How much of a Taiwan subsidiary's dividend actually reaches its US parent? As of October 2026, 79 cents of every dollar paid out. Taiwan withholds 21% of the gross dividend paid to a foreign corporate shareholder, and no income tax agreement between the United States and Taiwan is in force to lower that rate. Parent companies in Japan and Korea can bring it down to 10%, and a Vietnamese parent to 15%.
The subsidiary withholds 21% when it pays
Article 88 of Taiwan's Income Tax Act (paragraph 1, item 1) requires tax to be withheld at the time of payment when a company pays dividends to a profit-seeking enterprise headquartered outside Taiwan. Article 89 names the paying company as the withholding agent and the foreign corporate shareholder as the taxpayer. The rate is set by Article 4 of the Standards of Withholding Rates for Various Incomes: 21% of the amount paid. According to the Ministry of Finance's eTax Portal, that rate has applied to payments since January 1, 2018 (Q&A 1503).
"Payment" means actual payment, a book transfer or a remittance. Delay does not help. Under Article 82 of the Enforcement Rules of the Income Tax Act, a dividend still unpaid six months after the shareholders' meeting resolved to distribute it is treated as paid, and the same applies to cash dividends declared by the board.
Deadlines are short. The subsidiary must pay the tax to the National Treasury within 10 days from the day it withholds, file the withholding statement (扣繳憑單) with the tax office for verification, and then give it to the parent. Three or more consecutive national holidays in that window extend it by five days. These rules sit in Article 92, paragraph 2, in force since January 1, 2025. Paragraph 3 applies the same timetable when the foreign parent has its own fixed place of business in Taiwan.
Getting it wrong is costly. A withholding agent that fails to withhold, or withholds too little, is ordered to pay the shortfall by a deadline and fined up to the amount of tax not withheld; missing that deadline raises the ceiling to three times that amount (Article 114, item 1).
Why a US parent gets no reduction
Taiwan's Ministry of Finance publishes the list of agreements it has in force. As of the list updated on September 4, 2026, the only US entry is a 1988 exchange of letters on shipping and air transport income (MOF agreement list). Dividends are outside it.
Congress has moved, but only partway. H.R. 33, the United States-Taiwan Expedited Double-Tax Relief Act, passed the House 423 to 1 on January 15, 2025 and was received in the Senate and referred to the Committee on Finance the next day (H.R. 33 on Congress.gov). The Senate companion, S. 199, was introduced and referred to the same committee on January 23, 2025 (S. 199 on Congress.gov). The Library of Congress records showed no later action on either bill when checked on October 6, 2026.
Even an enacted bill would not change Taiwan's withholding by itself. As passed by the House, the new Internal Revenue Code section 894A would not apply for any period unless the Treasury Secretary has determined that Taiwan provides reciprocal benefits to US persons for that period (bill text). Taiwan's Ministry of Finance said on January 17, 2025 that the bill still needed Senate passage and the President's signature, and that any resulting agreement must, like Taiwan's other agreements, complete the procedures of Taiwan's Treaty Conclusion Act before taking effect in Taiwan (MOF release). Until then, the rate is 21%.
Japan, Korea, Vietnam and the US side by side
In a group with shareholders in several countries, the rate depends on where the shareholder receiving the dividend is resident. Each agreement below caps Taiwan's tax on dividends where the recipient is the beneficial owner; none sets a minimum shareholding.
| Parent resident in | Agreement with Taiwan | In force / Taiwan withholding applies | Taiwan tax on dividends |
|---|---|---|---|
| United States | No comprehensive agreement | — | 21% (domestic rate) |
| Japan | Association of East Asian Relations – Interchange Association agreement, signed November 26, 2015 (both bodies since renamed) | In force June 13, 2016; income payable from January 1, 2017 | Up to 10% |
| Korea | Taipei Mission in Korea – Korean Mission in Taipei agreement, signed November 17, 2021 | In force December 27, 2023; amounts payable from January 1, 2024 | Up to 10% |
| Vietnam | Taipei Economic and Cultural Office in Hanoi – Vietnam Economic and Cultural Office in Taipei agreement, signed April 6, 1998 | In force May 6, 1998 | Up to 15% |
Sources: Article 10(2) of the Japan, Korea and Vietnam agreements; the MOF list; MOF releases on the Japan and Korea agreements. These agreements were concluded between representative offices or associations, and Taiwan's Ministry of Finance lists them among Taiwan's income tax agreements.
On a dividend of NT$10 million, that is the difference between NT$2.1 million withheld for a US parent, NT$1.5 million for a Vietnamese parent and NT$1 million for a Japanese or Korean one (an invented example).
Could a US group simply hold its Taiwan subsidiary through its Japanese or Korean affiliate? The cap follows the beneficial owner. The Japan agreement (Article 26) denies relief where obtaining it was the main purpose, or one of the main purposes, of the activities. The Korea agreement (Article 27) does the same for arrangements and transactions, unless granting the benefit is shown to fit the agreement's object and purpose. Taiwan's tax offices also examine these cases on the basis of the economic substance (Regulations Governing Application of Agreements for the Avoidance of Double Taxation, Article 4).
Paperwork for the lower rate
A Japanese, Korean or Vietnamese parent that wants 10% or 15% withheld at payment gives the subsidiary a residence certificate issued by its home tax authority and proof that it is the beneficial owner of the dividend. The subsidiary cites the agreement article in its withholding return and attaches those documents, its shareholding records and the dividend calculation or notice (Article 25). The reduced rate is not available where the shares are effectively connected with a permanent establishment the parent has in Taiwan (Article 10(4) of each agreement).
What if 21% was withheld anyway? Article 34 of the same regulations allows the recipient or the withholding agent to apply to the tax office that received the withholding return within 10 years from the date the tax was paid, with the supporting documents and the withholding statement (Article 34). Under the transitional rule in the April 8, 2025 amendment, tax already paid more than five years earlier when that amendment took effect stays under the pre-amendment rules.
The 5% surtax on retained earnings
Taiwan subsidiaries usually decide each year whether to pay out profits, and the surtax is one reason. Article 66-9 of the Income Tax Act adds a 5% profit-seeking enterprise income tax, from tax year 2018, on a year's earnings that are not distributed. Dividends paid out of that year's earnings by the end of the following fiscal year are deducted. The return is due between May 1 and May 31 of the year after the annual income tax return for that year (Article 102-2). For a calendar-year subsidiary's 2025 earnings, dividends paid by the end of 2026 count, and the surtax return is filed in May 2027.
Operating through a branch
A branch is taxed differently. A Taiwan branch of a foreign company pays profit-seeking enterprise income tax on its Taiwan profits (Article 3, paragraph 3). Sending the after-tax profit home is not a dividend. The Ministry of Finance ruled on March 9, 1987 (Tai-Cai-Shui No. 7586738) that a branch's profits form part of the head office's profits, leaving no distribution to tax and nothing for the branch to withhold. Point 2 of the ministry's source-of-income principles, as amended in 2023, also excludes branch remittances from dividends. Enterprises headquartered outside Taiwan are exempt from filing the 5% surtax return as well (eTax Q&A 2814). The two structures are compared in Entering the Taiwan Market: Key Differences Between a Subsidiary and a Branch.
Getting the money out, and the US side
Article 12 of the Act for Investment by Foreign Nationals lets an investor apply to convert and remit the profits distributed to it each year. Returning capital itself, through a capital reduction or liquidation, follows a different procedure, covered in Closing a Taiwan Company: What Happens to Capital and Company Assets?. Withholding on royalties and service fees paid to US companies is discussed in U.S.–Taiwan Chip Investment: Royalties, Fees and the Treaty Gap.
How the 21% is treated on the US return is a US question. A US tax adviser can confirm whether and how the foreign tax credit applies to the parent.
If your subsidiary is about to declare a dividend, or you want to look at reclaiming tax already withheld, you can write to Hovering International Law Firm at wei@hoveringlaw.com.tw with the planned payment date and the ownership chain.
Keep the withholding statement the subsidiary issues. Article 34 requires it for any later claim to an agreement rate.
Official sources
- Income Tax Act (last amended September 11, 2026), Art. 3, Art. 66-9, Art. 88, Art. 89, Art. 92, Art. 102-2, Art. 114; Articles 88, 89, 92 and 114 as amended on August 7, 2024 and in force since January 1, 2025 (amendment history)
- Enforcement Rules of the Income Tax Act (last amended February 21, 2022), Art. 82
- Standards of Withholding Rates for Various Incomes (last amended June 30, 2021), Art. 4, Art. 14
- Regulations Governing Application of Agreements for the Avoidance of Double Taxation with Respect to Taxes on Income (last amended April 8, 2025), Art. 4, Art. 25, Art. 34
- Act for Investment by Foreign Nationals (last amended November 19, 1997), Art. 12; English titles checked at law.moj.gov.tw/ENG
- Ministry of Finance, list of Taiwan's income tax agreements (updated September 4, 2026); agreement texts for Japan, Korea and Vietnam
- Ministry of Finance releases: Japan agreement in force and applicable (June 15, 2016), Korea agreement in force and applicable (December 28, 2023), House passage of the US–Taiwan double-tax relief bill (January 17, 2025)
- Congress.gov, H.R. 33 (119th Congress) and S. 199 (119th Congress); actions read through the Library of Congress API on October 6, 2026; House-passed text as referred in the Senate
- Ministry of Finance, Tai-Cai-Shui No. 7586738 (March 9, 1987) and 所得稅法第八條規定中華民國來源所得認定原則 (amended October 13, 2023)
- Ministry of Finance eTax Portal Q&A 1503 (updated April 10, 2026) and 2814 (updated April 27, 2026)
Checked: October 6, 2026
Frequently Asked Questions
- Has Congress passed the US–Taiwan double-tax relief bill?
- Not as of October 6, 2026. H.R. 33 passed the House on January 15, 2025 and was referred to the Senate Committee on Finance on January 16, 2025. The Senate bill, S. 199, was referred to the same committee on January 23, 2025. Library of Congress records checked on October 6, 2026 show no later action on either bill, so a US parent's dividends from Taiwan are still withheld at Taiwan's domestic rate of 21%.
- Can a Japanese or Korean parent get the 10% rate without holding a minimum stake?
- Yes. Article 10(2) of both agreements caps Taiwan's tax at 10% of the gross dividend when the beneficial owner is a resident of Japan or Korea, with no shareholding threshold. The cap does not apply where the shares are effectively connected with a permanent establishment in Taiwan, and both agreements generally deny benefits where obtaining them was one of the main purposes (Japan, Article 26; Korea, Article 27).
- Does a Taiwan branch withhold tax when it sends profits to its US head office?
- No. Taiwan's Ministry of Finance ruled in 1987 that a branch's Taiwan profits are part of the head office's profits, so after the branch pays profit-seeking enterprise income tax there is no distribution and no withholding. The ministry's 2023 source-of-income principles likewise exclude branch remittances from dividends.
This article provides general information and is not legal advice on any individual matter.
