South Korean profit-seeking enterprises earning business profits within Taiwan's territory may apply for income tax exemption under an Agreement for the Avoidance of Double Taxation starting January 1
The National Taxation Bureau of the Central Area, Ministry of Finance (hereinafter referred to as the NTBCA) expressed that to avoid double taxation, Taiwan actively engages in signing comprehensive avoidance of double taxation agreements (hereinafter referred to as the “ADTA”) with other countries to promote international cooperation and trade. The ADTA between Taiwan and South Korea, which came into effect on December 27, 2023, and comes into force on January 1, 2024, marks Taiwan's 35th comprehensive avoidance of double taxation agreements in force. South Korean profit-seeking enterprises, starting from January 1, 2024, can apply for income tax exemption of business profits earned within Taiwan's territory by submitting relevant documents to the tax authorities for approval.
NTBCA explained that, according to Article 7 of the ADTA between Taiwan and South Korea, the profits of an enterprise of a territory shall be taxable only in that territory unless the enterprise carries out business in the other territory through a permanent establishment situated therein. If the South Korean enterprise does not constitute any permanent establishment within Taiwan or does not engage in business activities through the permanent establishments, the enterprise may, or appoint an agent to, apply for the tax relief under Article 7 of the ADTA between Taiwan and South Korea, and fill out the “Application Form for a Foreign Profit-Seeking Enterprise to Exempt Its Business Profits from Tax under an Agreement for the Avoidance of Double Taxation.” It must also submit a copy of the Resident Certificate issued by the tax authority of South Korea, a copy of the contract, the original power of attorney (if the case was applied for by an agent), and any other relevant documents providing information of the business profits. When completed, the tax relief can be applied for together when filing a profit-seeking enterprise income tax return or applied for separately on its own.
NTBCA provided an example: South Korean Company A signs a technical service contract with Taiwanese Company B in March 2024 agreeing to provide technical consulting services to Company B, stipulating that employees of South Korean Company A would be regularly dispatched to Taiwan to provide technical guidance services for Taiwanese Company B. They would visit Taiwan approximately 1 to 2 times per year, staying for about 1 to 2 weeks each time. As the total stay time within any 12-month period does not exceed 183 days as required by Article 5 of the ADTA between Taiwan and South Korea, Company A can apply for a reduction of income tax on the service fees received from Company B, in accordance with Article 7 of the ADTA between Taiwan and South Korea.
The NTBCA reminds taxpayers that South Korean enterprises seeking to apply for income tax reduction or exemption on business profits earned within Taiwan's territory should examine whether they meet the criteria for tax exemption on business profits. Relevant application forms can be downloaded from the “Profit-Seeking Enterprise Income Tax/Download Document and File” section on the eTax Portal, Ministry of Finance (website: https://www.etax.nat.gov.tw).
If you have any questions or concerns, please call our toll-free phone number 0800-000-321. The NTBCA will serve you with all sincerity.
(Contact: Ms. Huang, NTBCA Profit-Seeking Enterprise Income Tax Division; Tel: 04-23051111 ext. 7128; E-mail: NB02601@ntbca.gov.tw)
Reference URL：https://www.mof.gov.tw/Eng/singlehtml/f48d641f159a4866b1d31c0916fbcc71?cntId=288921568c3a42ed8d091e722b90b86f