DTAA Between India And Taiwan: Objective, Benefits, Claim Process & Tax Rates

The DTAA between India and Taiwan is a vital legal mechanism that actively supports the flow of high-tech investment and intellectual property (IP). This agreement, signed in 2011, eliminates the financial uncertainty of dual taxation on income earned across both territories. By providing explicit rules regarding corporate profits, technical fees, and the crucial definition of a Permanent Establishment (PE), this DTAA income tax treaty promotes transparent commerce. It provides confidence to Taiwanese technology firms operating in India. [1]

Objective of the DTAA Between India and Taiwan 

The objects of the Double Taxation Avoidance Agreement between India and Taiwan are:

• Eliminate Double Taxation: To ensure that income earned by residents of one territory is not fully taxed by both Indian and Taiwanese authorities, thereby preventing unfair financial burdens.
• Define Taxing Rights Clearly: The treaty establishes which territory holds primary taxation authority over different income streams, such as business profits, dividends, interest, and professional fees.
• Clarify Permanent Establishment Concept: The agreement provides detailed definitions of what constitutes a Permanent Establishment, helping multinational companies determine their tax obligations in the host territory.
• Prevent Tax Evasion: By enabling information exchange between tax authorities, the tax treaty between India and Taiwan helps identify tax avoidance schemes and ensures better compliance by taxpayers.
• Encourage Investment and Trade: The agreement creates a stable, predictable tax environment that encourages Taiwanese technology companies to invest in Indian manufacturing and Indian businesses to access Taiwanese markets.

Significance of DTAA for India and Taiwan 

The India-Taiwan tax agreement is significant given the complementary nature of both economies, with Taiwan's strength in electronics and India's growing manufacturing sector. [1]

• Promotes Technology Investment: The fiscal certainty provided attracts Taiwanese companies, especially in the semiconductor and electronics sectors, to establish operations and transfer technology to India.
• Facilitates Intellectual Property Exchange: Clear provisions governing royalties and technical fees simplify the tax treatment of intellectual property transfers, encouraging knowledge sharing between territories.
• Supports Professional Movement: The agreement simplifies taxation for engineers, consultants, and specialists who need to work temporarily in the other territory for project execution or knowledge transfer.
• Reduces Administrative Burden: Standardised procedures and documentation requirements make it easier for businesses to comply with tax regulations in both territories without excessive paperwork.

India-Taiwan DTAA Tax Rates 

The DTAA establishes specific maximum withholding tax (WHT) rates for passive and professional income earned by a resident of one territory from a source in the other. [1]

Taxation on Capital Gains under the DTAA Between India and Taiwan  

Capital gains taxation under the Double Taxation Avoidance Agreement between India and Taiwan follows specific rules based on the type of asset being transferred and its location. [1]

• Immovable Property Taxation: Profits from selling land, buildings, or real estate are taxed in the territory where the property is physically located. For NRIs disposing of Indian property, understanding TDS on the sale of property by NRI becomes critical for compliance.
• Business Asset Gains: When movable property forms part of assets belonging to a Permanent Establishment, gains from selling such assets can be taxed in the territory where that establishment operates.
• Ships and Aircraft: Gains from selling ships or aircraft used in international transport are taxable only in the territory where the enterprise's effective management is located.
• Share and Securities: Gains from selling shares in companies are generally taxed in the seller's territory of residence unless the shares derive substantial value from immovable property.
• Other Property Types: Capital gains from selling property not explicitly covered by other provisions are taxed only in the territory where the seller resides.

Taxation on Employment Income Under DTAA 

Employment income taxation under the India-Taiwan DTAA provides clear guidelines for individuals working across both territories, ensuring they understand their tax obligations. [1]

• Primary Taxation Rule: Salaries and wages are generally taxable in the territory where the employee physically performs their work, regardless of where the employer is based or where payment originates.
• 183-Day Exemption Rule: Employees can avoid taxation in the host territory if they meet three conditions: staying less than 183 days in the fiscal year, being paid by an employer not resident in the host territory, and the payment not being borne by a Permanent Establishment in the host territory.
• Professional Services Benefit: A distinctive feature of this treaty is that individual professional services rendered by residents in the other territory may qualify for zero withholding tax, provided the professional does not maintain a fixed base or exceed 183 days' stay.
• Permanent Establishment Impact: If employment services are rendered to or by a Permanent Establishment, the host territory gains taxation rights regardless of stay duration or payment source.
• Documentation Importance: Employees must maintain records of travel dates, employment contracts, and payment details to substantiate claims for exemption or reduced taxation under treaty provisions.

What documents are required to claim DTAA TDS?

To claim benefits under the tax treaty India-Taiwan and obtain reduced withholding tax rates, specific documentation must be prepared and submitted to the relevant authorities. [1]

• Tax Residency Certificate (TRC)
• Form 10F
• No Permanent Establishment Declaration Letter
• PAN Card
• Passport copies
• Visa documentation
• Employment agreement
• Form 15CA and 15CB
• Bank account statements
• Investment proof documents
• Business registration certificates
• Income declaration statements
• Property ownership documents

How to Claim DTAA Benefits? 

The process for claiming relief under the India-Taiwan taxation rules varies depending on whether you are in India earning Taiwanese income or in Taiwan earning Indian income. [1]

• For Indian Residents Earning in Taiwan: Indian residents can claim a foreign tax credit for taxes paid in Taiwan, which reduces their Indian tax liability by the amount already paid abroad. 
• For Taiwanese Residents Earning in India: Taiwanese residents should obtain a Tax Residency Certificate from the Taiwanese tax authorities. This enables the payer to apply the reduced treaty rate at source rather than the higher domestic withholding rate. Form 10F must be completed and submitted along with the TRC.
• No PE Declaration: Taiwanese companies earning business income in India without a Permanent Establishment should provide a No PE Declaration to claim the 0% withholding tax benefit on business profits.
• Form Requirements: Before remitting income abroad from India, payers must electronically file Form 15CA and 15CB with Indian tax authorities, certifying the payment nature and applicable treaty rates.
• Timeline Management: Apply for Tax Residency Certificates well in advance, as obtaining them from foreign tax authorities typically requires several weeks. Indian tax return deadlines are July 31st for individuals without audit requirements.
• Record Maintenance: Preserve all treaty-related documents for at least seven years, as tax authorities may request them during assessments or audits in either territory.

DTAA Impact on NRIs, Investors, and Businesses 

The agreement creates significant advantages for various stakeholders engaged in economic activities between the two territories. [1]

• Provides Legal Certainty: The treaty establishes precise dispute-resolution mechanisms through mutual agreement procedures, giving investors confidence in their tax treatment and obligations.
• Reduces Tax Burden: Maximum withholding rates of 10% on technical fees and royalties, along with zero tax on business profits without PE, significantly lower the effective tax burden.
• Protects Against Policy Changes: Treaty provisions generally override domestic tax amendments, providing stability and protecting against sudden policy shifts that might increase tax liabilities.
• Encourages Technology Transfer: Favourable royalty and technical fee rates make it financially attractive for companies to license technology and share intellectual property across territories.
• Supports Business Expansion: Clear taxation rules for Permanent Establishments help companies plan their market-entry strategies and operational structures with confidence about tax implications.

How NoBroker Can Help

Managing international tax compliance and securing the treaty benefits requires expert guidance and meticulous documentation. NoBroker assists individuals and businesses by simplifying the DTAA claim process between India and Taiwan. We provide support in obtaining the necessary Tax Residency Certificate (TRC), assist with preparing and filing mandatory forms such as Form 15CA/15CB, and conduct meticulous documentation review to ensure your claims for tax relief are accurate, compliant, and processed swiftly.

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