Four technicians from a Ho Chi Minh City engineering firm fly to Taichung to install a packaging line for a Taiwanese manufacturer. The job is planned to take five months. The same customer pays the firm a yearly fee for the line's control software, and the firm's Taiwan subsidiary has profits it wants to send home (an invented example). Three payments, three different answers.
Taiwan starts from its own withholding rules. The Taiwan–Vietnam tax agreement lowers the ceiling, and for the installation work it decides whether Taiwan may tax the profit at all.
The 1998 agreement and who can use it
Its full title is the Agreement between the Taipei Economic and Cultural Office in Hanoi and the Vietnam Economic and Cultural Office in Taipei for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income. The two representative offices signed it in Hanoi on April 6, 1998, in English. Article 27 put it into force thirty days after signature, and for tax withheld at source it covers amounts paid or credited from the first day of the month after that (English text). The Ministry of Finance's agreement list, updated September 4, 2026, gives May 6, 1998 as its effective date.
A Vietnamese company relies on it as a resident of Vietnam, which Article 4 defines by Vietnamese tax law. Taiwan recognizes that status from the residence certificate the Vietnamese side issues, under Article 5 of the Regulations Governing Application of Agreements for the Avoidance of Double Taxation with Respect to Taxes on Income ("the agreement regulations" below).
Dividends, interest and royalties
| Payment from Taiwan | Without the agreement (October 2026) | Cap under the agreement |
|---|---|---|
| Dividends from a Taiwan company | 21% | 15% (Article 10) |
| Interest | 20%; 15% on bond and short-term bill interest, securitization certificates and repos on them | 10% (Article 11) |
| Royalties | 20% | 15% (Article 12) |
The domestic rates, from Articles 3 and 4 of the Standards of Withholding Rates for Various Incomes, last amended June 30, 2021, are those for a foreign company with no fixed place of business in Taiwan. Each cap has a condition attached. The Vietnamese recipient must be the beneficial owner of the income. Article 10 sets no minimum shareholding, so a parent holding 5% of a Taiwan company and one holding all of it meet the same 15% ceiling.
Royalties under the agreement also include payments for the use of industrial, commercial or scientific equipment, so equipment rental can fall under the 15% cap; rent is otherwise withheld at 20%. No cap applies where the shares, loan or right is effectively connected with a permanent establishment in Taiwan; that income falls under the business-profits article instead. Between related parties, the cap covers only an arm's-length amount of interest or royalties (Articles 11(6) and 12(6)).
Software and know-how fees are trickier. Under Article 14 of the agreement regulations, a payment to use, operate or copy software only for the payer's own output, entertainment or backup is not a royalty under an agreement. A payment for industrial, commercial or scientific experience is one only if the information already exists, is not public and must be kept confidential, and the provider does no extra work to customize it and does not guarantee results. Why does that matter for the control-software fee? A Vietnamese company's business profits are not taxable in Taiwan at all under Article 7 unless it has a permanent establishment there.
Installation work and the six-month line
Article 7 keeps business profits in Vietnam unless the company carries on business in Taiwan through a permanent establishment, and then Taiwan may tax only the profit attributable to it. Article 5 defines one as a fixed place of business, such as a branch, an office or a factory. A building site, a construction, assembly or installation project, or supervisory activities connected with it, counts only where it lasts more than six months.
Five months in Taichung stays under that line. If delays push the installation past six months, the project becomes a permanent establishment. Article 8 of the agreement regulations sets the count: from the day the contractor starts work, preparatory work included, until the work is completed or permanently abandoned. Seasonal and temporary stoppages count. So does time spent by subcontractors.
Services get no separate rule. The 1998 text has no clause that turns the furnishing of services into a permanent establishment after a set number of days, as Taiwan's agreements with Japan and Korea do beyond 183 days.
Engineers at a customer's plant can still create one through a fixed place. Article 7 of the agreement regulations requires three things together: a specific area with buildings, facilities or installations; business carried on there for six months, or regularly if for less; and the place is controlled or used by the foreign enterprise. A local agent who habitually concludes contracts in the company's name has the same effect under Article 5(4). An independent agent acting in the ordinary course of its business does not.
No permanent establishment does not mean no withholding. Service fees paid to a foreign company with no fixed place of business and no business agent in Taiwan are withheld at 20% of the gross amount (item 10 of Article 3 of the withholding standards). To be paid in full, the Vietnamese company applies to the payer's local tax office with its residence certificate, proof that it has no permanent establishment in Taiwan and documents on the income; on approval, the office tells the payer not to withhold (Article 23 of the agreement regulations).
Some work never reaches that stage. Under point 4 of the Ministry of Finance's principles on Taiwan-source income, last amended October 13, 2023, services performed and completed entirely outside Taiwan are not Taiwan-source, unless they need equipment, staff or know-how from Taiwan residents or involve the enterprise's own fixed place of business or agent in Taiwan. Electronic services supplied from abroad to customers in Taiwan are treated as performed in Taiwan.
The technicians' own pay
Under Article 15, their pay for work in Taiwan stays taxable only in Vietnam if all three conditions hold. The employee spends no more than 183 days in total in Taiwan in the calendar year. The pay comes from, or on behalf of, an employer that is not a Taiwan resident. And no permanent establishment or fixed base the employer has in Taiwan bears it. If the installation project turns into a permanent establishment and the wages are charged to it, the third condition fails.
Taiwan's domestic threshold is shorter. Under Article 8, item 3 of the Income Tax Act, a non-resident's pay from a foreign employer is outside Taiwan-source income only if the person stays no more than 90 days in the tax year.
Getting the agreement rate at payment, or a refund later
Article 25 of the agreement regulations lets the Taiwan payer withhold at the agreement's cap. The recipient provides a residence certificate issued by the Vietnamese tax authority and proof that it is the beneficial owner of the income. The payer cites the agreement article in its withholding return and attaches those papers and calculation documents, such as the licence and its Chinese translation.
The payer works to a short timetable. Under Article 92 of the Income Tax Act, as in force since January 1, 2025, tax withheld from a foreign company with no fixed place of business in Taiwan must be paid in, and the withholding statement filed, within 10 days of withholding. A payer that fails to withhold must make up the tax and can be fined up to the amount not withheld, or three times that if it misses the deadline it is given (Article 114).
Money already withheld at 20% or 21% can come back. Article 34 of the agreement regulations lets the recipient or the payer ask the tax office that received the withholding return to apply the agreement, at the latest within 10 years from the date the tax was paid. That window comes from the amendment of April 8, 2025; tax paid more than five years before that date stays under the earlier rule.
Under Article 25 of the agreement, a Vietnamese resident taxed in a way the agreement does not allow can take its case to the Vietnamese competent authority within three years of the first notification.
Vietnam's side, and a branch instead of a subsidiary
Vietnam's side is set out in Article 23(1): Taiwan tax payable in accordance with the agreement may be credited against the Vietnamese tax levied on that resident, up to the Vietnamese tax on that income computed under Vietnamese law. A Vietnamese tax adviser can confirm how that credit is claimed at home.
In the opening example, the subsidiary's dividend meets the 15% cap. A branch works differently. In ruling 台財稅第7586738號 of March 9, 1987, the Ministry of Finance treated a branch's Taiwan profits as part of the head office's: the branch pays profit-seeking enterprise income tax on them, no distribution question arises, and the branch need not withhold (ruling text; source-income principles, point 2). Subsidiaries and branches are compared in Entering the Taiwan Market.
If a Taiwan customer has asked for a Vietnamese residence certificate before paying, or a site job is running close to six months, you can write to Hovering International Law Firm at wei@hoveringlaw.com.tw with the contract and the planned days on site.
Official sources
- Ministry of Finance, List of ROC Double Taxation Agreements (published and updated September 4, 2026)
- Agreement between the Taipei Economic and Cultural Office in Hanoi and the Vietnam Economic and Cultural Office in Taipei for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income (signed April 6, 1998): English text and Chinese translation, Articles 4, 5, 7, 10, 11, 12, 15, 23, 25 and 27
- Taiwan–Japan agreement, English text, Article 5(3); Taiwan–Korea agreement, consolidated English text, Article 5(3)
- Income Tax Act (last amended September 11, 2026), Art. 8, Art. 92, Art. 114
- Standards of Withholding Rates for Various Incomes (last amended June 30, 2021), Art. 3, Art. 4
- Regulations Governing Application of Agreements for the Avoidance of Double Taxation with Respect to Taxes on Income (last amended April 8, 2025), Art. 5, Art. 7, Art. 8, Art. 14, Art. 23, Art. 25, Art. 34
- Ministry of Finance, 所得稅法第八條規定中華民國來源所得認定原則 (principles on Taiwan-source income, last amended October 13, 2023), points 2 and 4
- Ministry of Finance ruling 台財稅第7586738號 (March 9, 1987), branch profits and the foreign head office
- Official English titles of the statutes checked at law.moj.gov.tw/ENG
Checked: October 6, 2026
Frequently Asked Questions
- Does a Vietnamese parent need a minimum shareholding to get the 15% dividend rate in Taiwan?
- Article 10 of the Taiwan–Vietnam agreement sets no minimum shareholding. The 15% cap applies where the Vietnamese recipient is the beneficial owner of the dividends. To have it applied at payment, the recipient gives the Taiwan company a residence certificate issued by the Vietnamese tax authority and proof that it is the beneficial owner.
- Are fees for installation work done by our engineers in Taiwan taxed there?
- Under Article 7, a Vietnamese company's business profits are taxable in Taiwan only if it carries on business there through a permanent establishment. A building site or a construction, assembly or installation project counts only if it lasts more than six months. To be paid without Taiwan withholding, the company applies for approval to the tax office where the payer is located.
- Tax was already withheld at 20% or 21%. Can we still use the agreement?
- Yes. Under Article 34 of Taiwan's regulations on applying tax agreements, as amended on April 8, 2025, the recipient or the payer can apply to the tax office that received the withholding return within 10 years from the date the tax was paid. Tax paid more than five years before that amendment stays under the earlier rule.
This article provides general information and is not legal advice on any individual matter.
