The Taipei National Tax Administration (TNTA), Ministry of Finance indicated that comprehensive agreement for the avoidance of double taxation (CDTA) between the ROC and Hungary, France, India, Slovakia as well as Switzerland have taken effect over the past year. The date of entry into force is stipulated in each income tax agreement. For details, please refer to the provisions of each agreement. For the reference of taxpayers, the entry-into-force dates have been compiled and disclosed by the TNTA (see the table below). If any profit-seeking enterprise having its headquarter in the ROC obtains income from the other contracting state of the aforementioned income tax agreement, it may apply for the resident certificate issued by the tax authority in charge in accordance with “Regulations Governing Application of the Agreements for Avoidance of Double Taxation with Respect to Taxes on Income Treaties” enacted by the Ministry of Finance. With the certificate, an enterprise could apply for tax exemption or a lower tax rate to the other contracting state pursuant to provisions of the income tax agreement.

The Administration suggested that according to Paragraph 2, Article 3 of the Income Tax Act, any profit-seeking enterprise having its head office within the territory of the Republic of China, its profit-seeking enterprise income tax shall be levied on its total profit-seeking enterprise income derived within or without the territory of the Republic of China; provided, that in case income tax has been paid on the income derived outside of the territory of the Republic of China in accordance with the tax act of the source country of that income, such tax paid may, upon presentation by the taxpayer of evidence of tax payment issued by the tax office of said source country for the same business year and attested by a Chinese embassy or consulate or other organizations recognized by the Government of the Republic of China in the said local, be deducted from the amount of tax payable by the taxpayer at the time of filing final returns on the total profit-seeking enterprise income, to the extent that such deduction shall not exceed the amount of tax which, computed at the applicable domestic tax rate, is increased in consequence of inclusion of its income derived from abroad.

The TNTA further pointed out that according to Paragraph 2, Article 26 of “Regulations Governing Application of the Agreements for the Avoidance of Double Taxation with Respect to Taxes on Income”, where the income derived from a Contracting State shall be taxable only in the other contracting state or is subject to the limited tax rate in that State in accordance with the provisions of the Direct Tax Agreement (DTA), but no application has been made for the exemption or the reduction of the tax rate of such income, the overpaid foreign tax on such income may not be credited against the tax payable in the other contracting state." Therefore, it is clear that if profit-seeking enterprises are headquartered in the ROC obtain income from the other contracting state, and the income is taxable only in the ROC or is subject to the limited tax rate in the other contracting state based on provisions of the income tax treaty, the overpaid foreign tax may not offset the income tax payable in the ROC. Profit-seeking enterprises shall claim the refund of overpaid foreign tax to the other contracting state in accordance with the provisions of the tax treaty.

The TNTA reminds that domestic residents may apply for resident certificates issued by the tax authority in charge if they obtain income from the other contracting states. With resident certificates, they can enjoy the tax-exempt or lower tax rates of the other state by the provisions of the tax treaty to ensure their own interests. For details of the contracting states and tax treaties with which the ROC involved, please refer to the website of the Taxation Agency, Ministry of Finance by the operation of the following sequent: “Announcements/Tax Treaty/List of Tax Treaties”.