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Taipei, Dec. 28 (CNA) An agreement between Taiwan and South Korea to prevent double taxation and reduce tax rates on certain types of income will come into force from next year, the Ministry of Finance (MOF) said Thursday.
The ADTA, or avoidance of double taxation agreement, was originally signed in 2021, and, having undergone the relevant legal procedures in both countries, will take effect from Jan. 1, 2024, the MOF said in a press release.
Under the agreement, the ministry said, Taiwanese enterprises operating in South Korea, or vice-versa, which do not have permanent establishment (PE), will be exempt from taxes on business profits.
The pact will also see both countries reciprocally lower withholding tax rates on dividends, interest and royalties to a uniform 10 percent, the ministry said.
In the absence of the agreement, South Korea imposes a 22 percent tax rate on non-residents' income from those sources.
Taiwan, meanwhile, taxes non-residents' income from dividends at 21 percent, royalty income at 20 percent, and income from interest on bonds, short term bills and securitized products at 15 percent. Income from most other types of interest is taxed at 20 percent.
In a separate statement Thursday, the Ministry of Foreign Affairs (MOFA) welcomed the agreement, saying it would help boost industry cooperation and technical exchanges between the countries.
Taiwan and South Korea are both each other's fifth-largest trading partner, and have closely-connected semiconductor and ICT supply chains, thriving economic and trade ties, and active people-to-people exchanges, MOFA said.
According to the Ministry of Finance, Taiwan now has tax agreements with 35 countries around the world, including two countries in Northeast Asia, the other being Japan.
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