The National Taxation Bureau of the Northern Area (“NTBNA”), Ministry of Finance, indicates the objectives of bilateral tax treaties are to facilitate cross-border trade, investment, activities or cultural interactions for residents and profit-seeking enterprises in both Contracting States on a reasonable tax basis, and to avoid or mitigate double taxation which is an inappropriate barrier to international commerce. Currently, over 3,700 tax treaties are in effect worldwide. It is an overwhelming international trend since the provision of tax treaties assures benefits to taxpayers of the two Contracting States under an efficient overseas investment environment.
NTBNA further states that there were 32 Comprehensive Income Tax Agreements and 13 International Transportation Income Tax Agreements that had taken effect. In accordance with Taiwan’s external economic and trading strategy, The New Southbound Policy, the Ministry of Finance, R.O.C. will promote taxation treaties with countries in the Association of Southeast Asian Nations and in South Asia in the future, which is advantageous for both Taiwanese and foreign enterprises to develop global operation strategies.
The Bureau offers the Taiwan-Japan Treaty as an example. If Company A in Japan dispatches employees to provide technical services for Company B in Taiwan and receives service remuneration from Company B, according to the Taiwan-Japan Treaty, Company A could apply for a tax exemption on its service remuneration under the conditions that it has no permanent establishment (“PE”) in Taiwan and its employees provide services in Taiwan for no more than 183 days in any twelve-month period. With this treaty, Japanese enterprises’ investment strategies in Taiwan can be facilitated.