Taiwan and Canada ink double taxation avoidance pack

According to the press release of Taiwan Ministry of Finance, Taiwan and Canada inked the “Agreement for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income” (hereinafter the “Agreement”) and the Agreement is set to take effect on January 1, 2017 after the Canadian Trade Office in Taipei and the Taipei Economic and Cultural Office in Canada have notified each other in writing of the completion of the procedures required in their respective territories. 

The pact prevents double taxation and provides tax relief measures taken by the country where the taxable income is derived with respect to the same taxable incomes received by the residents of the other country (including nationals and enterprises).  Like other international tax treaties, the Agreement provides a dispute resolution mechanism.

The Agreement applies not only to the residents subject to respective country’s domestic tax laws but also to those subject to tax under both countries’ domestic laws (dual residency).  The individuals of dual residency should be subject to the “tie-breaker rule” which provides a hierarchy of three to five tests to determine the identities of such individuals.  By operation of “tie-breaker rule”, individuals of dual residency will be subject to income taxation in either country (Taiwan or Canada) where they maintain their primary place of abode and enjoy the benefits of the Agreement in that country.

The tax relief measures are applicable to incomes from business profits, investments, and from property transactions.  Where an enterprise of a country carries on business in the other country without a “permanent establishment” situated therein, the enterprise will be exempt from tax on business profits.

This Agreement represents the first comprehensive taxation treaty that Taiwan has reached with a country in North America, which will substantially deepen Taiwan’s bilateral relationship with Canada.  (January 2016)
/CCS