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June 21, 2023

Taiwan amends the Assessment Rules for withholding tax mitigation regime

  • Taiwan's Ministry of Finance (MOF) recently promulgated amendments to rules in Taiwan's Income Tax Act for calculating the taxable income of foreign profit-seeking enterprises (Article 25 relief).
  • The amendments include adding qualified filing agents, extending the application deadline from the current 5 years to 10 years and stipulating the maximum approval period of the Article 25 relief.

Executive summary

On 29 May 2023, Taiwan's Ministry of Finance (MOF) announced amendments to the Assessment Rules for Paragraph 1 of Article 25 of Taiwan's Income Tax Act for calculating the taxable income of foreign profit-seeking enterprises (Article 25 relief). The changes include adding domestic enterprises and schools to the list of qualified filing agents, extending the application deadline and capping the approval period of the relief. The changes are aimed at streamlining tax administrative procedures and enhancing tax certainty when foreign companies apply for Article 25 relief.

This Alert summarizes the key features of these amendments.

Detailed discussion

Under Paragraph 1 of Article 25, a foreign profit-seeking enterprise that is engaged in certain business activities (e.g., international transport, construction contracting, technical services, or machinery and equipment leasing services) within Taiwan and has difficulty calculating and apportioning costs may apply for a deemed profit rate from the tax authority to determine the foreign enterprise's Taiwan source income. This option is available regardless of whether the entity has a fixed place of business (e.g., a branch or a business agent) in Taiwan. The deemed profit rate is 10% for the revenue from international transport activities or 15% for the revenue from the other qualified business activities (i.e., the withholding tax rate can be reduced from the statutory rate 20% to 3% for qualified business activities with the 15% deemed profit rate).

Adding two types of eligible filing agent

Foreign enterprises are required to apply to the tax authority to obtain the Article 25 relief. Before the amendments, foreign enterprises could submit the applications by themselves or appoint individuals residing in Taiwan or profit-seeking enterprises with fixed places of business in Taiwan as their filing agent. After the amendments, Taiwan domestic enterprises, institutions and schools can also serve as filing agents for the foreign enterprise to obtain the Article 25 relief.

Extending the application deadline

Per Paragraph 1, Article 131 of Taiwan Administrative Procedure Act, claims under public law need to be submitted within 10 years. The amendments align with the Administrative Procedure Act and extend the application deadline from 5 years to 10 years after the date of receiving income from Taiwan domestic payor. This means that for cases where the income was withheld for taxes more than 5 years (but less than 10 years) ago, the relief application can still be (re-) submitted under the amendments.

Capping the approval period

The amendments include a new provision to cap the approval period at five years. For the approval granted after May 29 2023, the approval period will be the duration of the underlying service contract or a five-year maximum from the effective date of the underlying service contract if the contract does not have an expiration date or lasts more than five years. A new application should be submitted to obtain the approval and refresh the approval period.


The amendments offer much-awaited certainty about the application deadline and approval period under Article 25 relief application. Foreign enterprises performing services within the extended deadline and receiving income from Taiwan should revisit their service contracts, identify ones that could be affected by the amendments potentially leading to a tax refund, and consider how to begin taking action.

For additional information with respect to this Alert, please contact the following:

Ernst & Young (Taiwan), Taipei

Ernst & Young LLP (United States), Taiwan Tax Desk, New York

Ernst & Young LLP (United States), Asia Pacific Business Group, New York

Ernst & Young LLP (United States), Asia Pacific Business Group, Chicago

Published by NTD's Tax Technical Knowledge Services group; Carolyn Wright, legal editor