Taiwan TAX TREATIES with other countries Q&A

Taiwan has tax treaties signed with over 30 countries. This is to prevent double taxation and allow cooperation with overseas tax authorities in enforcing tax laws.
In Taiwan, a foreign individual or corporation of which is resident in the country that has a tax treaty with Taiwan, would follow the terms and conditions stated in the tax treaty and enjoy the benefit of withholding tax (WHT) reduction or exemption.

Taiwan Zero Tax Exemption Application Services Under DTA

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

We set up below judgment criteria on Treaty application:

Scenarios:
If you are not a Taiwan legal resident, and if your resident country has DTA with Taiwan, and if you are without PE (Permanent Establishment), please go to Section .
If you are not a Taiwan legal resident, and if your resident country has DTA with Taiwan, and if you are with PE (Permanent Establishment) please go to Section .
If you are not a Taiwan legal resident, and if your resident country has no DTA with Taiwan, please go to Section.

Section :
Scenario:

If you are not a Taiwan legal resident, and if your resident country has DTA with Taiwan, and if you are without PE (Permanent Establishment), it will be redeemed as “non-Taiwan Domestic Sourced Income”.
That means Taiwan will levy zero-tax.
However, you still need to send the zero-tax application to Taiwan Tax Bureau for being approval.

Below, we will let you understand through Q&A.

DTA-Q-10:
In Taiwan, which foreign legal resident company can apply for a zero tax rate without PE under DTA?

DTA-A-10:
Taiwan has signed DTAs with over 30 countries:

Australia Germany Luxembourg Singapore
Austria Hungary Malaysia Slovakia
Belgium India Netherlands South Africa
Canada Indonesia New Zealand Sweden
Denmark Israel North Macedonia Switzerland
Eswatini (‘Swaziland’) Italy Paraguay Thailand
France Japan Poland United Kingdom
Gambia Kiribati Senegal Vietnam

DTA-Q-20:
Why does the Country’s foreign capital without a permanent establishment (PE) in Taiwan, under the DTA enjoy zero tax rate?

DTA-A-20:
It follows Article 5 and Articles 7 in the DTA Treaty. The article defines if a foreign entity has PE in Taiwan. Article 7 regulates if no PE, non-Taiwan domestic sourced income will not be levied tax in Taiwan.

DTA-Q-30:
Under what circumstances are deemed to have no PE, and will the establishment of a foreign-funded subsidiary in Taiwan be regarded as a foreign-funded subsidiary in Taiwan?

DTA-A-30:
According to DTA Article 5 item 7, A Wholly Foreign Owned subsidiary in Taiwan will not be treated as PE because it is a separate legal entity.
That means if a Taiwan Subsidiary pays service fee to a non-Taiwan Parent Company through a service contract signed between a subsidiary and a non -Taiwan Parent company,as an investor, non-Taiwan Parent Company can apply zero tax.
As for if the paid amount is reasonable, it will get involved TP (Transfer Pricing) judgment by Taiwan Tax Bureau.
Please see Taiwan Transfer Pricing webpage.

DTA-Q-40:
If a foreign company establishes a branch or office in Taiwan, can the zero-tax rate without PE be applied?

DTA-A-40:
According to DTA Article 5 item 2, If a foreign company sets up a branch or office in Taiwan, then will be considered as Taiwan domestic Income.
But according to DTA Article 5 item 4,if an Office is only doing a preparatory or auxiliary activity, will apply a zero-tax rate.

DTA-Q-50:
What is the procedure for Taiwan to apply for a zero tax rate under DTA without PE?

Non-resident in Taiwan who wishes to avail treaty benefits are required to furnish 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 prove 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. The 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

Section :

Scenario:
If you are not a Taiwan legal resident, and if your resident country has DTA with Taiwan, and if you are with PE (Permanent Establishment), 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.

Below, we will let you understand through Q&A.

DTA-Q-60:
What are the factors that are deemed to be the country’s domestic source income?

DTA-A-60:
Definition of source income in Taiwan.
A non-resident company with Permanent Establishment (PE) (terms and conditions of PE is stated in tax treaties), is taxed similarly to a resident company. Article 73 states that Taiwan Source Income (TSI) derived from non-resident individuals or companies without PE in Taiwan would be subject to WHT.
Taiwan Source Income (TSI) is defined as below:

  1. Services are performed in Taiwan
  2. Services are performed partly in Taiwan
  3. Services are performed outside Taiwan but require the involvement or assistance of a Taiwanese resident or a Taiwanese enterprise, in the form of provision of equipment, labor, technical expertise, etc.

DTA-Q-70:
Do Article 5 and Article 7 in the DTA take precedence over the Taiwan determination factors on Taiwan domestic sourced income?

DTA-A-70:
When DTA is applied, in the event of a different PE definition between Taiwan domestic tax laws and Article 5 in the DTA, the definition under the DTA shall prevail over the domestic regulations.
When DTA is applied, if a foreign company is defined as without PE (Permanent Establishment) in Taiwan, then will be considered non-Taiwan domestic sourced income, in the event business profit is relevant to this issue, the clause in Article 7 in the DTA zero-rate tax can be applied accordingly. In this scenario, please see section A.

DTA-Q-80:
When non-tax residents of Taiwan have Taiwan domestic sourced income ,what is the withholding tax rate according to Taiwan tax regulations excluding DTA?

DTA-A-80:
Generally, a Taiwanese resident making payments for services to a non-resident 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 records or similar contracts or industry comparable.
*Contribution ratio has to be certified by COA or from a similar approved contract or 100%.

Article 25 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 the tax authority, for example, a 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 the 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
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
6 Professional services (Individual) 20% (Max) Can apply deemed profit ratio as in Article 15-1 or Article 25

Technical Services application services < click me

DTA-Q-90:
If DTA Tax Rate is higher than Taiwan tax rate, apply which tax rate?

DTA-A-90
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.

DTA-Q-A0:
When non-tax residents of Taiwan have Taiwan domestic sourced income, what is Taiwan’s application procedure based on the DTA preferential tax rate?

DTA-A-A0:
Non-resident in Taiwan who wishes to avail treaty benefits are required to furnish 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. The 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

Section :

DTA-Q-B0:
As an investor, if your country has not signed DTA with Taiwan, what kinds of tax rates when you have Taiwan relevant income?

DTA-A-Q0:
If you are not a Taiwan legal resident, and if your resident country has no DTA with Taiwan,
Whatever you are with PE or without PE, all kinds of income will be levied according to Taiwan’s domestic sourced income.
Besides, it will be levied by Taiwan Tax Rates.
Generally, a Taiwanese resident making payments for services to a non-resident 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 records or similar contracts or industry comparable.
** Contribution ratio has to be certified by COA or from a similar approved contract or 100%.

Article 25 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 the tax authority, for example, a 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 the 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
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
6 Professional services (Individual) 20% (Max) Can apply deemed profit ratio as in Article 15-1 or Article 25

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 Treaty with Japan
Taiwan Tax Treaty with Germany
Other Countries on request

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

Additional Information

Evershine has 100% affiliates in the following cities:
Headquarter, Taipei, Xiamen, Beijing, Shanghai,
New York, San Francisco, Houston, Phoenix
Tokyo, Seoul, Hanoi, Ho Chi Minh, Bangkok,
Singapore, Kuala Lumpur, Manila, Dubai,
New Delhi, Mumbai, Dhaka, Jakarta,
Frankfurt, Paris, London, Amsterdam,
Milan, Barcelona, Bucharest,
Melbourne, Sydney, Toronto

Other cities with existent clients:
Miami, Atlanta, Oklahoma, Michigan, Seattle, Delaware;
Berlin, Stuttgart; Prague; Czech Republic; Bangalore; Surabaya;
Kaohsiung, Hong Kong, Shenzhen, Donguan, Guangzhou, Qingyuan, Yongkang, Hangzhou, Suzhou, Kunshan, Nanjing, Chongqing, Xuchang, Qingdao, Tianjin.

Evershine Potential Serviceable City (2 months preparatory period):
Evershine CPAs Firm is an IAPA member firm headquartered in London, with 300 member offices worldwide and approximately 10,000 employees.
Evershine CPAs Firm is a LEA member headquartered in Chicago, USA, it has 600 member offices worldwide and employs approximately 28,000 people.
Besides, Evershine is Taiwan local Partner of ADP Streamline ®.
(version: 2022/03)

Please contact us by email : HQ4TPE@evershinecpa.com

More Cities and More Services please click  Sitemap