Taiwan, Czech taxation agreement to come into operation as of January 1, 2021
E200708Y8．E200708Z8 | Aug. 2020（E249）
The Ministry of Finance issued a press release to the effect that the agreement executed on December 12, 2017 by and between Taiwan and Czech Republic on the avoidance of double taxation and prevention of fiscal evasion with respect to income taxes (hereinafter referred to as the “Taiwan-Czech ADTA”) has come into effect since May 12, 2020, and both Taiwan and Czech Republic have mutually notified the other of the scheduled date for implementation of the Taiwan-Czech ADTA on January 1, 2021. The Taiwan-Czech ADTA is the thirty-third comprehensive bilateral accord in effect with respect to taxation on income (It is also the 16th of such pact Taiwan has signed with a European country and the 13th one with the European Union members, respectively). The Taiwan-Czech ADTA will bring down the barriers of cross-border trade and investment and will also create a fairer and friendlier taxation system for the economic and trade dealings, industrial cooperation, and technical exchanges between the two sides.
The Taiwan-Czech ADTA comprises a total of 29 articles, under which appropriate tax exemption and reduction measures are forged and provided for the income derived by the residents (including nationals and enterprises) of a territory (Taiwan, for example) from the source territory (the Czech Republic, for example), so as to eliminate double taxation. This accord also provides a dispute resolution mechanism for preventing and removing problems arising from cross-border taxation.
The Ministry of Finance noted that the Czech Republic, as a member of the European Union, is geographically well situated in the center of Europe and has a complete and sound infrastructure. As revealed by the Ministry of Economic Affairs’ statistics effective by the end of May 2020, the Czech Republic is Taiwan’s 7th largest investment destination in Europe (following the Netherlands, the UK, Luxembourg, Germany, Italy, and Austria). With many factories invested and established therein by Taiwanese leading information technology companies, the Czech Republic serves as an important base for Taiwanese companies to invest in the European market. The implementation of the Taiwan-Czech ADTA will alleviate the tax burden of Taiwanese companies in the Czech Republic. Under the accord, on condition that relevant provisions thereof are met, the Taiwanese companies which receive dividends from Czech companies will be eligible for a tax rate reduction from 35% to 10%, and likewise, there will be a tax rate reduction from 35% to 5% for Taiwanese companies’ rental income from Czech company for renting industrial or scientific equipment to the Czech company. Moreover, for any Taiwanese companies that receive income for providing technical services to any Czech companies, the tax rate on such service income will be reduced from 35% to 0% if and only if the Taiwanese companies do not establish a fixed place of business in Czech and have sent personnel or employees to Czech for providing such service for a period of no longer than nine months in any twelve-month period. The Taiwan-Czech ADTA is applied equally and reciprocally to the residents of both sides. In this regard, any Czech companies engaged in the business operations similar to the aforesaid ones will enjoy the same tax rate reduction in Taiwan. As a result, the Taiwan-Czech ADTA would prompt Czech companies to choose Taiwan as their base for launching into the Asian markets, which will enhance both sides’ cooperation for investment and trade relations. (Released 2020.07.08)