Does Taiwan tax the profit when a US parent sells its Taiwan subsidiary? For shares that count as securities, it does not tax the gain itself. The seller bears a securities transaction tax of 0.3% of the price, and as of October 2026 income tax on securities gains has been suspended for more than three decades. Two situations change the answer. One is a subsidiary that never issued bank-attested share certificates, or that is organized as a limited company. The other is a subsidiary whose value lies mostly in Taiwan real estate. No income tax agreement between the United States and Taiwan is in force to soften either.
0.3%, borne by the seller and collected by the buyer
Article 2 of the Securities Transaction Tax Act charges the seller three-thousandths of the price of each transaction in shares issued by a company. Who collects it depends on how the sale is made. A broker collects on a brokered sale; where the holder transfers the shares directly to the buyer, the buyer is the collection agent (Article 4, paragraph 1). In a private sale of an unlisted subsidiary, then, the buyer withholds the tax on the settlement day and pays it to the National Treasury the next day (Article 3, paragraph 1).
On a NT$1 billion sale, that is NT$3 million. When the buyer is also a foreign company with no presence in Taiwan, how it will carry out that collection is worth settling with the competent tax office before signing.
Even the subsidiary has a part to play. When a holder applies to register a transfer, the issuing company must check the transaction tax receipt for the previous transfer and report any unpaid tax to the tax authority. A company that fails to report becomes liable for the tax itself (Article 6, paragraphs 2 and 3).
Why the gain is usually untaxed, and what counts as a security
Article 4-1 of the Income Tax Act reads: "自中華民國七十九年一月一日起，證券交易所得停止課徵所得稅". From January 1, 1990, securities transaction income has not been subject to income tax, and securities losses cannot be deducted. The article does not distinguish between sellers. The Ministry of Finance's eTax Portal applies it to enterprises selling both listed and unlisted shares (Q&A 2301).
Had a Taiwan company sold the same shares, it would add the suspended gain back when computing its alternative minimum tax (Income Basic Tax Act, Article 7, paragraph 1, item 1). A foreign enterprise with neither a fixed place of business nor a business agent in Taiwan is outside that tax (Article 3, paragraph 1, item 5).
So what is a security? Three kinds of holding are not. The ministry has ruled that a member's transfer of a capital contribution (出資額) in a limited company (有限公司) is a property transaction (Tai-Cai-Shui No. 38498). In a company limited by shares (股份有限公司) that has not issued share certificates, the transfer instruments shareholders use are not securities for transaction tax purposes (eTax Q&A 6104). Printed certificates that lack the bank attestation required by Article 162 of the Company Act are treated as a transfer of a capital contribution as well (Tai-Cai-Shui No. 841632176).
None of the three attracts transaction tax. Their gain, however, is property transaction income (財產交易所得), which the 1990 suspension does not reach (eTax Q&A 1144). The rate, base and filing deadline that apply to a foreign seller without a Taiwan presence should be confirmed with the competent tax office or a Taiwan CPA before the sale agreement is signed. The first diligence question is simple. Is the subsidiary a limited company, and if it is a company limited by shares, did it issue attested certificates?
Property-rich companies: 45% or 35%
Since July 1, 2021, Article 4-4, paragraph 3 of the Income Tax Act has treated some share sales as sales of Taiwan houses and land. All three conditions must be met:
- the seller directly or indirectly holds more than half of the company's shares or capital;
- Taiwan houses and land make up 50% or more of the value of the company's shares or capital;
- the shares are not listed, OTC-traded or emerging-board stock.
The ministry's filing directions for the house and land tax (amended April 21, 2026), point 6, test the holding on every day of the year before the sale: more than 50% on any single day is enough. Real estate held by companies the subsidiary controls also counts toward the 50%.
For an enterprise headquartered outside Taiwan, the rate is 45% for a holding period of two years or less and 35% beyond that, computed separately from other income (Article 24-5, paragraph 2, item 2). The 20% rate for holdings over five years appears only in the list for enterprises headquartered in Taiwan. A seller with no fixed place of business or business agent in Taiwan files and pays through an agent approved under Article 60 of the Enforcement Rules of the Income Tax Act, paragraph 2, at the tax office where the agent is located when filing (point 23 of the directions).
Selling a small block does not avoid the rule. In an example published by the Taipei National Taxation Bureau, a company holding 60% of an unlisted real estate trading company sold 10% of that company's shares less than a year after buying them. It reported the gain as suspended securities income. The bureau treated it as house and land income taxed at 45%, assessed more than NT$2 million in additional tax and imposed a fine (release of December 11, 2025).
Long-held shares get some relief. Two dates matter. If the shares were acquired on or before June 30, 2021, the share of the gain matching the proportion of the company's Taiwan real estate acquired on or before December 31, 2015 falls outside the rule (point 2 of the directions).
What Taiwan's agreements say about share gains
Taiwan's agreements with Japan, Korea and Vietnam say that the share gains they cover "may be taxed" in Taiwan; whether tax is actually due still depends on Taiwan's own law. Article 13 therefore matters mainly for the two taxable cases above.
| Seller resident in | Article 13 on shares of a Taiwan company | Effect on a subsidiary sale |
|---|---|---|
| United States | No comprehensive income tax agreement in force | Taiwan domestic law applies in full |
| Japan | Para. 4: shares in a company deriving at least 50% of the value of its property from Taiwan immovable property may be taxed in Taiwan; para. 5: other gains taxable only where the seller resides | Taiwan keeps its right for property-rich companies |
| Korea | Para. 4: shares deriving more than 50% of their value from Taiwan immovable property; para. 5: shares of any Taiwan company if the seller held at least 25% of its capital at any time in the prior 12 months | A parent holding 25% or more leaves Taiwan's right intact |
| Vietnam | Para. 3: shares or comparable interests in a company whose assets consist wholly or principally of Taiwan immovable property; para. 5: other gains taxable only where the seller resides | Taiwan keeps its right for property-rich companies |
Sources: Article 13 of the Japan, Korea and Vietnam agreements, and the Ministry of Finance agreement list updated September 4, 2026, where the only US entry is a 1988 exchange of letters on shipping and air transport. These agreements were concluded between representative offices or associations. The Japan text was signed by the Association of East Asian Relations and the Interchange Association, both since renamed.
For a Japanese or Vietnamese seller, gains on shares or capital contributions in a company that is not property-rich fall under the residence-only paragraph. How to claim that treatment in Taiwan is a point to raise with the tax office before closing. Domestic law measures real estate against the value of the shares, while the Japan text speaks of the value of the company's property, so the two tests may not give the same answer. Vietnamese readers will find the agreement's other rates in Vietnamese Companies with Taiwan Income.
A US parent has no such paragraph to rely on. How the United States taxes the gain, and whether any Taiwan tax can be credited, is a question for a US tax adviser.
MOEA approval and remitting the proceeds
Under Article 10 of the Act For Investment by Foreign Nationals, paragraph 2, an investor transferring its investment must apply for approval jointly with the transferee. The competent authority is the Ministry of Economic Affairs (Article 2); since September 26, 2023, foreign investment review has been handled by its 投資審議司 (經濟部處務規程, Articles 9 and 19). Once a share transfer is approved, the investor may apply to convert and remit its approved investment amount in a single lump sum, and the capital gain from the investment as well (Article 12, paragraph 2).
Taking profits out as a dividend before a sale is a separate route; see Taiwan Subsidiary Dividends to a US Parent. Winding the company up instead is covered in Closing a Taiwan Company.
If you are weighing a sale and want the subsidiary's form, certificates and real estate share reviewed first, Hovering International Law Firm can be reached at wei@hoveringlaw.com.tw.
Timing matters here too. The holding test looks back a full year, and selling down below 50% first does not reset it: one day above half in the year before the sale still meets the first condition.
Official sources
- Securities Transaction Tax Act (證券交易稅條例, last amended January 2, 2025), Article 2, Article 3, Article 4, Article 6
- Income Tax Act (所得稅法, last amended September 11, 2026), Article 4-1, Article 4-4, Article 24-5 (Articles 4-4 and 24-5 in force since July 1, 2021; amendment history)
- Enforcement Rules of the Income Tax Act (last amended February 21, 2022), Article 60
- Income Basic Tax Act (所得基本稅額條例, last amended January 27, 2021), Article 3, Article 7
- Company Act (公司法, last amended December 26, 2025), Article 162
- Act For Investment by Foreign Nationals (外國人投資條例, last amended November 19, 1997), Article 2, Article 10, Article 12; 經濟部處務規程 (last amended September 25, 2023), Article 9, Article 19
- Ministry of Finance rulings Tai-Cai-Shui No. 38498 (December 26, 1978), Tai-Cai-Shui No. 841632176 (June 29, 1995); 房地合一課徵所得稅申報作業要點 (amended April 21, 2026)
- eTax Portal Q&A 2301 (updated March 20, 2017), 6104 (updated June 12, 2024), 1144 (updated April 10, 2026)
- Taipei National Taxation Bureau, release on share sales treated as house and land transactions (December 11, 2025)
- Tax agreements, English texts on the Ministry of Finance site: Japan, Korea (consolidated), Vietnam; Ministry of Finance agreement list (updated September 4, 2026)
Checked on October 6, 2026.
Frequently Asked Questions
- Does a US parent with no office in Taiwan pay Taiwan tax on the gain from selling its subsidiary's shares?
- Not on a gain from shares that count as securities, such as bank-attested share certificates. Article 4-1 of the Income Tax Act has suspended income tax on securities transaction income since January 1, 1990, and a foreign enterprise with neither a fixed place of business nor a business agent in Taiwan is outside the alternative minimum tax. The seller still bears the 0.3% securities transaction tax. Two exceptions apply: interests that are not securities, and shares in property-rich companies, which are taxed at 45% or 35%.
- Our Taiwan subsidiary is a limited company. Is there transaction tax on selling the capital contribution?
- No. Taiwan's Ministry of Finance treats a transfer of a limited company's capital contribution as a property transaction, not a securities transaction, so there is no securities transaction tax. The gain is property transaction income, which the 1990 suspension does not cover. The rate and filing route for a foreign seller with no presence in Taiwan should be confirmed with the competent tax office or a Taiwan CPA before signing.
- Does a tax agreement stop Taiwan from taxing the sale of a property-rich subsidiary?
- Generally not. The Japan, Korea and Vietnam agreements each let Taiwan tax gains on shares in a company whose value or assets come mainly from Taiwan real estate, though each states its own test: at least 50% for Japan, more than 50% for Korea, and wholly or principally for Vietnam. Korea's agreement also lets Taiwan tax gains on any Taiwan company's shares where the seller held at least 25% of the capital in the prior 12 months. The United States has no comprehensive income tax agreement with Taiwan in force.
This article provides general information and is not legal advice on any individual matter.
