A US technology contract and the evidence of work contributed in Taiwan

How does a US supplier explain a service completed abroad with help from its Taiwan customer? A licence and an engineering report may support different parts of the same invoice. For the service element, the records must show what help was needed and how the work was divided before a proposed Taiwan profit allocation can be assessed.

For a foreign enterprise with neither a Taiwan fixed place of business nor a business agent, Income Tax Act Article 73 provides payment-time withholding on Taiwan-source income within Article 88. Whether the fee is Taiwan-source income comes before choosing a withholding rate.

Work performed abroad and the Taiwan team's role

Where did the service take place? For services performed by people, point 4 of the Ministry's source-income principles excludes remuneration if all work is performed and completed abroad and the enterprise has neither a Taiwan fixed place of business nor a business agent. The fact that the customer is in Taiwan does not, on its own, answer that test.

Remuneration for work that needs to be performed both inside and outside Taiwan is Taiwan-source income. The same applies to work abroad that requires Taiwan equipment, personnel, expertise or technology to be completed. Basic background information and ordinary notification or confirmation are excluded from that substantive assistance. An email exchange may therefore need to be read for its actual contribution to the work.

Project records can show the distinction. A work plan, allocation of staff responsibilities and completed deliverables explain more than the location from which the final report was sent. Services supplied electronically from abroad, including download or online use, are covered separately by point 4, paragraph 2.

Points 4 and 10 provide for the tax office to determine Taiwan-attributable business profits where evidence clearly separates the relative contributions inside and outside Taiwan. Point 10 names CPA audit reports, transfer-pricing evidence, work-plan records or reports as examples. It specifies no universal headcount ratio.

For a US vendor answering a deduction query, the customer's requested allocation can be tested against the original statement of work. Did the customer supply ordinary background information, or did completion depend on its specialist personnel or equipment? Version histories and resource records may explain that distinction. A claim about the relative contribution still requires evidence capable of supporting the tax office's assessment.

The licence inside the service package

A customer may be paying for permission to use technology as well as engineers' work. Article 8(6) treats royalties for specified rights used in Taiwan, including patents, copyright and secret processes, as Taiwan-source income. Licence scope and duration identify what the customer is entitled to use.

The mixed-contract rule needs care. Point 13 of the source-income principles requires the components to be examined; activity within the foreign enterprise's ordinary business is assessed under Article 8(9). Outside that ordinary-business category, remuneration with service, royalty or other listed characteristics is separated and assessed under the relevant categories. Calling everything “technical support,” or adding two price lines, does not establish the accepted classification.

Domestic rules start at 20% of gross Taiwan-source royalties. Ordinary service income of a foreign enterprise with neither a Taiwan fixed place of business nor a business agent also generally starts at 20% of gross payments, absent applicable relief or an approved income calculation (Article 3 of the withholding standards).

Individuals need separate classification. Article 73 also covers nonresident individuals, but salary, professional remuneration and other categories do not share a universal 20% rate. Nor can every individual's service fee use the corporate business-profit procedure.

When a supplier does qualify under an agreement

Within a group, suppliers may be resident in different jurisdictions. As checked on October 21, 2026, the Finance Ministry's agreement list contains no comprehensive Taiwan–US income tax agreement; the US entry concerns shipping and air transport. A US recipient cannot assume another jurisdiction's royalty cap applies to it. Agreement documents also do not replace the records showing the work and rights acquired.

Business-profit relief follows Article 23 of Taiwan's DTA application regulations. The enterprise applies to the payer's local tax office with a residence certificate, proof of no Taiwan permanent establishment or of not conducting business through one, and income documents. Approval results in a notice to the withholding agent of the exemption. The certificate is supporting evidence, not that approval.

Royalty relief has a different file. Under Article 25, an applicable cap requires residence and beneficial-ownership evidence, the licence with a Chinese translation and the royalty calculation. There must be no Taiwan permanent establishment or fixed base, or no effective connection between the right and that establishment or base. Other agreement conditions remain applicable.

The payment date still matters

If relief is unavailable at payment, the payer follows the applicable domestic rules. Article 92(2) requires remittance to the Treasury, submission of the withholding statement for verification and issue to the recipient within ten days from withholding. Three or more consecutive national holidays within that period extend it by five days.

An agreement application after withholding has its own timetable. For tax paid in 2026, the recipient or withholding agent may apply within ten years from payment of the tax, with the required evidence and withholding statement, unless the applicable agreement provides otherwise (Article 34). A refund requires examination. This route presupposes an applicable agreement and does not suspend the payer's immediate deadline.

The general withholding procedure for payments to foreign companies provides the background to that filing. Hovering International Law Firm receives contract and payment questions at wei@hoveringlaw.com.tw. For a US supplier querying a deduction, a proposed allocation needs to lead back to both the licence and the records of the work each team actually contributed.

Official sources

• Income Tax Act, Article 8, Article 73, Article 88 and Article 92.
• Ministry of Finance, 所得稅法第八條規定中華民國來源所得認定原則, points 4, 10 and 13; amended October 13, 2023.
• Standards of Withholding Rates for Various Incomes, Article 3.
• Regulations Governing Application of Agreements for the Avoidance of Double Taxation with Respect to Taxes on Income, Article 23, Article 25 and Article 34.
• Ministry of Finance, list of income tax agreements, checked October 21, 2026.

Checked: October 21, 2026