Taiwan's Government Considers Ending Double Taxation On Chinese Earnings

by Mary Swire, Tax-News.com, Hong Kong

28 June 2002

Taiwan's Ministry of Finance is considering proposals designed to reduce the tax burden on companies repatriating earnings from mainland China, according to recent reports in the local media.

Speaking at a Finance Committee meeting held this week, Chu Hau-min, banking professor at the National Chengchi University suggested that fear of double taxation is one of the reasons why Taiwanese companies are failing to remit Chinese corporate earnings back to Japan. Currently, the Chinese authorities tax companies at a rate of 15% on earnings, which are then submitted to another levy of between 15% and 25% on their return to Taiwan.

'Revision of the tax law to include corporate earnings that have been levied (at) the 15% business income tax in China will further encourage capital inflow back into Taiwan,' Mr Chu explained. He added that another possible factor preventing the return of earnings could be that Taiwanese companies want to keep the size of their mainland investments quiet, fearing a government clampdown on future China-bound investment.

Responding to the proposal, Finance Minister Lee Young-san announced that the Central Bank is currently considering proposals to raise the investment ceiling for mainland-bound investments. However, he stressed the need for an element of give and take, adding that: 'Flexibility will be adopted to allow more capital flow out to China if there is more capital inflow back into Taiwan.'

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