After years of discussions, Taiwan and the United States seem closer than ever to finalizing a double taxation avoidance agreement (DTAA). Authorizing legislation has passed the U.S. House of Representatives at a time when bipartisan agreement is rare, and the Taiwanese government has signaled its preparedness to enact necessary equivalent legislation once the initiative has been passed by both chambers of the U.S. Congress.
But despite clear benefits and firm support, the bill on double taxation avoidance with Taiwan remains stuck in the U.S. Senate Finance Committee. The primary challenge is not the Taiwan-specific part of the act but its inclusion in a broader tax package containing other issues that have become politically contentious during an election year.
Industry leaders have consistently emphasized the benefits that both economies would derive from this legislation and the symbolic value its passage would represent for U.S.-Taiwan relations. Double taxation avoidance is a vital instrument that would encourage more investment in both directions. It provides clarity and certainty to taxpayers on tax liabilities, reduces the tax burden on businesses and individuals operating across borders, and promotes transparency and cooperation between tax authorities.
A prominent example of the necessity of a U.S.-Taiwan DTAA is the substantial investment by Taiwan Semiconductor Manufacturing Co. (TSMC) in Arizona, totaling US$65 billion. Central to TSMC’s strategy is the ability to enhance its supply chain by building a cluster in Arizona of the mainly small and medium-sized Taiwanese enterprises that are integral parts of its ecosystem. As these SMEs lack the capital to manage substantial financial burdens, the prospect of double taxation presents them with significant challenges that may deter their willingness to proceed with a U.S. investment project.
Stakeholders have expressed frustration with the delay in Congress, recognizing that a DTAA would encourage economic cooperation and create a more favorable environment for cross-border economic activities.
AmCham Taiwan has been proactive in its advocacy efforts for double taxation avoidance. During the Chamber’s 2024 Doorknock trip to Washington, D.C., AmCham leadership highlighted the bill’s importance in discussions with U.S. legislators and key Congressional staff. In June, AmCham Taiwan President Patrick P. Lin and U.S.-Taiwan Business Council President Rupert Hammond-Chambers jointly signed a letter to the Senate Foreign Relations Committee and the Senate Finance Committee urging the U.S. government to begin substantive engagement with Taiwan on anti-double taxation implementation even before the Senate completes the legislative process.
The United States already maintains tax treaties with 66 other countries and Taiwan has similar agreements with 34. Yet Taiwan, which consistently ranks among the top 10 American trading partners, is the only market in that category without a double-taxation avoidance mechanism with the United States. It’s about time this changed.
As interest in Taiwanese technology companies investing in the United States grows, the need for this agreement becomes increasingly urgent. The challenges and legislative hurdles must be overcome to realize the bilateral partnership’s full potential, demonstrating both economies’ ambition and determination to foster a robust economic alliance.
