Japan, Taiwan to sign tax treaty
TAIPEI — Japan and Taiwan will sign a bilateral tax treaty aimed at improving the flow of people and investment between the two economies, sources familiar with the matter said on Wednesday.
The treaty will reduce or eliminate taxes on dividends repatriated from companies’ overseas branches and help avoid issues of double taxation for those traveling between the two islands on business.
If implemented, the treaty will boost the economic ties between Japan and Taiwan, which Taiwanese leader Ma Ying-jeou has described as a “special partnership.”
Because Japan and Taiwan do not have official diplomatic relations, the treaty will be concluded through their de facto diplomatic organizations. The heads of these organizations are expected to exchange a memorandum of understanding at an upcoming economic conference on Japan and Taiwan, to be held in Tokyo on Nov. 25-26, with an eye toward implementing the treaty as soon as possible.
Taiwan currently has similar tax agreements with 29 countries and regions, including the U.K. and India. It signed an agreement with China in August.
Cross-border transactions between Japan and Taiwan are currently subject onerous taxation. For instance, when Japanese companies repatriate dividends from their Taiwanese subsidiaries, 20% of the total is withheld by Taiwanese authorities. Under the planned treaty, that amount will be lowered, in some cases to zero. Taiwanese companies operating in Japan will receive similar benefits, making it easier for them to expand their operations.