U.S. Senate committee approves bill on avoidance of double tax with Taiwan

Washington, Sept. 14 (CNA) The U.S. Senate Committee on Finance on Thursday unanimously adopted a bill aimed at alleviating the burden of double taxation on American and Taiwanese businesses and individuals operating in each other's country.

The United States-Taiwan Expedited Double-Tax Relief Act was approved in a 27-0 vote at the end of a hearing led by Ron Wyden, the Democratic chairman of the committee.

The bill is "hugely important" to the U.S.' workers and national security, Wyden remarked at the beginning of the hearing, noting that it had been built upon the Senate's "bipartisan" support for strengthening economic partnership with Taiwan.

Wyden described Taiwan as "a global leader" in semiconductor manufacture that "plays a critical role" in helping secure strategic supply chains, expressing alarm at China's continued attempts to "intimidate and isolate Taiwan through diplomatic and economic coercion."

He went on to say that providing double-tax relief to Taiwan similar to the treatment the U.S. has given to other countries through tax treaties was part of efforts by Congress to help "stabilize" the region in the face of potential disruptions in trade, investment, and finance by Beijing's "aggressive" activities.

At the same time, Taiwanese businesses are "critical partner[s]" as the U.S. pours billions of dollars into semiconductor manufacturing and development, he said, adding that the country cannot allow tax barriers to "hamper any growth in our domestic semiconductor industry."

Currently, Taiwanese corporations operating in the U.S. are subject to a 30 percent dividend withholding tax, according to Mike Crapo, ranking member of the Senate Finance Committee.

"Taiwan is our largest trading partner with whom we do not have an income tax treaty," he said, adding that the bill would "encourage cross-border investment" and "strengthen [bilateral] economic partnership."

The bill proposes changing the U.S. tax code so that it includes new double-tax relief rules for American and Taiwanese workers and businesses that are "analogous" to provisions typical in bilateral tax treaties.

While the U.S. normally enters into a tax treaty with another country via Congressional authorization, "Taiwan's very unique status requires a very unique solution," Crapo said, in likely reference to the absence of diplomatic relations between Taipei and Washington.

According to Crapo, changes made to the tax code would "deliver treaty-like benefits" to businesses and individuals from both sides on condition that Taiwan rolls out reciprocal tax measures.

In particular, the bill involves the reduction of withholding taxes, the application of permanent establishment rules, the treatment of income from employment and the determination of qualified residents of Taiwan.

"While a treaty with Taiwan is not possible given its status, we can and should insist that the U.S. and Taiwan conclude a binding tax agreement and that Congress approve it," commented Chairman of the U.S. Senate Foreign Relations Committee Robert Menendez, who also took part in the hearing.

Thursday's vote came weeks after Menendez's committee approved the Taiwan Tax Agreement Act of 2023, which authorized Washington to negotiate with Taipei for the avoidance of double taxation.

Taiwanese representative to the U.S. Hsiao Bi-khim (蕭美琴) later thanked Senators across party lines for working together to address double taxation issues concerning both Taiwan and the U.S.

Taiwan's de facto ambassador to Washington added she looked forward to seeing the legislative procedures completed soon to further boost cross-border investment between the two sides.