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Taiwan and China to sign taxation agreement by year end.

Taipei, Nov. 4, 2009 (CENS)--Taiwan and China will sign a double tax avoidance agreement by the end of the year, exempting numerous Taiwanese people working in China from double taxation on their incomes by both governments.

The agreement is expected to be signed by P.K. Chiang, chairman of Straits Exchange Foundation, and Chen Yunlin, chairman of Association for the Relations Across the Taiwan Straits, during their next meeting in the second half of December. Following two rounds of talks last week, one in Taipei and the other in Beijing, both sides have reached consensus on most of the contents of the agreement, including tax allocation and exchange of tax information.

The agreement will enable Taiwanese people working in China to apply with the governments on both sides for the application of advanced pricing agreement (APA), thereby avoiding double taxation and tax investigation.

However, the agreement will not include the clause enabling Taiwanese investors to deduct their tax incentives in China, as an equivalent of paid tax, from their taxable income in Taiwan, as requested by some Taiwanese businesses. Of the 16 double tax avoidance agreements which Taiwan has signed, only that with Singapore contains such a clause.

The cross-Strait double tax avoidance agreement is patterned after the exemplary framework formulated by the Organization of Economic Cooperation and Development (OECD), following the norms for tax allocation in international tax convention. In principle, Taiwanese people working in China, or the host country, will only pay tax to the Chinese government for their salary and business income, while their retirement payment and pension fund will be subject to the taxation of Taiwan, or the country of residence.

Tax incomes from royalties, stock dividends, and interest incomes will be evenly divided by the Chinese and Taiwanese governments, while incomes from deals in realties or securities will be taxed by the government of the site for the deals entirely.

The exchange of tax information is meant for the information on specific taxation targets or cases, rather than general taxation information.

The signing of the cross-Strait taxation agreement is expected to greatly facilitate Taiwan's effort in signing a similar agreement with other countries.

((PL)) (GE)
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Publication:The Taiwan Economic News
Geographic Code:9TAIW
Date:Nov 4, 2009
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