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Taiwan’s Ministry of Finance Clarifies Beneficial Ownership Rules for Tax Treaty Purposes

TAIPEI, TAIWAN - June 24, 2019

The Taiwanese government has issued new guidance to clarify the application of the term “beneficial owner” (BO) for tax treaty purposes. This move aligns Taiwan’s approach with international consensus and practice.

Clarifying Beneficial Ownership

The Ministry of Finance’s Guidance aims to provide greater clarity for taxpayers by specifying the situations where BO status will be granted or denied. According to the document, a foreign resident deriving Taiwan source income can identify themselves as the BO for treaty purposes simply by providing a BO declaration to the Ministry of Finance.

Eligible Entities

Qualified funds and trusts that are residents of the treaty country and have invested in Taiwan as foreign institutional investors can also apply for BO treatment in the same manner.

However, if a foreign recipient of income is acting in the role of an agent, nominee, financial conduit entity, or similar arrangement, the Ministry of Finance will deny BO status.

Updates to Existing Policies

The Guidance also updates previous policies regarding the application of BO status to:

• Australian legal persons
• United Kingdom Authorized Unit Trusts
• United Kingdom Open-ended Investment Companies

Benefits for Taxpayers

Taxpayers are expected to benefit from reduced compliance costs, decreased treaty disputes, and a better investment environment as a result of the new guidance. However, experts advise that existing and proposed structures and investments should be carefully reviewed in light of the changes.

Promoting Transparency and Reducing Tax Treaty Abuse

The Ministry of Finance’s Guidance is seen as a significant step towards reducing tax treaty abuse and promoting transparency in international tax matters.