Taiwan’s Ministry of Finance (MOF) released guidance to clarify the application of the term “beneficial owner” (BO) for tax treaty purposes. The Guidance aims to provide greater clarity for taxpayers as it specifies the situations where BO status will be granted or denied and aligns Taiwan’s position with the OECD Model Tax Convention Commentary, MOF practices and approaches taken by other countries.
Ministry of finance issued the updated guidance due to the result of consensus of BEPS action 6 regarding the treaty abuse. Aligned with OECD approach, including BEPS project, the Guidance clarifies that a foreign resident deriving Taiwan source income, and seeking to claim treaty benefits, can identify themselves as the BO for treaty purposes simply by providing a BO declaration to the MOF. The Guidance also confirms that a qualified fund or trust that is a resident of the treaty country and has invested in Taiwan in the capacity of a foreign institutional investor can apply for BO treatment in the same manner.
In addition the guidance clarifies the situation where a foreign recipient of income is acting in the role of an agent, a nominee, a financial conduit entity, or a similar arrangement, the MOF will deny BO status.
As the Guidance aligns Taiwan’s approach with international consensus and practice, taxpayers are expected to benefit from reduced compliance costs, decreased treaty disputes, and a better investment environment. Further, taxpayer need to be aware and carefully considered the existing and proposed structures and investments.
Source: Taiwan Ministry Of Finance
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