HR33-119

What This Bill Does

H.R. 33 is a two-title U.S.-Taiwan double-tax relief package. Title I, the United States-Taiwan Expedited Double-Tax Relief Act, adds new Internal Revenue Code section 894A. For qualified residents of Taiwan, it substitutes reduced applicable percentages for the usual 30 percent U.S. tax and withholding rates on interest, dividends, royalties, certain gains, and related payments. The default applicable percentage is 10 percent, while most dividends use 15 percent unless a Taiwan corporation has held at least 10 percent of the U.S. corporation's vote and value for the required 12-month period, in which case a 10 percent rate can apply. It excludes nonqualified REIT dividends, section 897 real-property gains, expatriated-entity payments to foreign related persons, and REMIC excess-inclusion amounts. It creates no-tax rules for certain wages paid by non-U.S. employers, limited entertainer and athlete income up to $30,000, pension and similar remuneration, government functions, and teachers, students, trainees, and other categories under detailed conditions. It also creates permanent-establishment rules, qualified-resident tests, anti-abuse rules, withholding cross-references, and authority for Treasury regulations and guidance.

Who Benefits and How

Taiwan individual taxpayers, Taiwan corporate taxpayers, Taiwan dividend investors, Taiwan royalty recipients, Taiwan interest recipients, Taiwan workers paid by non-U.S. employers, Taiwan entertainers below the $30,000 gross-receipts threshold, Taiwan athletes below the $30,000 gross-receipts threshold, Taiwan companies with U.S. permanent establishments, U.S. businesses paying Taiwan counterparties, U.S. investors operating in Taiwan, and the Taiwan tax authority benefit because the bill supplies treaty-like relief despite the absence of a normal Article II tax treaty and creates a statutory path for a fuller tax agreement.

Who Bears the Burden and How

The Treasury Department, Internal Revenue Service, U.S. withholding agents, U.S. financial institutions, regulated investment companies, real estate investment trusts, expatriated entities, REMIC administrators, the President, State Department negotiators, Senate Foreign Relations Committee staff, Senate Finance Committee staff, House Ways and Means Committee staff, and congressional drafters of approval and implementing legislation bear burdens because the bill requires Taiwan-specific withholding administration, anti-abuse determinations, permanent-establishment analysis, public agreement text, technical explanations, implementation-policy submissions, briefings every 180 days during negotiations, and a custom legislative approval process.

Key Provisions

• Adds Internal Revenue Code section 894A with reduced U.S. withholding and tax rates for qualified Taiwan residents.
• Provides 10 percent default relief, 15 percent ordinary dividend relief, and 10 percent dividend relief for qualifying 10 percent corporate shareholders.
• Excludes nonqualified REIT dividends, FIRPTA section 897 amounts, expatriated-entity payments, and REMIC excess-inclusion amounts from relief.
• Provides targeted relief for certain wages, entertainers, athletes, pensions, government functions, teachers, students, trainees, and permanent-establishment income.
• Creates qualified-resident, anti-abuse, withholding, regulation, and guidance rules for Treasury and IRS administration.
• Authorizes the President to negotiate a Taiwan tax agreement after the section 894A determination.
• Requires Treasury and State consultations with Senate Foreign Relations, Senate Finance, and House Ways and Means committees.
• Requires public text, final agreement submission, technical explanation, approval legislation, and implementing legislation before entry into force.