The US Department of the Treasury announced on the 29th that the United States and Taiwan will begin comprehensive negotiations to address the issue of double taxation. The Ministry of Finance of the Republic of China stated that it welcomes the active response from the US to address the double taxation issue and also expressed gratitude to the US executive branch and Congress for their long-term support in promoting a US-Taiwan agreement to avoid double taxation.
The US Department of the Treasury announced that the United States and Taiwan will initiate negotiations for a comprehensive tax agreement to resolve the issue of double taxation, with the discussions to be conducted under the auspices of the American Institute in Taiwan and the Taipei Economic and Cultural Representative Office in the United States. The first round of negotiations is expected to commence within the next few weeks.
The US Department of the Treasury noted that these negotiations build on the proactive actions taken by the US Congress on this issue, with Congress remaining a key partner in resolving the problem. The Biden-Harris administration acknowledged the work completed by relevant committees in both chambers, including the drafting of the US-Taiwan Exemption from Double Taxation Acceleration Act and the US-Taiwan Tax Agreement Authorization Act.
The Biden-Harris administration is committed to maintaining communication with relevant committees during the negotiation process and collaborating with Congress to legislate and approve the final agreement in accordance with the Internal Revenue Code.
The Treasury Department of the United States stated that a comprehensive tax agreement will bring significant benefits to both the US and Taiwan. This move is expected to support the goals of the Chips for America Act by enhancing the resilience of the semiconductor supply chain, creating job opportunities, and incentivizing investments in semiconductor manufacturing facilities across the United States.
The agreement will reduce obstacles faced by Taiwan in furthering investments in the US due to double taxation, and vice versa. This is particularly crucial for small and medium-sized enterprises, which play a critical role in the complete semiconductor ecosystem.
The US further elaborated that the content of this tax agreement is expected to be based on the “US Model Income Tax Convention.” It will include measures to reduce withholding taxes on cross-border payments of dividends, interest, and royalties; provisions regarding permanent establishments and the taxation of temporary cross-border workers; modern anti-abuse clauses to prevent income from escaping taxation and the misuse of tax agreements; dispute resolution mechanisms; and provisions for information exchange to assist tax authorities in both the US and Taiwan in fulfilling their tax management responsibilities.
Regarding the statement issued by the US Department of the Treasury on the US-Taiwan tax issue on the 29th, the Ministry of Finance of the Republic of China welcomed the US’s proactive response to addressing the double taxation issue and expressed appreciation to the US executive branch and Congress for their long-term support in promoting a US-Taiwan agreement to avoid double taxation.
The Ministry of Finance of the Republic of China explained, “The US is one of our major trading and investment partners. By negotiating a US-Taiwan agreement to avoid double taxation and eliminating tax barriers to bilateral investment and trade activities, it is expected to bring substantive reciprocal benefits to both Taiwan and the US, including allowing Taiwanese companies to receive the same tax treatment as other US treaty partner countries and attracting wider US investments in Taiwan, thus strengthening key industry supply chains between Taiwan and the US.”
The Ministry of Finance of Taiwan emphasized, “In recent years, relevant agencies of Taiwan have continued to engage in extensive communication with the US executive branch and Congress to address concerns of excessive tax burdens and double taxation issues affecting people and businesses in both Taiwan and the US. The finance ministries of both sides will discuss the issues related to the US-Taiwan agreement to avoid double taxation in the near future, and the US Congress is actively promoting the ‘US-Taiwan Double Taxation Relief Act.'”
The Ministry of Finance of Taiwan expressed sincere gratitude to the US executive and legislative branches for taking proactive steps to address the double taxation issue between Taiwan and the US. “While the Ministry of Finance of Taiwan engages in dialogues, relevant agencies will continue to work with the US Department of the Treasury and Congress to promote related legislation.”
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This comprehensive translation reflects the recent developments between the United States and Taiwan in advancing tax negotiations to address double taxation issues. It highlights the potential benefits of the upcoming agreement for both countries and the efforts of both governments to enhance economic cooperation through tax agreements in the semiconductor industry and beyond.