The Ministry of Finance promulgated amendments to Article 34 of the Regulations Governing Application of Agreements for the Avoidance of Double Taxation with Respect to Taxes on Income (hereinafter referred to as the “DTA Audit Rules”) on April 8, 2025. Effective April 10, 2025 (the third day following promulgation), the period of applying for a refund of over-withheld tax under the Double Taxation Agreement (DTA) in respect of R.O.C.-sourced income derived by a resident of the other Contracting State (foreign taxpayer) to the tax collection authority has been extended from five years to ten years from the date of original tax payment. Moreover, applicable provisions during the transition period and rules giving priority to specific provisions under a taxation agreement have been added.
The National Taxation Bureau of Kaohsiung, Ministry of Finance (hereinafter referred to as the Bureau) further stated that, under amended Article 34 of the DTA Audit Rules, the rules have been relaxed to provide that where a resident of the other Contracting State deriving R.O.C.-sourced income has not applied for relief under the DTA, the resident may apply for such relief “within 10 years from the date of original tax payment”. Furthermore, where a refund of over-withheld tax under the DTA has been approved, the tax collection authority shall refund the over-withheld tax accordingly.
Under the transitional application rules, where an application filed by a resident of the other Contracting State has exceeded five years from the date of tax payment as of the effective date of the said amendment (April 10, 2025), the amended provisions shall not apply. The amendment also provides that, where a taxation agreement contains specific provisions, such provisions shall prevail. For example, Paragraph 2 of Article 26 of the tax treaty entered into between our country and Germany provides that “A tax refund application shall be filed no later than the end of the fourth calendar year following the year in which dividends, interest, royalties, or other income items subject to withholding tax are derived.” Accordingly, an application under the DTA filed by a resident of Germany shall be made no later than the end of the fourth calendar year following the year in which withholding tax is levied, and the amended extension of the application period to ten years shall not apply.
The Bureau provides the following example: A Taiwanese company, Company A, paid a technical service fee to a Japanese company, Company B, and withheld tax thereon on April 15, 2020. Company B intends to apply to the business profits exemptions under the taxation agreement entered into between Taiwan and Japan, and to claim a refund of over-withheld tax. According to Article 34 of the DTA Audit Rules prior to the amendment, the application period for Company B to claim a tax refund is five years, with the deadline falling on April 14, 2025. However, as the five-year period had not yet expired at the time the amendment took effect (April 10, 2025), the amended provisions apply, and Company B may apply for a tax refund within ten years from the date of original tax payment. Accordingly, Company B shall file the application no later than April 14, 2030.
The Bureau would like to especially remind foreign taxpayers engaging in similar transactions to review their past contracts and, where any tax relief under a DTA is available but has not yet been claimed, to promptly prepare and submit an application form, contracts (with Chinese translation), as well as a certificate of residence and income-related supporting documents issued by the tax authority of the other Contracting State. Where the application is filed through an agent, the original power of attorney shall also be provided. If you have any questions, please dial the free service hotline 0800-000-321 for more information or visit the Bureau’s website (https://www.ntbk.gov.tw) to make an inquiry online through the national tax smart customer service “National Tax Assistant”.
Provided by: Profit-Seeking Enterprise Income Tax Section
Contact person: Section Chief Chen Su-hua Telephone: (07)725-6600 Ext.7140
Written by: Huang Pei-yuan Telephone: (07)725-6600 Ext.7148.