II
119THCONGRESS
1
STSESSION S. 199
To amend the Internal Revenue Code of 1986 to provide special rules for
the taxation of certain residents of Taiwan with income from sources
within the United States.
IN THE SENATE OF THE UNITED STATES
JANUARY23, 2025
Mr. C
RAPO(for himself, Mr. RISCH, Mr. WYDEN, and Mrs. SHAHEEN) intro-
duced the following bill; which was read twice and referred to the Com-
mittee on Finance
A BILL
To amend the Internal Revenue Code of 1986 to provide
special rules for the taxation of certain residents of Tai-
wan with income from sources within the United States.
Be it enacted by the Senate and House of Representa-1
tives of the United States of America in Congress assembled, 2
TITLE I—UNITED STATES-TAI-3
WAN EXPEDITED DOUBLE- 4
TAX RELIEF ACT 5
SEC. 101. SHORT TITLE. 6
This title may be cited as the ‘‘United States-Taiwan 7
Expedited Double-Tax Relief Act’’. 8
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•S 199 IS
SEC. 102. SPECIAL RULES FOR TAXATION OF CERTAIN 1
RESIDENTS OF TAIWAN. 2
(a) I
NGENERAL.—Subpart D of part II of sub-3
chapter N of chapter 1 of the Internal Revenue Code of 4
1986 is amended by inserting after section 894 the fol-5
lowing new section: 6
‘‘SEC. 894A. SPECIAL RULES FOR QUALIFIED RESIDENTS OF 7
TAIWAN. 8
‘‘(a) C
ERTAININCOMEFROMUNITEDSTATES 9
S
OURCES.— 10
‘‘(1) I
NTEREST, DIVIDENDS, AND ROYALTIES, 11
ETC.— 12
‘‘(A) I
N GENERAL.—In the case of interest 13
(other than original issue discount), dividends, 14
royalties, amounts described in section 15
871(a)(1)(C), and gains described in section 16
871(a)(1)(D) received by or paid to a qualified 17
resident of Taiwan— 18
‘‘(i) sections 871(a), 881(a), 1441(a), 19
1441(c)(5), and 1442(a) shall each be ap-20
plied by substituting ‘the applicable per-21
centage (as defined in section 22
894A(a)(1)(C))’ for ‘30 percent’ each place 23
it appears, and 24
‘‘(ii) sections 871(a), 881(a), and 25
1441(c)(1) shall each be applied by sub-26
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•S 199 IS
stituting ‘a United States permanent es-1
tablishment of a qualified resident of Tai-2
wan’ for ‘a trade or business within the 3
United States’ each place it appears. 4
‘‘(B) E
XCEPTIONS.— 5
‘‘(i) I
N GENERAL.—Subparagraph (A) 6
shall not apply to— 7
‘‘(I) any dividend received from 8
or paid by a real estate investment 9
trust which is not a qualified REIT 10
dividend, 11
‘‘(II) any amount subject to sec-12
tion 897, 13
‘‘(III) any amount received from 14
or paid by an expatriated entity (as 15
defined in section 7874(a)(2)) to a 16
foreign related person (as defined in 17
section 7874(d)(3)), and 18
‘‘(IV) any amount which is in-19
cluded in income under section 860C 20
to the extent that such amount does 21
not exceed an excess inclusion with re-22
spect to a REMIC. 23
‘‘(ii) Q
UALIFIED REIT DIVIDEND .— 24
For purposes of clause (i)(I), the term 25
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•S 199 IS
‘qualified REIT dividend’ means any divi-1
dend received from or paid by a real estate 2
investment trust if such dividend is paid 3
with respect to a class of shares that is 4
publicly traded and the recipient of the 5
dividend is a person who holds an interest 6
in any class of shares of the real estate in-7
vestment trust of not more than 5 percent. 8
‘‘(C) A
PPLICABLE PERCENTAGE .—For 9
purposes of applying subparagraph (A)(i)— 10
‘‘(i) I
N GENERAL.—Except as pro-11
vided in clause (ii), the term ‘applicable 12
percentage’ means 10 percent. 13
‘‘(ii) S
PECIAL RULES FOR DIVI -14
DENDS.—In the case of any dividend in re-15
spect of stock received by or paid to a 16
qualified resident of Taiwan, the applicable 17
percentage shall be 15 percent (10 percent 18
in the case of a dividend which meets the 19
requirements of subparagraph (D) and is 20
received by or paid to an entity taxed as 21
a corporation in Taiwan). 22
‘‘(D) R
EQUIREMENTS FOR LOWER DIVI -23
DEND RATE.— 24
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•S 199 IS
‘‘(i) IN GENERAL.—The requirements 1
of this subparagraph are met with respect 2
to any dividend in respect of stock in a 3
corporation if, at all times during the 12- 4
month period ending on the date such 5
stock becomes ex-dividend with respect to 6
such dividend— 7
‘‘(I) the dividend is derived by a 8
qualified resident of Taiwan, and 9
‘‘(II) such qualified resident of 10
Taiwan has held directly at least 10 11
percent (by vote and value) of the 12
total outstanding shares of stock in 13
such corporation. 14
For purposes of subclause (II), a person 15
shall be treated as directly holding a share 16
of stock during any period described in the 17
preceding sentence if the share was held by 18
a corporation from which such person later 19
acquired that share and such corporation 20
was, at the time the share was acquired, 21
both a connected person to such person 22
and a qualified resident of Taiwan. 23
‘‘(ii) E
XCEPTION FOR RICS AND 24
REITS.—Notwithstanding clause (i), the re-25
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•S 199 IS
quirements of this subparagraph shall not 1
be treated as met with respect to any divi-2
dend paid by a regulated investment com-3
pany or a real estate investment trust. 4
‘‘(2) Q
UALIFIED WAGES.— 5
‘‘(A) I
N GENERAL.—No tax shall be im-6
posed under this chapter (and no amount shall 7
be withheld under section 1441(a) or chapter 8
24) with respect to qualified wages paid to a 9
qualified resident of Taiwan who— 10
‘‘(i) is not a resident of the United 11
States (determined without regard to sub-12
section (c)(3)(E)), or 13
‘‘(ii) is employed as a member of the 14
regular component of a ship or aircraft op-15
erated in international traffic. 16
‘‘(B) Q
UALIFIED WAGES.— 17
‘‘(i) I
N GENERAL.—The term ‘quali-18
fied wages’ means wages, salaries, or simi-19
lar remunerations with respect to employ-20
ment involving the performance of personal 21
services within the United States which— 22
‘‘(I) are paid by (or on behalf of) 23
any employer other than a United 24
States person, and 25
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‘‘(II) are not borne by a United 1
States permanent establishment of 2
any person other than a United States 3
person. 4
‘‘(ii) E
XCEPTIONS.—Such term shall 5
not include directors’ fees, income derived 6
as an entertainer or athlete, income de-7
rived as a student or trainee, pensions, 8
amounts paid with respect to employment 9
with the United States, any State (or polit-10
ical subdivision thereof), or any possession 11
of the United States (or any political sub-12
division thereof), or other amounts speci-13
fied in regulations or guidance under sub-14
section (f)(1)(F). 15
‘‘(3) I
NCOME DERIVED FROM ENTERTAINMENT 16
OR ATHLETIC ACTIVITIES.— 17
‘‘(A) I
N GENERAL.—No tax shall be im-18
posed under this chapter (and no amount shall 19
be withheld under section 1441(a) or chapter 20
24) with respect to income derived by an enter-21
tainer or athlete who is a qualified resident of 22
Taiwan from personal activities as such per-23
formed in the United States if the aggregate 24
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•S 199 IS
amount of gross receipts from such activities 1
for the taxable year do not exceed $30,000. 2
‘‘(B) E
XCEPTION.—Subparagraph (A) 3
shall not apply with respect to— 4
‘‘(i) income which is qualified wages 5
(as defined in paragraph (2)(B), deter-6
mined without regard to clause (ii) there-7
of), or 8
‘‘(ii) income which is effectively con-9
nected with a United States permanent es-10
tablishment. 11
‘‘(b) I
NCOMECONNECTEDWITH AUNITEDSTATES 12
P
ERMANENT ESTABLISHMENT OF A QUALIFIEDRESI-13
DENT OFTAIWAN.— 14
‘‘(1) I
N GENERAL.— 15
‘‘(A) I
N GENERAL.—In lieu of applying 16
sections 871(b) and 882, a qualified resident of 17
Taiwan that carries on a trade or business 18
within the United States through a United 19
States permanent establishment shall be taxable 20
as provided in section 1, 11, 55, or 59A, on its 21
taxable income which is effectively connected 22
with such permanent establishment. 23
‘‘(B) D
ETERMINATION OF TAXABLE IN -24
COME.—In determining taxable income for pur-25
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•S 199 IS
poses of paragraph (1), gross income includes 1
only gross income which is effectively connected 2
with the permanent establishment. 3
‘‘(2) T
REATMENT OF DISPOSITIONS OF UNITED 4
STATES REAL PROPERTY .—In the case of a qualified 5
resident of Taiwan, section 897(a) shall be applied— 6
‘‘(A) by substituting ‘carried on a trade or 7
business within the United States through a 8
United States permanent establishment’ for 9
‘were engaged in a trade or business within the 10
United States’, and 11
‘‘(B) by substituting ‘such United States 12
permanent establishment’ for ‘such trade or 13
business’. 14
‘‘(3) T
REATMENT OF BRANCH PROFITS 15
TAXES.—In the case of any corporation which is a 16
qualified resident of Taiwan, section 884 shall be ap-17
plied— 18
‘‘(A) by substituting ‘10 percent’ for ‘30 19
percent’ in subsection (a) thereof, and 20
‘‘(B) by substituting ‘a United States per-21
manent establishment of a qualified resident of 22
Taiwan’ for ‘the conduct of a trade or business 23
within the United States’ in subsection (d)(1) 24
thereof. 25
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•S 199 IS
‘‘(4) SPECIAL RULE WITH RESPECT TO INCOME 1
DERIVED FROM CERTAIN ENTERTAINMENT OR ATH -2
LETIC ACTIVITIES.— 3
‘‘(A) I
N GENERAL.—Paragraph (1) shall 4
not apply to the extent that the income is de-5
rived— 6
‘‘(i) in respect of entertainment or 7
athletic activities performed in the United 8
States, and 9
‘‘(ii) by a qualified resident of Taiwan 10
who is not the entertainer or athlete per-11
forming such activities. 12
‘‘(B) E
XCEPTION.—Subparagraph (A) 13
shall not apply if the person described in sub-14
paragraph (A)(ii) is contractually authorized to 15
designate the individual who is to perform such 16
activities. 17
‘‘(5) S
PECIAL RULE WITH RESPECT TO CER -18
TAIN AMOUNTS.—Paragraph (1) shall not apply to 19
any income which is wages, salaries, or similar re-20
muneration with respect to employment or with re-21
spect to any amount which is described in subsection 22
(a)(2)(B)(ii). 23
‘‘(c) Q
UALIFIEDRESIDENT OFTAIWAN.—For pur-24
poses of this section— 25
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•S 199 IS
‘‘(1) IN GENERAL.—The term ‘qualified resi-1
dent of Taiwan’ means any person who— 2
‘‘(A) is liable to tax under the laws of Tai-3
wan by reason of such person’s domicile, resi-4
dence, place of management, place of incorpora-5
tion, or any similar criterion, 6
‘‘(B) is not a United States person (deter-7
mined without regard to paragraph (3)(E)), 8
and 9
‘‘(C) in the case of an entity taxed as a 10
corporation in Taiwan, meets the requirements 11
of paragraph (2). 12
‘‘(2) L
IMITATION ON BENEFITS FOR COR -13
PORATE ENTITIES OF TAIWAN .— 14
‘‘(A) I
N GENERAL.—Subject to subpara-15
graphs (E) and (F), an entity meets the re-16
quirements of this paragraph only if it— 17
‘‘(i) meets the ownership and income 18
requirements of subparagraph (B), 19
‘‘(ii) meets the publicly traded re-20
quirements of subparagraph (C), or 21
‘‘(iii) meets the qualified subsidiary 22
requirements of subparagraph (D). 23
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•S 199 IS
‘‘(B) OWNERSHIP AND INCOME REQUIRE -1
MENTS.—The requirements of this subpara-2
graph are met for an entity if— 3
‘‘(i) at least 50 percent (by vote and 4
value) of the total outstanding shares of 5
stock in such entity are owned directly or 6
indirectly by qualified residents of Taiwan, 7
and 8
‘‘(ii) less than 50 percent of such enti-9
ty’s gross income (and in the case of an 10
entity that is a member of a tested group, 11
less than 50 percent of the tested group’s 12
gross income) is paid or accrued, directly 13
or indirectly, in the form of payments that 14
are deductible for purposes of the income 15
taxes imposed by Taiwan, to persons who 16
are not— 17
‘‘(I) qualified residents of Tai-18
wan, or 19
‘‘(II) United States persons who 20
meet such requirements with respect 21
to the United States as determined by 22
the Secretary to be equivalent to the 23
requirements of this subsection (deter-24
mined without regard to paragraph 25
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•S 199 IS
(1)(B)) with respect to residents of 1
Taiwan. 2
‘‘(C) P
UBLICLY TRADED REQUIRE -3
MENTS.—An entity meets the requirements of 4
this subparagraph if— 5
‘‘(i) the principal class of its shares 6
(and any disproportionate class of shares) 7
of such entity are primarily and regularly 8
traded on an established securities market 9
in Taiwan, or 10
‘‘(ii) the primary place of manage-11
ment and control of the entity is in Taiwan 12
and all classes of its outstanding shares 13
described in clause (i) are regularly traded 14
on an established securities market in Tai-15
wan. 16
‘‘(D) Q
UALIFIED SUBSIDIARY REQUIRE -17
MENTS.—An entity meets the requirement of 18
this subparagraph if— 19
‘‘(i) at least 50 percent (by vote and 20
value) of the total outstanding shares of 21
the stock of such entity are owned directly 22
or indirectly by 5 or fewer entities— 23
‘‘(I) which meet the requirements 24
of subparagraph (C), or 25
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•S 199 IS
‘‘(II) which are United States 1
persons the principal class of the 2
shares (and any disproportionate class 3
of shares) of which are primarily and 4
regularly traded on an established se-5
curities market in the United States, 6
and 7
‘‘(ii) the entity meets the require-8
ments of clause (ii) of subparagraph (B). 9
‘‘(E) O
NLY INDIRECT OWNERSHIP 10
THROUGH QUALIFYING INTERMEDIARIES 11
COUNTED.— 12
‘‘(i) I
N GENERAL.—Stock in an entity 13
owned by a person indirectly through 1 or 14
more other persons shall not be treated as 15
owned by such person in determining 16
whether the person meets the requirements 17
of subparagraph (B)(i) or (D)(i) unless all 18
such other persons are qualifying inter-19
mediate owners. 20
‘‘(ii) Q
UALIFYING INTERMEDIATE 21
OWNERS.—The term ‘qualifying inter-22
mediate owner’ means a person that is— 23
‘‘(I) a qualified resident of Tai-24
wan, or 25
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‘‘(II) a resident of any other for-1
eign country (other than a foreign 2
country that is a foreign country of 3
concern) that has in effect a com-4
prehensive convention with the United 5
States for the avoidance of double tax-6
ation. 7
‘‘(iii) S
PECIAL RULE FOR QUALIFIED 8
SUBSIDIARIES.—For purposes of applying 9
subparagraph (D)(i), the term ‘qualifying 10
intermediate owner’ shall include any per-11
son who is a United States person who 12
meets such requirements with respect to 13
the United States as determined by the 14
Secretary to be equivalent to the require-15
ments of this subsection (determined with-16
out regard to paragraph (1)(B)) with re-17
spect to residents of Taiwan. 18
‘‘(F) C
ERTAIN PAYMENTS NOT IN -19
CLUDED.—In determining whether the require-20
ments of subparagraph (B)(ii) or (D)(ii) are 21
met with respect to an entity, the following pay-22
ments shall not be taken into account: 23
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‘‘(i) Arm’s-length payments by the en-1
tity in the ordinary course of business for 2
services or tangible property. 3
‘‘(ii) In the case of a tested group, 4
intra-group transactions. 5
‘‘(3) D
UAL RESIDENTS.— 6
‘‘(A) R
ULES FOR DETERMINATION OF STA -7
TUS.— 8
‘‘(i) I
N GENERAL.—An individual who 9
is an applicable dual resident and who is 10
described in subparagraph (B), (C), or (D) 11
shall be treated as a qualified resident of 12
Taiwan. 13
‘‘(ii) A
PPLICABLE DUAL RESIDENT .— 14
For purposes of this paragraph, the term 15
‘applicable dual resident’ means an indi-16
vidual who— 17
‘‘(I) is not a United States cit-18
izen, 19
‘‘(II) is a resident of the United 20
States (determined without regard to 21
subparagraph (E)), and 22
‘‘(III) would be a qualified resi-23
dent of Taiwan but for paragraph 24
(1)(B). 25
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‘‘(B) PERMANENT HOME .—An individual 1
is described in this subparagraph if such indi-2
vidual— 3
‘‘(i) has a permanent home available 4
to such individual in Taiwan, and 5
‘‘(ii) does not have a permanent home 6
available to such individual in the United 7
States. 8
‘‘(C) C
ENTER OF VITAL INTERESTS .—An 9
individual is described in this subparagraph if— 10
‘‘(i) such individual has a permanent 11
home available to such individual in both 12
Taiwan and the United States, and 13
‘‘(ii) such individual’s personal and 14
economic relations (center of vital inter-15
ests) are closer to Taiwan than to the 16
United States. 17
‘‘(D) H
ABITUAL ABODE.—An individual is 18
described in this subparagraph if— 19
‘‘(i) such individual— 20
‘‘(I) does not have a permanent 21
home available to such individual in 22
either Taiwan or the United States, or 23
‘‘(II) has a permanent home 24
available to such individual in both 25
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•S 199 IS
Taiwan and the United States but 1
such individual’s center of vital inter-2
ests under subparagraph (C)(ii) can-3
not be determined, and 4
‘‘(ii) such individual has a habitual 5
abode in Taiwan and not the United 6
States. 7
‘‘(E) U
NITED STATES TAX TREATMENT OF 8
QUALIFIED RESIDENT OF TAIWAN .—Notwith-9
standing section 7701, an individual who is 10
treated as a qualified resident of Taiwan by 11
reason of this paragraph for all or any portion 12
of a taxable year shall not be treated as a resi-13
dent of the United States for purposes of com-14
puting such individual’s United States income 15
tax liability for such taxable year or portion 16
thereof. 17
‘‘(4) R
ULES OF SPECIAL APPLICATION .— 18
‘‘(A) D
IVIDENDS.—For purposes of apply-19
ing this section to any dividend, paragraph 20
(2)(D) shall be applied without regard to clause 21
(ii) thereof. 22
‘‘(B) I
TEMS OF INCOME EMANATING FROM 23
AN ACTIVE TRADE OR BUSINESS IN TAIWAN .— 24
For purposes of this section— 25
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‘‘(i) IN GENERAL.—Notwithstanding 1
the preceding paragraphs of this sub-2
section, if an entity taxed as a corporation 3
in Taiwan is not a qualified resident of 4
Taiwan but meets the requirements of sub-5
paragraphs (A) and (B) of paragraph (1), 6
any qualified item of income such entity 7
derived from the United States shall be 8
treated as income of a qualified resident of 9
Taiwan. 10
‘‘(ii) Q
UALIFIED ITEMS OF INCOME .— 11
‘‘(I) I
N GENERAL.—The term 12
‘qualified item of income’ means any 13
item of income which emanates from, 14
or is incidental to, the conduct of an 15
active trade or business in Taiwan 16
(other than operating as a holding 17
company, providing overall supervision 18
or administration of a group of com-19
panies, providing group financing, or 20
making or managing investments (un-21
less such making or managing invest-22
ments is carried on by a bank, insur-23
ance company, or registered securities 24
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•S 199 IS
dealer in the ordinary course of its 1
business as such)). 2
‘‘(II) S
UBSTANTIAL ACTIVITY RE-3
QUIREMENT.—An item of income 4
which is derived from a trade or busi-5
ness conducted in the United States 6
or from a connected person shall be a 7
qualified item of income only if the 8
trade or business activity conducted in 9
Taiwan to which the item is related is 10
substantial in relation to the same or 11
a complementary trade or business ac-12
tivity carried on in the United States. 13
For purposes of applying this sub-14
clause, activities conducted by persons 15
that are connected to the entity de-16
scribed in clause (i) shall be deemed 17
to be conducted by such entity. 18
‘‘(iii) E
XCEPTION.—This subpara-19
graph shall not apply to any item of in-20
come derived by an entity if at least 50 21
percent (by vote or value) of such entity is 22
owned (directly or indirectly) or controlled 23
by residents of a foreign country of con-24
cern. 25
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•S 199 IS
‘‘(d) OTHERDEFINITIONS ANDSPECIALRULES.— 1
For purposes of this section— 2
‘‘(1) U
NITED STATES PERMANENT ESTABLISH -3
MENT.— 4
‘‘(A) I
N GENERAL.—The term ‘United 5
States permanent establishment’ means, with 6
respect to a qualified resident of Taiwan, a per-7
manent establishment of such resident which is 8
within the United States. 9
‘‘(B) S
PECIAL RULE.—The determination 10
of whether there is a permanent establishment 11
of a qualified resident of Taiwan within the 12
United States shall be made without regard to 13
whether an entity which is taxed as a corpora-14
tion in Taiwan and which is a qualified resident 15
of Taiwan controls or is controlled by— 16
‘‘(i) a domestic corporation, or 17
‘‘(ii) any other person that carries on 18
business in the United States (whether 19
through a permanent establishment or oth-20
erwise). 21
‘‘(2) P
ERMANENT ESTABLISHMENT .— 22
‘‘(A) I
N GENERAL.—The term ‘permanent 23
establishment’ means a fixed place of business 24
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•S 199 IS
through which a trade or business is wholly or 1
partly carried on. Such term shall include— 2
‘‘(i) a place of management, 3
‘‘(ii) a branch, 4
‘‘(iii) an office, 5
‘‘(iv) a factory, 6
‘‘(v) a workshop, and 7
‘‘(vi) a mine, an oil or gas well, a 8
quarry, or any other place of extraction of 9
natural resources. 10
‘‘(B) S
PECIAL RULES FOR CERTAIN TEM -11
PORARY PROJECTS.— 12
‘‘(i) I
N GENERAL.—A building site or 13
construction or installation project, or an 14
installation or drilling rig or ship used for 15
the exploration or exploitation of the sea 16
bed and its subsoil and their natural re-17
sources, constitutes a permanent establish-18
ment only if it lasts, or the activities of the 19
rig or ship lasts, for more than 12 months. 20
‘‘(ii) D
ETERMINATION OF 12 -MONTH 21
PERIOD.—For purposes of clause (i), the 22
period over which a building site or con-23
struction or installation project of a person 24
lasts shall include any period of more than 25
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•S 199 IS
30 days during which such person does not 1
carry on activities at such building site or 2
construction or installation project but 3
connected activities are carried on at such 4
building site or construction or installation 5
project by one or more connected persons. 6
‘‘(C) H
ABITUAL EXERCISE OF CONTRACT 7
AUTHORITY TREATED AS PERMANENT ESTAB -8
LISHMENT.—Notwithstanding subparagraphs 9
(A) and (B), where a person (other than an 10
agent of an independent status to whom sub-11
paragraph (D)(ii) applies) is acting on behalf of 12
a trade or business of a qualified resident of 13
Taiwan and has and habitually exercises an au-14
thority to conclude contracts that are binding 15
on the trade or business, that trade or business 16
shall be deemed to have a permanent establish-17
ment in the country in which such authority is 18
exercised in respect of any activities that the 19
person undertakes for the trade or business, un-20
less the activities of such person are limited to 21
those described in subparagraph (D)(i) that, if 22
exercised through a fixed place of business, 23
would not make this fixed place of business a 24
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•S 199 IS
permanent establishment under the provisions 1
of that subparagraph. 2
‘‘(D) E
XCLUSIONS.— 3
‘‘(i) I
N GENERAL.—Notwithstanding 4
subparagraphs (A) and (B), the term ‘per-5
manent establishment’ shall not include— 6
‘‘(I) the use of facilities solely for 7
the purpose of storage, display, or de-8
livery of goods or merchandise belong-9
ing to the trade or business, 10
‘‘(II) the maintenance of a stock 11
of goods or merchandise belonging to 12
the trade or business solely for the 13
purpose of storage, display, or deliv-14
ery, 15
‘‘(III) the maintenance of a stock 16
of goods or merchandise belonging to 17
the trade or business solely for the 18
purpose of processing by another 19
trade or business, 20
‘‘(IV) the maintenance of a fixed 21
place of business solely for the pur-22
pose of purchasing goods or merchan-23
dise, or of collecting information, for 24
the trade or business, 25
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•S 199 IS
‘‘(V) the maintenance of a fixed 1
place of business solely for the pur-2
pose of carrying on, for the trade or 3
business, any other activity of a pre-4
paratory or auxiliary character, or 5
‘‘(VI) the maintenance of a fixed 6
place of business solely for any com-7
bination of the activities mentioned in 8
subclauses (I) through (V), provided 9
that the overall activity of the fixed 10
place of business resulting from this 11
combination is of a preparatory or 12
auxiliary character. 13
‘‘(ii) B
ROKERS AND OTHER INDE -14
PENDENT AGENTS .—A trade or business 15
shall not be considered to have a perma-16
nent establishment in a country merely be-17
cause it carries on business in such coun-18
try through a broker, general commission 19
agent, or any other agent of an inde-20
pendent status, provided that such persons 21
are acting in the ordinary course of their 22
business as independent agents. 23
‘‘(3) T
ESTED GROUP.—The term ‘tested group’ 24
includes, with respect to any entity taxed as a cor-25
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•S 199 IS
poration in Taiwan, such entity and any other entity 1
taxed as a corporation in Taiwan that— 2
‘‘(A) participates as a member with such 3
entity in a tax consolidation, fiscal unity, or 4
similar regime that requires members of the 5
group to share profits or losses, or 6
‘‘(B) shares losses with such entity pursu-7
ant to a group relief or other loss sharing re-8
gime. 9
‘‘(4) C
ONNECTED PERSON .—Two persons shall 10
be ‘connected persons’ if one owns, directly or indi-11
rectly, at least 50 percent of the interests in the 12
other (or, in the case of a corporation, at least 50 13
percent of the aggregate vote and value of the cor-14
poration’s shares) or another person owns, directly 15
or indirectly, at least 50 percent of the interests (or, 16
in the case of a corporation, at least 50 percent of 17
the aggregate vote and value of the corporation’s 18
shares) in each person. In any case, a person shall 19
be connected to another if, based on all the relevant 20
facts and circumstances, one has control of the other 21
or both are under the control of the same person or 22
persons. 23
‘‘(5) F
OREIGN COUNTRY OF CONCERN .—The 24
term ‘foreign country of concern’ has the meaning 25
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•S 199 IS
given such term under paragraph (7) of section 1
9901 of the William M. (Mac) Thornberry National 2
Defense Authorization Act for Fiscal Year 2021 (15 3
U.S.C. 4651(7)), as added by section 103(a)(4) of 4
the CHIPS Act of 2022). 5
‘‘(6) P
ARTNERSHIPS; BENEFICIARIES OF ES -6
TATES AND TRUSTS.—For purposes of this section— 7
‘‘(A) a qualified resident of Taiwan which 8
is a partner of a partnership which carries on 9
a trade or business within the United States 10
through a United States permanent establish-11
ment shall be treated as carrying on such trade 12
or business through such permanent establish-13
ment, and 14
‘‘(B) a qualified resident of Taiwan which 15
is a beneficiary of an estate or trust which car-16
ries on a trade or business within the United 17
States through a United States permanent es-18
tablishment shall be treated as carrying on such 19
trade or business through such permanent es-20
tablishment. 21
‘‘(7) D
ENIAL OF BENEFITS FOR CERTAIN PAY -22
MENTS THROUGH HYBRID ENTITIES .—For purposes 23
of this section, rules similar to the rules of section 24
894(c) shall apply. 25
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•S 199 IS
‘‘(e) APPLICATION.— 1
‘‘(1) I
N GENERAL.—This section shall not apply 2
to any period unless the Secretary has determined 3
that Taiwan has provided benefits to United States 4
persons for such period that are reciprocal to the 5
benefits provided to qualified residents of Taiwan 6
under this section. 7
‘‘(2) P
ROVISION OF RECIPROCITY .—The Presi-8
dent or his designee is authorized to exchange let-9
ters, enter into an agreement, or take other nec-10
essary and appropriate steps relative to Taiwan for 11
the reciprocal provision of the benefits described in 12
this section. 13
‘‘(f) R
EGULATIONS OROTHERGUIDANCE.— 14
‘‘(1) I
N GENERAL.—The Secretary shall issue 15
such regulations or other guidance as may be nec-16
essary or appropriate to carry out the provisions of 17
this section, including such regulations or guidance 18
for— 19
‘‘(A) determining— 20
‘‘(i) what constitutes a United States 21
permanent establishment of a qualified 22
resident of Taiwan, and 23
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•S 199 IS
‘‘(ii) income that is effectively con-1
nected with such a permanent establish-2
ment, 3
‘‘(B) preventing the abuse of the provisions 4
of this section by persons who are not (or who 5
should not be treated as) qualified residents of 6
Taiwan, 7
‘‘(C) requirements for record keeping and 8
reporting, 9
‘‘(D) rules to assist withholding agents or 10
employers in determining whether a foreign per-11
son is a qualified resident of Taiwan for pur-12
poses of determining whether withholding or re-13
porting is required for a payment (and, if with-14
holding is required, whether it should be applied 15
at a reduced rate), 16
‘‘(E) the application of subsection 17
(a)(1)(D)(i) to stock held by predecessor own-18
ers, 19
‘‘(F) determining what amounts are to be 20
treated as qualified wages for purposes of sub-21
section (a)(2), 22
‘‘(G) determining the amounts to which 23
subsection (a)(3) applies, 24
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•S 199 IS
‘‘(H) defining established securities market 1
for purposes of subsection (c), 2
‘‘(I) the application of the rules of sub-3
section (c)(4)(B), 4
‘‘(J) the application of subsection (d)(6) 5
and section 1446, 6
‘‘(K) determining ownership interests held 7
by residents of a foreign country of concern, 8
and 9
‘‘(L) determining the starting and ending 10
dates for periods with respect to the application 11
of this section under subsection (e), which may 12
be separate dates for taxes withheld at the 13
source and other taxes. 14
‘‘(2) R
EGULATIONS TO BE CONSISTENT WITH 15
MODEL TREATY.—Any regulations or other guidance 16
issued under this section shall, to the extent prac-17
tical, be consistent with the provisions of the United 18
States model income tax convention dated February 19
7, 2016.’’. 20
(b) C
ONFORMINGAMENDMENT TO WITHHOLDING 21
T
AX.—Subchapter A of chapter 3 of the Internal Revenue 22
Code of 1986 is amended by adding at the end the fol-23
lowing new section: 24
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•S 199 IS
‘‘SEC. 1447. WITHHOLDING FOR QUALIFIED RESIDENTS OF 1
TAIWAN. 2
‘‘For reduced rates of withholding for certain resi-3
dents of Taiwan, see section 894A.’’. 4
(c) C
LERICALAMENDMENTS.— 5
(1) The table of sections for subpart D of part 6
II of subchapter N of chapter 1 of the Internal Rev-7
enue Code of 1986 is amended by inserting after the 8
item relating to section 894 the following new item: 9
‘‘Sec. 894A. Special rules for qualified residents of Taiwan.’’.
(2) The table of sections for subchapter A of 10
chapter 3 of such Code is amended by adding at the 11
end the following new item: 12
‘‘Sec. 1447. Withholding for qualified residents of Taiwan.’’.
TITLE II—UNITED STATES-TAI-13
WAN TAX AGREEMENT AU-14
THORIZATION ACT 15
SEC. 201. SHORT TITLE. 16
This title may be cited as the ‘‘United States-Taiwan 17
Tax Agreement Authorization Act’’. 18
SEC. 202. DEFINITIONS. 19
In this title: 20
(1) A
GREEMENT.—The term ‘‘Agreement’’ 21
means the tax agreement authorized by section 22
203(a). 23
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•S 199 IS
(2) APPROPRIATE CONGRESSIONAL COMMIT -1
TEES.—The term ‘‘appropriate congressional com-2
mittees’’ means— 3
(A) the Committee on Foreign Relations 4
and the Committee on Finance of the Senate; 5
and 6
(B) the Committee on Ways and Means of 7
the House of Representatives. 8
(3) A
PPROVAL LEGISLATION .—The term ‘‘ap-9
proval legislation’’ means legislation that approves 10
the Agreement. 11
(4) I
MPLEMENTING LEGISLATION .—The term 12
‘‘implementing legislation’’ means legislation that 13
makes any changes to the Internal Revenue Code of 14
1986 necessary to implement the Agreement. 15
SEC. 203. AUTHORIZATION TO NEGOTIATE AND ENTER 16
INTO AGREEMENT. 17
(a) I
NGENERAL.—Subsequent to a determination 18
under section 894A(e)(1) of the Internal Revenue Code 19
of 1986 (as added by the United States-Taiwan Expedited 20
Double-Tax Relief Act), the President is authorized to ne-21
gotiate and enter into a tax agreement relative to Taiwan. 22
(b) E
LEMENTS OFAGREEMENT.— 23
(1) C
ONFORMITY WITH BILATERAL INCOME TAX 24
CONVENTIONS.—The President shall ensure that— 25
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•S 199 IS
(A) any provisions included in the Agree-1
ment conform with provisions customarily con-2
tained in United States bilateral income tax 3
conventions, as exemplified by the 2016 United 4
States Model Income Tax Convention; and 5
(B) the Agreement does not include ele-6
ments outside the scope of the 2016 United 7
States Model Income Tax Convention. 8
(2) I
NCORPORATION OF TAX AGREEMENTS AND 9
LAWS.—Notwithstanding paragraph (1), the Agree-10
ment may incorporate and restate provisions of any 11
agreement, or existing United States law, addressing 12
double taxation for residents of the United States 13
and Taiwan. 14
(3) A
UTHORITY.—The Agreement shall include 15
the following statement: ‘‘The Agreement is entered 16
into pursuant to the United States-Taiwan Tax 17
Agreement Authorization Act.’’ 18
(4) E
NTRY INTO FORCE.—The Agreement shall 19
include a provision conditioning entry into force 20
upon— 21
(A) enactment of approval legislation and 22
implementing legislation pursuant to section 23
207; and 24
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•S 199 IS
(B) confirmation by the Secretary of the 1
Treasury that the relevant authority in Taiwan 2
has approved and taken appropriate steps re-3
quired to implement the Agreement. 4
SEC. 204. CONSULTATIONS WITH CONGRESS. 5
(a) N
OTIFICATIONUPONCOMMENCEMENT OF NEGO-6
TIATIONS.—The President shall provide written notifica-7
tion to the appropriate congressional committees of the 8
commencement of negotiations between the United States 9
and Taiwan on the Agreement at least 15 calendar days 10
before commencing such negotiations. 11
(b) C
ONSULTATIONSDURINGNEGOTIATIONS.— 12
(1) B
RIEFINGS.—Not later than 90 days after 13
commencement of negotiations with respect to the 14
Agreement, and every 180 days thereafter until the 15
President enters into the Agreement, the President 16
shall provide a briefing to the appropriate congres-17
sional committees on the status of the negotiations, 18
including a description of elements under negotia-19
tion. 20
(2) M
EETINGS AND OTHER CONSULTATIONS .— 21
(A) I
N GENERAL.—In the course of nego-22
tiations with respect to the Agreement, the Sec-23
retary of the Treasury, in coordination with the 24
Secretary of State, shall— 25
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•S 199 IS
(i) meet, upon request, with the chair-1
man or ranking member of any of the ap-2
propriate congressional committees regard-3
ing negotiating objectives and the status of 4
negotiations in progress; and 5
(ii) consult closely and on a timely 6
basis with, and keep fully apprised of the 7
negotiations, the appropriate congressional 8
committees. 9
(B) E
LEMENTS OF CONSULTATIONS .—The 10
consultations described in subparagraph (A) 11
shall include consultations with respect to— 12
(i) the nature of the contemplated 13
Agreement; 14
(ii) how and to what extent the con-15
templated Agreement is consistent with the 16
elements set forth in section 203(b); and 17
(iii) the implementation of the con-18
templated Agreement, including— 19
(I) the general effect of the con-20
templated Agreement on existing laws; 21
(II) proposed changes to any ex-22
isting laws to implement the con-23
templated Agreement; and 24
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•S 199 IS
(III) proposed administrative ac-1
tions to implement the contemplated 2
Agreement. 3
SEC. 205. APPROVAL AND IMPLEMENTATION OF AGREE-4
MENT. 5
(a) I
NGENERAL.—The Agreement may not enter 6
into force unless— 7
(1) the President, at least 60 days before the 8
day on which the President enters into the Agree-9
ment, publishes the text of the contemplated Agree-10
ment on a publicly available website of the Depart-11
ment of the Treasury; and 12
(2) there is enacted into law, with respect to 13
the Agreement, approval legislation and imple-14
menting legislation pursuant to section 207. 15
(b) E
NTRYINTOFORCE.—The President may pro-16
vide for the Agreement to enter into force upon— 17
(1) enactment of approval legislation and imple-18
menting legislation pursuant to section 207; and 19
(2) confirmation by the Secretary of the Treas-20
ury that the relevant authority in Taiwan has ap-21
proved and taken appropriate steps required to im-22
plement the Agreement. 23
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SEC. 206. SUBMISSION TO CONGRESS OF AGREEMENT AND 1
IMPLEMENTATION POLICY. 2
(a) S
UBMISSION OFAGREEMENT.—Not later than 3
270 days after the President enters into the Agreement, 4
the President or the President’s designee shall submit to 5
Congress— 6
(1) the final text of the Agreement; and 7
(2) a technical explanation of the Agreement. 8
(b) S
UBMISSION OFIMPLEMENTATION POLICY.—Not 9
later than 270 days after the President enters into the 10
Agreement, the Secretary of the Treasury shall submit to 11
Congress— 12
(1) a description of those changes to existing 13
laws that the President considers would be required 14
in order to ensure that the United States acts in a 15
manner consistent with the Agreement; and 16
(2) a statement of anticipated administrative 17
action proposed to implement the Agreement. 18
SEC. 207. CONSIDERATION OF APPROVAL LEGISLATION 19
AND IMPLEMENTING LEGISLATION. 20
(a) I
NGENERAL.—The approval legislation with re-21
spect to the Agreement shall include the following: ‘‘Con-22
gress approves the Agreement submitted to Congress pur-23
suant to section 206 of the United States-Taiwan Tax 24
Agreement Authorization Act on llll.’’, with the 25
blank space being filled with the appropriate date. 26
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(b) APPROVALLEGISLATIONCOMMITTEEREFER-1
RAL.—The approval legislation shall— 2
(1) in the Senate, be referred to the Committee 3
on Foreign Relations; and 4
(2) in the House of Representatives, be referred 5
to the Committee on Ways and Means. 6
(c) I
MPLEMENTING LEGISLATIONCOMMITTEERE-7
FERRAL.—The implementing legislation shall— 8
(1) in the Senate, be referred to the Committee 9
on Finance; and 10
(2) in the House of Representatives, be referred 11
to the Committee on Ways and Means. 12
SEC. 208. RELATIONSHIP OF AGREEMENT TO INTERNAL 13
REVENUE CODE OF 1986. 14
(a) I
NTERNALREVENUECODE OF1986 TOCON-15
TROL.—No provision of the Agreement or approval legisla-16
tion, nor the application of any such provision to any per-17
son or circumstance, which is inconsistent with any provi-18
sion of the Internal Revenue Code of 1986, shall have ef-19
fect. 20
(b) C
ONSTRUCTION.—Nothing in this title shall be 21
construed— 22
(1) to amend or modify any law of the United 23
States; or 24
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•S 199 IS
(2) to limit any authority conferred under any 1
law of the United States, unless specifically provided 2
for in this title. 3
SEC. 209. AUTHORIZATION OF SUBSEQUENT TAX AGREE-4
MENTS RELATIVE TO TAIWAN. 5
(a) I
NGENERAL.—Subsequent to the enactment of 6
approval legislation and implementing legislation pursuant 7
to section 207— 8
(1) the term ‘‘tax agreement’’ in section 203(a) 9
shall be treated as including any tax agreement rel-10
ative to Taiwan which supplements or supersedes 11
the Agreement to which such approval legislation 12
and implementing legislation relates; and 13
(2) the term ‘‘Agreement’’ shall be treated as 14
including such tax agreement. 15
(b) R
EQUIREMENTS, ETC., TOAPPLYSEPA-16
RATELY.—The provisions of this title (including section 17
204) shall be applied separately with respect to each tax 18
agreement referred to in subsection (a). 19
SEC. 210. UNITED STATES TREATMENT OF DOUBLE TAX-20
ATION MATTERS WITH RESPECT TO TAIWAN. 21
(a) F
INDINGS.—Congress makes the following find-22
ings: 23
(1) The United States addresses issues with re-24
spect to double taxation with foreign countries by 25
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entering into bilateral income tax conventions 1
(known as tax treaties) with such countries, subject 2
to the advice and consent of the Senate to ratifica-3
tion pursuant to article II of the Constitution. 4
(2) The United States has entered into more 5
than sixty such tax treaties, which facilitate eco-6
nomic activity, strengthen bilateral cooperation, and 7
benefit United States workers, businesses, and other 8
United States taxpayers. 9
(3) Due to Taiwan’s unique status, the United 10
States is unable to enter into an article II tax treaty 11
with Taiwan, necessitating an agreement to address 12
issues with respect to double taxation. 13
(b) S
TATEMENT OFPOLICY.—It is the policy of the 14
United States to— 15
(1) provide for additional bilateral tax relief 16
with respect to Taiwan, beyond that provided for in 17
section 894A of the Internal Revenue Code of 1986 18
(as added by the United States-Taiwan Expedited 19
Double-Tax Relief Act), only after entry into force 20
of an Agreement, as provided for in section 205, and 21
only in a manner consistent with such Agreement; 22
and 23
(2) continue to provide for bilateral tax relief 24
with sovereign states to address double taxation and 25
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•S 199 IS
other related matters through entering into bilateral 1
income tax conventions, subject to the Senate’s ad-2
vice and consent to ratification pursuant to article II 3
of the Constitution. 4
Æ
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