US, Taiwan to begin talks on double taxation deal, says Treasury Department

The United States and Taiwan will begin negotiations in the coming weeks to work on an agreement to address double taxation issues, the U.S. Treasury Department said on Tuesday.

Both sides have said such an agreement will foster more investment, and Taipei has long pushed for it. The move was announced as a senior U.S. diplomat who helps manage ties with Taiwan arrived in Taipei on Tuesday.

Washington and Taipei do not have formal diplomatic relations, so the lack of a tax agreement means Taiwanese businesses and individuals are taxed on their income by both the U.S. and Taiwanese governments.

Taiwan is a major global supplier of the semiconductor chips essential to a wide range of consumer goods and military equipment. Washington has been keen to get Taiwanese chip companies to build factories in the United States.

The Treasury Department said the action builds on congressional initiatives and the administration will work with Congress on legislation to approve an agreement.

"A comprehensive tax agreement will provide critical benefits for both the United States and Taiwan," Treasury said. "In particular, this action will support the CHIPS and Science Act’s aims of strengthening the resilience of the semiconductor supply chain, creating jobs, and incentivizing investments in semiconductor manufacturing facilities across the United States.

"It will reduce double taxation barriers for further investment by Taiwan into the United States, and vice versa, particularly for the small and medium-sized enterprises that are crucial to a complete semiconductor ecosystem."

Washington has been moving toward a tax agreement with Taiwan for months. But legislation that would have laid the groundwork for a bilateral tax agreement with the island failed to pass the Senate over the summer.