The Ministry of Finance states that the "Protocol Amending the Agreement between the Taipei Representative Office in the United Kingdom and the British Trade and Cultural Office, Taipei for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income and on Capital Gains, and the Annex thereto, Signed at London on 8 April 2002" (hereinafter referred to as the Amending Protocol) between Taiwan and the United Kingdom was signed in August 2021.  Such Amending Protocol entered into force on December 23, 2021 after both sides completed the notifying procedures necessary for bringing it into force, and takes effect from January 1, 2022.

The Ministry of Finance explains that "Agreement between the Taipei Representative Office in the United Kingdom and the British Trade and Cultural Office, Taipei for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income and on Capital Gains" (hereinafter referred to as the 2002 Agreement) was signed and brought into effect in 2002.  In order to align with the new international standards, strengthen tax cooperation between the two sides, and enhance the efficiency of cross-border tax dispute resolution mechanisms, both sides reached a consensus to conclude an Amending Protocol for updating several parts of the 2002 Agreement.  The main changes to the content of the 2002 Agreement are as follows:

*Article of the Amending Protocol. 

The Ministry of Finance points out that in order to effectively implement the minimum standard of the BEPS Action 6: Prevention of Tax Treaty Abuse, a brand-new article, Article 27 (Entitlement to benefits), is being added to the 2002 Agreement.  Paragraph 1 of that new article adopts the Principal Purpose Test (PPT) provision to prevent the Agreement from being abusively used, and it stipulates that the benefit of the Agreement shall not be granted where, having regard to all relevant facts and circumstances, one of the principal purposes of the related transaction or arrangement was to obtain such a benefit under the Agreement and granting such a benefit would not be in accordance with the object and purpose of the relevant provisions of the Agreement.  Paragraph 2 of that new article additionally stipulates that where a benefit under the Agreement is denied under the above-mentioned circumstance, the taxpayer concerned is eligible to request competent authorities of both sides to consult each other in order to protect his/her/its right to enjoy the benefit that would otherwise be provided by the application of the Agreement.

To effectively implement the minimum standard of the BEPS Action 14: Making Dispute Resolution Mechanisms More Effective, the Amending Protocol updates the provisions of Article 25 (Mutual agreement procedure) of the 2002 Agreement.  Through such an amendment, the competent authority to whom a taxpayer may present his/her/its Mutual Agreement Procedure (MAP) case is expanded from "the competent authority of the territory of which he is a resident" to "the competent authorities of either territory."  Additionally, the new provisions lay down a clear time period for making such a request by stipulating that a MAP case must be presented "within three years from the first notification of the action resulting in taxation not in accordance with the provisions of the Agreement" as well as add that "any agreement reached shall be implemented notwithstanding any time limits in the domestic law of the territories."  All together this makes the remedy procedure provided under the Agreement to be in line with the internationally accepted minimum standards, effectively implements the dispute resolution mechanisms, and protects the benefits to and the rights of taxpayers.

In order to enhance the tax transparency of both sides and to align with the international standards that carry out the exchange of information, the Amending Protocol updates the provisions of Article 26 (Exchange of information) of the 2002 Agreement.  Under the new provisions, the tax covered by the exchange of information mechanism is no longer restricted to income tax.  The new provision also expressly recognizes that either side may not decline to supply information solely because it has no domestic interest in such information or the information is held by a bank.  In order to protect the benefits to and the rights of taxpayers, the Amending Protocol further stipulates that in respect of requests made in accordance with the new provisions under the exchange of information article, the information requested must be information that relates to any year of assessment or financial year on or after January 1, 2022. 

The Ministry of Finance once again emphasizes that, generally speaking, the Amending Protocol neither changes the reduction of or exemption from tax provided by the 2002 Agreement for which taxpayers of both sides may apply, nor reduces the benefits to or the rights of legitimate taxpayers.  These amendments are made to align the Taiwan-UK Income Tax Agreement with the OECD BEPS relevant standards, to enhance the sound legal basis for carrying out the exchange of information in tax matters in accordance with the international standards, and to expressly recognize that this Agreement does not intend to create opportunities for non-taxation or reduced taxation through tax evasion or avoidance; all of these would form the basis to protect the benefits to and the rights of legitimate taxpayers, and to facilitate fairness in taxation.

Attachment: The Chinese and English texts of the Protocol Amending the Taiwan-UK Income Tax Agreement.

Contact person: Mr. Kevin Pao, Section Chief.
Contact Number: +886-2-23228150