit-Seeking Enterprise to Exempt its Business Profits from Tax under an Agreement for the Avoidance of Double Taxation.
  5. Original power of attorney (for application on behalf).
  6. Photocopy of agreement (including Chinese translation).

Submit the above application documents to the taxation authority in the place where the payer is located.
Refer to the below website for further forms and details:
https://www.ntbna.gov.tw/multiplehtml/8e6b810dcee94ddc822e96c950ff430f

JP-Q-40
日本母公司有台灣來源所得的各項所得扣繳稅率為何?
When Japan Resident company having Taiwan domestic sourced income, what are the withholding tax rates for various incomes in Taiwan?

JP-A-40:
Japan has DTA with Taiwan, and if you are with PE (Permanent Establishment) in Taiwan, your income will be considered as Taiwan domestic sourced income.
As for levying Tax Rate, please be aware:
if Taiwan Tax rate > DTA Rate, adopt DTA Rate; if Taiwan Tax rate < DTA Rate, adopt Taiwan Rate.
If DTA applied, the DTA rates between Japan and Taiwan are as below:

No. Type of Payments DTA rates Taiwan Rates Applicable Rates
1 Business profits (with PE) 20% 20% 20%
2 Dividends 10% 21% 10%
3 Interest (General) 10% 20% 10%
4 Royalties fee 10% 20%/0% 10%
5 Technical services 0% 3% 0%
6 Professional services (Individual) 0% 20% (Max) 0%

*The withholding tax rate under domestic law may apply rather than the treaty rate where the domestic law rate is lower than the treaty rate.
*No tax is imposed on dividends paid to nonresident corporations under Taiwanese domestic law.

JP-Q-50
當日本稅務居民有台灣來源所得,依DTA優惠稅率申請的程序為何?
When Japan Tax Resident having Taiwan domestic sourced income, what is Taiwan’s application procedure based on the DTA preferential tax rate?

JP-A-50:
Non-resident in Taiwan who wishes to avail treaty benefits are require furnishing the following to the Taiwan Company (Tax deductor) and they will file to the tax bureau.

  1. Tax Residency certificate (TRC) from the country in which the non-resident is the resident.
  2. Relevant documents providing information of the income (eg. Billing statement, invoice, service procedures, the evidence of service).
  3. Original application form for the Calculation of Business Revenue for Foreign Profit-seeking Enterprise in Accordance with the Provisions of Paragraph 1, Article 25 of the Income Tax Act.
  4. Original power of attorney (for application on behalf).
  5. Photocopy of agreement (including Chinese translation).

Submit the above application documents to the taxation authority in the place where the payer is located.
Refer to the below website for further forms and details:
https://www.ntbna.gov.tw/multiplehtml/1b4a2f4b58d943cdb3c90aaa628a40de

Summary of Tax Treaty between Taiwan and Japan

Interchange Association in Japan and The Association of East Asian Relations in Taiwan concluded and signed an Agreement for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income (Double Taxation Agreements, DTA), on 26 November 2015 and takes effect from 01 January 2017.

Permanent Establishment

Article 5 states the term permanent establishment (PE) means a fixed place of business which generally includes the followings:
A place of management
A branch
An office
A factory
A workshop
The furnishing of services, includes consultancy services, through employees or other personnel for periods aggregating more than 183 days.

Withholding Tax

No. Type of Payments DTA rates Article in DTA Taiwan Rates Applicable Rates
1 Business profits (without PE) 0% Article 7 0% 0%
2 Business profits (with PE) 20% Article 7 20% 20%
3 Dividends 10% Article 10 20% 10%
4 Interest (General) 10% Article 11 10% 10%
5 Royalties fee 10% Article 12 10% 10%
6 Technical services 0% Article 7 3% 0%
7 Professional services (Individual) 0% Article 14 20% (Max) 0%

*Article 7 of DTA between Japan and Taiwan explained, an enterprise shall not be taxed on business profits unless it is attributable to the permanent establishment situated in the relevant territory.
*In the Article 10, dividends paid by a Taiwan Resident enterprise to Japan Resident enterprise (and vice versa), the tax so charged shall not exceeding 10% of the gross dividends.
*Article 11 states that where beneficial owner of the interest (exclude interest from government) is a non-resident, shall be taxed in the territory in which it arises at the rate not exceeding 10% of the gross interest.
*Article 12 explained royalties means payment for the use of, right to use, copyright of literary, artistic, or scientific work, information concerning industrial, commercial, or scientific experience. Payment for technical services is taxed at 10%.
*Technical services rendered are covered by the business profits article. Payment for technical services is taxed at 0%. Technical services rendered in an independent capacity should be covered in Article 14 (see professional services) instead.
*A professional services or other activities provided by individual of an independent character was explained in Article 14. Taiwan may not tax payments for professional service rendered by a Japan resident unless the Japanese resident has fixed place or stay in Taiwan for 183 days or more (and vice versa). An independent profession includes physicians, lawyers, engineers, architects, dentists, and accountants.

Elimination of Double Taxation
Article 22 of the DTA 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 25 states that the competent authorities of the territories shall exchange such information relevant to the provision of 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.

Taiwan Tax treaties with other countries

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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(version: 2022/03)

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