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December 9, 2021

Taiwan and UK sign protocol to amend tax treaty

Executive summary

The protocol amending the 2002 tax treaty in force between Taiwan and the United Kingdom (UK) (the Treaty) was signed on 11 August 2021 in London and 19 August 2021 in Taipei. The Taiwan Ministry of Finance issued a press release on 18 November 2021 providing the details of the amendment to the Treaty. The amendment is intended to meet the requirements of the OECD1/G202 Base Erosion and Profit Shifting (BEPS) Actions.

The key amendments include a new article incorporating the Principal Purpose Test (PPT), revised definitions (persons covered, taxes covered and residence), updated Mutual Agreement Procedure (MAP) and Exchange of Information provisions, higher dividend withholding tax for certain payers, and a specific threshold for source-country taxation of capital gains on the transfer of land-rich shares.

The protocol will enter into force after the relevant procedures required by the laws of Taiwan and UK are completed.

This Alert summarizes the key changes under the protocol.

Detailed discussion

Persons covered (Article 1)

A new paragraph is added to address the application of the Treaty to income derived by or through a fiscally transparent entity.

Taxes covered (Article 2)

Taiwanese Income Basic Tax is now included in taxes covered.

Residence (Article 4)

Under the Tie-Breaker Rule for dual residency, where a person other than an individual is a resident of both the jurisdictions, all economic factors will be taken into consideration, and mutual agreement procedures will be applied to determine the taxpayer’s residency status (previously, only the effective place of management was considered).

Dividends (Paragraph 2 of Article 10)

Dividends paid by Real Estate Investment Trusts (REITs) of companies of a jurisdiction to residents of the other jurisdiction are subject to a 15% limited tax rate under the Treaty. However, if the beneficial owner of such dividends is a qualified pension fund, the original 10% limited tax rate under the Treaty shall apply.

Capital gains (Paragraph 2 of Article 13)

For gains derived from the transfer of shares or interests deriving more than 50% of their value directly or indirectly from immovable property, the source jurisdiction (i.e., where the immovable property is situated)) will have the taxing right (previously, no specific threshold was provided in the Treaty).

Mutual Agreement Procedure (MAP) (Article 25)

A MAP case must be presented within three years from the first notification of the action (i.e., receiving the notice from the tax authorities) resulting in taxation not in accordance with the provisions of the Treaty. Additionally, for the purpose of protecting the rights of taxpayers, the implementation of any agreements under MAP entered by the two jurisdictions will not be restricted by any time limits under the domestic legislation. Accordingly, any consensus being reached between the two jurisdictions will not be subject to the statute of limitations under any of the domestic laws of the two jurisdictions, which is favorable for taxpayers. For example, if a taxpayer was subject to a transfer pricing adjustment by the other jurisdiction, the taxpayer can seek a corresponding adjustment from the tax authority and would not be subject to the domestic statute of limitations.

Entitlement to benefits (Article 27)

A new article, Article 27, is added in the Treaty to incorporate the PPT. Other pre-existing similar provisions in specific Articles are accordingly deleted from the Treaty.


The Taiwan Ministry of Finance emphasized that, in general, the amendments to the Treaty do not reduce the benefits or rights of the taxpayers but are meant to align the Treaty with the BEPS standards, enhance the exchange of information and to expressly recognize that the Treaty does not intend to provide opportunities for tax evasion or avoidance.

The protocol will enter into force after the ratification instruments are exchanged between Taiwan and the UK. The amendment to the Treaty will be applicable in Taiwan from 1 January of the calendar year next following the date on which the protocol enters into force. The following timelines apply for the amendment to be applicable in the UK:

  • Withholding taxes - Amounts paid or credited on or after 1 January of the calendar year next following the date on which the protocol enters into force.

  • Corporation tax – Any financial year beginning on or after 1 April of the calendar year following the year in which the protocol enters into force.

  • Income tax and capital gains – Any year of assessment beginning on or after 6 April of the calendar year following the year in which the protocol enters into force.


For additional information with respect to this Alert, please contact the following:

Ernst & Young (Taiwan), Taipei

Ernst & Young LLP (United States), Asia Pacific Business Group, New York

Ernst & Young LLP (United States), Asia Pacific Business Group, Chicago



  1. Organisation for Economic Co-operation and Development.

  2. Group of 20.


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