[Taxation] Cross-Strait Mutual Tax Exemption Agreement Is Expected to Be Signed End of the Year

Mainland China and Taiwan have reached a consensus to sign a comprehensive agreement on mutual income tax exemption by the end of this year. Cooperation on power of taxation allocation and tax information exchange will start as early next year.

However, the proposal regarding “tax sparing credit” raised by Taiwan entrepreneurs was not accepted. In 16 countries that have signed comprehensive income tax treaties with Taiwan, the tax sparing credit is only applicable for Singapore.

The country in which the service is provided has the right of taxation on income from salary and professional practice. A Taiwan entrepreneur is only required to pay individual income tax for salary paid for the service provided in Mainland China to China authority and needs not pay income tax in Taiwan. However, Taiwan authority has the right of taxation on Taiwan entrepreneur’s pension paid by Mainland China company.

On royalties, dividends and interests, Mainland China and Taiwan each has half right of taxation. For example, in case of 20% income tax from dividend, the rate of withholding will be 10% for each side. On income derived from transaction of real estate or stock exchange, source place of income has full right of taxation.