The Ministry of Finance states that the tax collection authority would leniently recognize the Certificate of Residence issued by a treaty partner of Taiwan to a person who applies for tax reductions or exemptions under the relevant income tax agreement to the said tax collection authority and presents the case within six months from the date of the issuance of the Certificate. This measure is to solve the problems of inconsistencies in the content and validity of the aforesaid Certificate issued by various countries, or the inability of that person to obtain from a treaty partner of Taiwan a Certificate of Residence in a timely manner.
The Ministry of Finance explains that a resident of a treaty partner of Taiwan who derives taxable income from Taiwan sources and would like to apply for tax reductions or exemptions under the income tax agreement, shall apply the case to Taiwan’s tax collection authority following the procedures and providing the prescribed documents under Articles 23 to 27 or 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 “these Regulations”). According to Paragraph 2 of Article 5 of these Regulations, the responsible tax collection authority shall recognize whether such taxpayer is qualified as a resident of a treaty partner of Taiwan or not based on the Certificate of Residence issued by that treaty partner of Taiwan to that taxpayer. Considering the differences in the way, content, and time required for the issuance of a Certificate of Residence by various countries, in practice, Taiwan tax collection authority would leniently determine the residency status of a person from Taiwan’s treaty partner to be met based on whether the Certificate was issued by that treaty partner and whether the case was presented within six months from the date of the issuance of the Certificate, or based on other facts and circumstances of the case.
The Ministry of Finance provides an example to illustrate the situation. A resident of a treaty partner of Taiwan who has not entered Taiwan but received dividends distributed by a Taiwanese company on March 1, 2023. In order to apply for the income tax agreement, on January 1, 2023, that resident provided the Certificate issued by the treaty partner of Taiwan on November 1, 2022, stating that he, she, or it is a resident for the purpose of the income tax agreement, to the Taiwanese company (the tax withholder) for the handling of withholding matters, according to Paragraphs 1 and 2 of Article 25 of these Regulations, within the stipulated time limit to apply for the preferential tax rate of the tax agreement. Given the factors such as the taxpayer in this case has not entered Taiwan, the time required for the issuance of certified documents by a treaty partner of Taiwan, and the difficulty of obtaining the Certificate of Residence for the year when the income occurs, the tax collection authority would be lenient to assess that the aforementioned Certificate complies with the requirements of these Regulations. If the tax collection authority finds matters which need to be clarified for the purpose of implementing the tax agreement correctly, it would then be required to obtain extra information according to relevant rules or verify it through the exchange of information mechanism provided by such a tax agreement.
The Ministry of Finance emphasizes that Taiwan has entered into force 34 income tax agreements, which effectively address the issue of double taxation, and enhance the free movement of personnel, capital, products, and services across borders, benefiting Taiwanese people and enterprises in the global deployment. Both Taiwanese people and enterprises, as well as those of our treaty partners, can fully leverage these income tax agreements to their advantage. Going forward, the Ministry of Finance will continue to initiate the conclusion of income tax agreements with countries with whom we have close economic and trade relationships, and will further refine or simplify the treaty application process so as to create a fair, stable, and reasonable tax environment.
Contact person: Mr. Kuo-Ting Chen, Section Chief.
Contact Number: +886-2-23228150.