萬國法律事務所

The double taxation agreement between Italy and Taiwan (hereinafter the “DTA”) entered into force on December 31^st 2015 and applies as from January 1^st 2016. The DTA provides clarity on tax matters and eliminates double taxation relating to cross-border transactions between Taiwan and Italy. The DTA consists of 30 articles. The tax relieves under the agreement which impact both countries' economy, trade, investment and technology include those on business profits, dividends, interests, royalties and income from securities transactions.
 
The DTA, based on the OECD model tax convention against double taxation, provides, inter alia, a specific clause concerning the exchange of information between Taiwan and Italy.
 
The main benefits deriving from the DTA shall, inter alia, include:
i. a significant reduction of the rates of certain withholding taxes applicable in Italy to specific payments made to Taiwan resident entities¹.  These are:
    

Tax	Applicable (domestic) rate	Reduced rate (under the DTA)
Dividends	26%	10%
Interest	26%	10%
Royalties	30%2	10%

ii. specific criteria applicable for evaluating whether an enterprise that is resident in a contracting State may be considered a permanent establishment in the other contracting State, as well as how the business income tax is levied on permanent establishments.

iii. the introduction of an ad hoc rule (so called “tie-breaker rule”) designed to minimize cases of double tax residency;

For sake of completeness, we note that Taiwan is not yet included in the list of jurisdictions that allow for an adequate exchange of information with Italy provided in the Ministerial Decree of 4 September 1996 (so called “White List”). The White List is provided for the purpose of the application of special tax regimes on certain financial incomes. 

In light of the coming into force of the DTA at issue, which ensures an exchange of information for tax purposes, Taiwan is expected to be formally included in the White List.
 
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