Executive summary

The Ministry of Finance (MOF) introduced a draft amendment on Article 34 of "Regulations Governing Application of Agreements for the Avoidance of Double Taxation With Respect to Taxes on Income" on 13 January 2025, aiming to extend the application period for reclaims under income tax treaties from five to 10 years. The draft amendment is currently open for public comments for a two-month period.

Detailed discussion

The draft amendment aligns with relevant tax regulations that already set forth the 10-year period of reclaiming refunds of tax overpayment. The relevant tax regulations include:

• Article 15, Paragraph 2 of Guidelines for the Determination of Income from Sources in Taiwan, in Accordance with Article 8 of the Income Tax Act
• Article 10, Subparagraph 1 of Directions on the Levying of the Income Tax on Cross-Border Electronic Services Transactions
• Decree No. Tai-Tsai-Shui-11204568351 issued by the MOF on 13 October 2023, amending the Subparagraph 1 of Article 6 of Decree No. Tai-Tsai-Shui-10604704390 issued on 2 January 2018

A non-Taiwan-resident taxpayer who derives Taiwan-sourced income and has been taxed through either tax withholding at the source or tax return filing with the Taiwan tax authority will have a longer (10-year) period from the original tax payment date to submit supporting documentation to the Taiwan tax authority to reclaim tax refund(s) under the applicable income tax treaty provisions.

The draft amendment also provides a clear-cut principle for determining if a taxpayer's reclaim case is still open within the reclaim period. Once the draft amendment comes into effect, cases that are still within the five-year period will be eligible for the benefits of the new 10-year timeframe. Cases for which the five-year reclaim period has expired will not be considered in scope of this extended timeframe proposal.

Additionally, any specific provisions regarding the applicable reclaim period that are prescribed in income tax treaties shall continue to prevail (i.e., those provisions will take precedence over the new reclaim timeframe and will not be overridden).

Implications

This extension of the applicable reclaim period is expected to benefit the taxpayers by giving them a longer timeframe for reclaiming tax refunds under applicable income tax treaties. It will also align the reclaim period across the current regulations, including the Administrative Procedure Act and the Tax Collection Act.