The present e-Alert aims at explaining the possibilities for Luxembourg SICAVs to benefit from the Double Taxation Agreement between Luxembourg and Taiwan (“DTA”) that will become effective on 1 January 2015.
The most important highlight of this DTA is that it has specified that a Luxembourg resident Collective Invest Vehicle (“CIV”) that is established in Luxembourg and treated as a body corporate for tax purpose in Luxembourg (e.g., Luxembourg SICAVs), can be directly treated as the beneficial owner of the dividend and interest received in Taiwan with a preferential tax rate of 15%, while the regular foreign institutional investor (“FINI”) in Taiwan will be subject to the regular tax rate of 20%. For all other cases, including non-qualifying CIVs, the DTA allows a reduced rate of 10% if the beneficial owner of the payment is resident in Luxembourg. In addition, tax exemption on capital gain may also be applied for those qualifying CIVs.
To enjoy such treaty benefits, the Luxembourg eligible CIVs must submit either a pre-approval application on an annual basis to the Taiwanese Tax Authority in order to obtain a statutory pre-approval letter for tax relief at source for the entire calendar year, or a tax reclaim application can also be filed later before the 5-year statute of limitations are due.
The process in Taiwan is complicated because the FINIs must appoint a tax agent in Taiwan in order to apply for the necessary approval letters from the Taiwan Tax Authority, and provide a number of pieces of documentary evidence in order to support their claim. The documentary evidence required is also significantly more comprehensive than in other treaty markets and differs between funds and corporate investors.
KPMG has an extensive and considerable experience in filing these claims for investors who have been or planning on investing in the Taiwanese market, including acting as a tax agent / tax guarantor as a mandatory requirement for all FINIs in Taiwan. As the dividend distribution season generally starts around May of each year, the 2015 pre-approval application shall be submitted in early 2015 for the Taiwan Tax Authority’s review in order to assist investors in obtaining a tax relief at source in time. We would encourage investors to take immediate action by contacting us if they would need help with an application.”
For further information, please do not hesitate to contact us.
The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.