The U.S. Department of the Treasury on October 29, 2024, announced that the U.S. and Taiwan will begin negotiations on a comprehensive agreement to address double taxation issues. While these negotiations will not immediately result in a double taxation convention between the U.S. and Taiwan, such a treaty would reduce the current barriers that cross-border workers in the two jurisdictions face regarding double taxation.
The agreement would complement the Biden-Harris administration’s CHIPS and Science Act of 2022, which was enacted with the goal of boosting domestic semiconductor production. By reducing double taxation barriers between the U.S. and Taiwan, the agreement is expected to spur bilateral investment by both jurisdictions.
The agreement would be implemented through the Internal Revenue Code and is expected to be based on the current U.S. model treaty. The text is expected to include:
- Provisions related to the tax treatment of temporary cross-border workers;
- Provisions governing permanent establishments;
- A reduction of withholding taxes on certain cross-border payments;
- Anti-abuse provisions intended to prevent instances of non-taxation of income;
- Dispute resolution mechanisms; and
- Exchange of information provisions to help revenue authorities in the U.S. and Taiwan to carry out their duties as tax administrators.
Companies should be aware of these negotiations and the potential changes that could impact their global mobility population. While the first round of negotiations is expected to occur in the coming weeks, it is not immediately clear how the incoming Trump administration will impact these negotiations or a future agreement. However, bilateral tax relief between the U.S. and Taiwan has previously enjoyed bipartisan support in Congress.
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