Taxed Twice on One Profit: Taiwan's Mutual Agreement Procedure, and What US Groups Use Instead

A Taiwan subsidiary pays its California parent a royalty for process technology. In 2026 the local National Taxation Bureau decides part of the 2024 royalty was above an arm's length price, disallows the excess and issues an additional assessment. The parent has already reported the full royalty at home (an invented example). One profit, two tax bills.

Had the parent been in Osaka, Seoul or Ho Chi Minh City, the next step could have been a mutual agreement procedure (MAP) under Taiwan's tax agreement with that partner. A US parent has no such agreement to invoke.

Three agreements, one three-year window

Taiwan's agreements with these three partners were concluded through representative offices and associations: with Japan in 2015 between the Association of East Asian Relations and the Interchange Association, with Korea in 2021 between the Taipei Mission in Korea and the Korean Mission in Taipei, and with Vietnam in 1998 between the economic and cultural offices in Hanoi and Taipei (MOF agreement list, updated September 4, 2026). Their MAP articles share a core.

A case may be presented irrespective of the remedies provided by the domestic law of the two sides. The competent authority that receives it, if it finds the objection justified and cannot fix the problem alone, "shall endeavour" to resolve it with the other side. That is a duty to try. With no arbitration clause, an agreed outcome depends on the two authorities. The Korea agreement goes a step further. Its protocol requires a bilateral notification or consultation process even where the authority receiving the case does not consider the taxpayer's objection justified.

Article 9(2) is where corresponding adjustments come from. When one side taxes an enterprise on profits the other side has already taxed, and those profits would have accrued to the first enterprise under arm's length conditions, the other side "shall make an appropriate adjustment" to its tax. The Japan text adds a condition: "that other Territory agrees" that the profits are arm's length profits.

Timing matters too. MOF says the Japan agreement entered into force on June 13, 2016 and applies from January 1, 2017 (MOF release), and the Korea agreement entered into force on December 27, 2023 and applies from January 1, 2024 (MOF release). The Vietnam agreement entered into force 30 days after its April 6, 1998 signing and applies from the first day of the month after that (Art. 27). Vietnamese readers will find the withholding side in our Taiwan–Vietnam agreement column.

How Taiwan's Ministry of Finance takes a request

Article 41 of Taiwan's treaty-application regulations leaves the procedure to the Ministry of Finance (MOF). MOF's Directions Governing Application of Mutual Agreement Procedures (issued June 25, 2018, last amended November 25, 2020; the Chinese text governs) list nine grounds, among them dual-residence tie-breaks, permanent establishment and profit attribution, treaty relief disputes, transfer pricing corresponding adjustments and bilateral or multilateral advance pricing agreements. A request may be filed whether or not domestic remedies have been pursued (Art. 2). The applicant must be a resident of Taiwan or of the partner, the tax must be income tax, and the case must fall within the agreement's period of application (Art. 4). In a 2020 release MOF named its International Fiscal Affairs department as the place to file (MOF, August 14, 2020).

The request states the applicant's name, tax ID and residence, the agreement relied on, the tax notices, and the tax type, years, background, reasons and position, with a power of attorney if an agent files (Art. 6). Foreign-language documents need Chinese translations unless MOF or the tax office accepts a Chinese summary or the foreign version. MOF confirms receipt within 10 days (Art. 7).

Then the clocks start. In a general case, MOF checks eligibility within 30 days and sends the file to the local tax office, which has 60 days (one 60-day extension) to review it. If the objection is well founded, the applicant has not failed to act and Taiwan can solve the problem alone, the office implements the fix within 90 days of notifying MOF. Otherwise MOF sends Taiwan's position paper to the other side within 90 days of receiving the office's review (Art. 8).

Corresponding adjustments follow a separate track (Art. 9). The trigger is a partner adjusting, at arm's length, profits of a controlled transaction that Taiwan has already taxed. The tax office answers within six months whether it accepts the case and decides the adjustment within 12 months of MOF's letter. If the applicant agrees, the adjustment is carried out within 90 days. If the office refuses or allows only part, and the applicant objects and keeps the request alive, MOF asks the partner's competent authority for MAP within 30 days. Results agreed between the two authorities are implemented within 90 days (Arts. 9 and 13). For this kind of request, the three years run from receipt of the first tax notice issued by the partner (Art. 5).

Taiwan's own clocks keep running

Will a MAP request stop the domestic deadline? Article 35 of the Tax Collection Act gives 30 days to apply for re-examination of an assessment, counted from the day after the payment period on the tax bill ends. Nothing in that article extends the period because a MAP request is pending.

Withholding at the domestic rate is a different problem with its own route. Where a treaty resident was taxed at Taiwan's standard withholding rates, Article 34 of the treaty-application regulations lets the recipient or the withholding agent claim the agreement rate within 10 years of payment. For tax that was already more than five years past payment when the April 8, 2025 amendment took effect, the earlier rules apply. Our withholding column covers the documents.

What the two tax authorities exchange

Each agreement has an exchange-of-information article. Japan's Article 25 and Korea's Article 26 cover information foreseeably relevant to taxes of every kind; Japan's bars use of the information in criminal tax matters, and Korea's says a request cannot be refused solely because a bank holds the information. Vietnam's Article 26 covers information "necessary" for the agreement or for the covered taxes, to be treated as secret. Taiwan's Regulations Governing the Exchange of Tax Information Concerning Agreements on Tax Matters, announced December 7, 2017, provide for requests, spontaneous exchange and automatic exchange. Information supplied in a MAP is handled as confidential under the agreement's exchange-of-information rules (Directions, Art. 12).

Automatic exchange of financial account data (CRS) is narrower. An MOF notice of April 16, 2021, still shown as current on October 6, 2026, lists Japan and Australia (accounts from 2019) and the UK (from 2020). Korea, Vietnam and the US are not on it. On July 30, 2026, MOF said it would exchange CRS data with those three partners in September 2026.

FATCA is separate. The American Institute in Taiwan and TECRO signed a Model 2 agreement on December 22, 2016 (US Eastern time), and Taiwan's Financial Supervisory Commission said it would take effect after Legislative Yuan approval and presidential promulgation (FSC release). On October 6, 2026, the US Treasury's FATCA page listed Taiwan as "Signed", Model 2, and treated as having an IGA in effect from June 30, 2014.

No agreement: the remedies a US group has

The MOF list shows only one US agreement: a 1988 exchange of letters exempting income from the international operation of ships and aircraft. The Directions define an income tax agreement as one signed and brought into force (Art. 3), so the procedure above has nothing to attach to in a royalty or transfer pricing dispute with a US parent. H.R.33, a bill that would grant US tax relief to qualified Taiwan residents, passed the House on January 15, 2025 and was referred to the Senate Finance Committee the next day. It had not been enacted as of October 6, 2026; our US–Taiwan column covers what it would change.

That leaves Taiwan's general remedies, which apply to any taxpayer. Re-examination must be filed within 30 days (Article 35); a petition and an administrative court action can follow (eTax Q&A on appeals). Separately, Article 28 allows a refund claim within 10 years of payment where tax was overpaid through an error in applying the law, finding facts or calculating, and 15 years where the error is the government's. A US tax adviser can confirm whether any relief is available on the US side.

To have a Taiwan assessment or notice reviewed against these deadlines, send its date and the tax years involved to Hovering International Law Firm at wei@hoveringlaw.com.tw.

In the California example, the date on the Bureau's assessment and its payment period set the first deadline. Re-examination has to be filed within 30 days, counted from the day after that payment period ends.

Official sources

• Taiwan–Japan agreement, MOF texts in English and Chinese (Arts. 9, 24, 25, 27)
• Taiwan–Korea agreement, MOF consolidated texts in English and Chinese (Arts. 9, 25, 26 and Protocol)
• Taiwan–Vietnam agreement, MOF texts in English and Chinese (Arts. 9, 25, 26, 27)
• US–Taiwan shipping and air transport exchange of letters, 1988, MOF text
• MOF list of income tax agreements, updated September 4, 2026; releases on the Japan agreement (June 15, 2016), the Korea agreement (December 28, 2023) and MAP (August 14, 2020)
• MOF Directions Governing Application of Mutual Agreement Procedures of Agreements for the Avoidance of Double Taxation with Respect to Taxes on Income (amended November 25, 2020): English, Chinese
• Regulations Governing Application of Agreements for the Avoidance of Double Taxation with Respect to Taxes on Income (amended April 8, 2025), Art. 34, Art. 41
• Tax Collection Act (amended December 17, 2021), Art. 28, Art. 35
• Regulations Governing the Exchange of Tax Information Concerning Agreements on Tax Matters (announced December 7, 2017), Art. 2
• MOF eTax Q&A on re-examination, petition and litigation
• MOF CRS reportable jurisdictions notice, April 16, 2021; CRS statistics release, July 30, 2026
• Library of Congress, H.R.33, 119th Congress (status via the congress.gov API)
• Financial Supervisory Commission FATCA release, December 27, 2016; US Treasury FATCA page

Checked: October 6, 2026