U.S. Treasury announces talks with Taiwan on double taxation

Washington, Oct. 29 (CNA) The first round of talks between Taiwan and the United States on an agreement to prevent the double taxation of income is expected to take place in the coming weeks, according to the U.S. Department of the Treasury.

The launch of the "negotiations on a comprehensive agreement to address double taxation issues" resulted from the U.S. Congress' efforts to push progress in the area through draft legislation, such as the proposed United States-Taiwan Tax Agreement Authorization Act, the U.S. Treasury Department said in a press statement Tuesday.

The U.S. administration under President Joe Biden is committed to "engaging with relevant committees throughout the negotiation process and working with Congress on legislation to approve a final agreement and implement the agreement through the Internal Revenue Code," according to the statement.

Both the U.S. and Taiwan can benefit from a comprehensive tax agreement, the U.S. Treasury Department said, because such an agreement can "reduce double taxation barriers for further investment by Taiwan into the United States, and vice versa, particularly for the small and medium-sized enterprises that are crucial to a complete semiconductor ecosystem."

The text of the agreement is expected to be based on the U.S. Model Income Tax Convention, according to the statement, and covers such issues as "reduction of withholding taxes on cross-border payments of dividends, interest and royalties" and "provisions governing permanent establishments and tax treatment of temporary cross-border workers."

The agreement should also have "provisions intended to prevent instances of non-taxation of income as well as tax forum shopping," dispute resolution mechanisms, and provisions for the exchange of information between the U.S. and Taiwanese revenue authorities, so both of them can carry out their duties as tax administrators, the U.S. Treasury Department said.

The negotiations will be conducted through the American Institute in Taiwan and the Taipei Economic and Cultural Representative Office in the U.S., according to the statement.

Taiwan has signed a comprehensive agreement on double taxation with 35 countries as of July 31, including Canada, Germany, Israel, Japan, the United Kingdom, Australia and Paraguay, according to information published on the Ministry of Finance's website.