Taiwan’s taxation pact with Saudi Arabia takes effect

Saudi Arabia. Image from Pixabay

Table of Contents

From our friends at: focustaiwan.tw

Taipei, Nov. 19 (CNA) An agreement with Saudi Arabia to avoid double taxation and prevent tax evasion officially went into effect on Nov. 1, making it the first comprehensive taxation pact between Taiwan and an Islamic state in the Middle East, according to the Ministry of Finance (MOF).

Its provisions will apply to income to be generated from Jan. 1, 2022 after both parties complete the required notification procedures, the ministry said.

The agreement was signed by the Taipei Economic and Cultural Representative Office in Saudi Arabic (TECRO) and the Council for Saudi Chambers of Commerce and Industry (CSC) on Dec. 2, 2020.

The agreement is the 34th taxation pact Taiwan has signed with another country, according to the MOF.

In addition to providing residents and entities on both sides with appropriate measures for tax reduction to avoid double taxation, the agreement also provides a mechanism to resolve tax disputes between the two sides, the MOF said.

According to the MOF, the agreement complies with Zakat, which refers to an obligation in Islam to make contributions towards the less fortunate, and it also ensures income tax filed will include Saudi Arabia’s natural gas investment tax.

At the same time, the MOF said, the agreement also applies to Taiwan’s profit-seeking enterprise income tax, the individual consolidated income tax and the income basic tax.

Citing statistics from the Ministry of Economic Affairs, the MOF said Saudi Arabia is Taiwan’s 15th largest trading partner and Taipei is Riyadh’s 11th largest buyer of goods in 2020, adding that both sides have developed close trade ties.

The MOF said the agreement is expected to lower a tax burden shouldered by Taiwanese companies with operations in Saudi Arabia.

It used a Taiwanese technology service provider which has not yet opened an office in Saudi Arabia as an example, saying that under the new taxation agreement, the company is expected to enjoy a tax-free status, as long as it provides services for no longer than six months to its Saudi Arabic clients in a 12-month period, whereas under current tax laws, it would have to pay 15 percent tax.

Implemented based on reciprocal principles, the agreement is aimed at benefiting individuals and entities on both sides.

Since 2016, Saudi Arabia has launched the Saudi Vision 2030 program to raise infrastructure investments, boost foreign investments and reduce the country’s dependence on oil income. Along with the new taxation agreement, the MOF said, the program is expected to entice more Taiwanese investors to invest in Saudi Arabia.

The MOF said the ministry will continue efforts to sign similar taxation agreements with more countries which have close business relations with Taiwan, and will target those included under the government’s New Southbound Policy, which covers countries in Southeast and South Asia.

The New Southbound Policy is aimed at reinforcing economic ties with the Association of Southeast Asian Nations (ASEAN) member states, as well as India, Australia and New Zealand, to reduce Taiwan’s economic dependence on China.

(By Wu Chia-jung and Frances Huang)

Enditem/cs

Leave a Reply

Your email address will not be published. Required fields are marked *

Share on facebook
Share on twitter
Share on pinterest
Share on reddit