The Double Taxation Treaty expands the period for an over-withheld tax refund application
Date:2025-09-29
The Ministry of Finance amended and announced Article 34 of the Guidelines for Auditing the Application of Income Tax Agreements (hereinafter referred to as the Agreement Audit Guidelines) on April 8, 114 (2025). Effective from April 10, 2025 (the third day counting from the announcement date), the period during which a resident of the other contracting state (a foreign taxpayer) who has obtained income sourced from Taiwan and legally paid withholding tax may apply to the Taiwanese tax authority for a refund of over-withheld tax under an applicable income tax agreement is extended from originally 5 years from the date of tax payment to 10 years. Transitional rules for pending cases and a provision stating that special regulations in income tax agreements take precedence are also added. I. Main Amendments: Starting from April 10, 2025, the statute of limitations for foreign taxpayers to apply for a refund of over-withheld tax on Taiwan-sourced income is extended from 5 years to 10 years (calculated from the tax payment date). II. Important Reminders and Exceptions: Transitional Rule: Cases where the original 5-year application period had already expired before April 10, 2025, are not eligible for the new 10-year rule. Agreement Priority Principle: If the income tax agreement between Taiwan and the other country stipulates a stricter deadline for refund applications, that agreement provision takes precedence. For example, the agreement with Germany requires applications to be filed by the end of the fourth year following the tax year in question; therefore, the new 10-year rule does not apply. III. Practical Example: Japanese Company A paid withholding tax on Taiwan-sourced income on April 15, 2020, and wishes to apply for a refund under the Taiwan-Japan tax agreement: Old Rule: Had to apply by April 14, 2025 (within 5 years). New Rule: Since the 5-year period had not expired when the new rule took effect on April 10, 2025, the 10-year period applies. The final application deadline is extended to April 14, 2030. The Kaohsiung National Tax Bureau of the Ministry of Finance specially reminds foreign taxpayers involved in similar transactions to review past contracts. If there are cases eligible for tax reduction or exemption under an income tax agreement that have not been applied for, they should prepare and submit the application form, contract (including Chinese translation), certificate of residence issued by the tax authority of the other contracting state, and relevant income documentation within the specified timeframe. If applying through an agent, a power of attorney original should also be prepared. Reference Source: Ministry of Finance, Republic of China (Taiwan) https://www.mof.gov.tw/singlehtml/384fb3077bb349ea973e7fc6f13b6974?cntId=83a4034562d5404b8c5f7f8a71a2f3b2
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