Recommendations on Branch Profits Tax in Taiwan

• Main Authors: Hui-Chien Hsu, 許惠茜
• Other Authors: Su-Ming Lin
• Format: Others
• Language: zh-TW
• Published: 2006
• Online Access: http://ndltd.ncl.edu.tw/handle/37712415783374181937

碩士 === 國立臺灣大學 === 資訊管理學研究所 === 94 === Taiwan imposes a dividend withholding tax on remittances from the foreign subsidiary to its parent company. The foreign branch, however, is not subject to similar tax (remittances are not taxed). U.S Tax Reform Act of 1986 revised the taxation on foreign branch profits, seeking to tax a foreign corporation''s U.S. business profits with the same levies, whether the business is done through a domestic subsidiary or an unincorporated branch. In addition to foreign branch profits tax, the U.S. Congress regulated an exception of the residence-of-debtor criterion. This revision regulates that any interest payment attributable to a foreign branches in U.S. be classified as U.S.-source income. Therefore interest paid by a foreign corporation with an unincorporated U.S. branch, is subject to branch-level interest tax of 30%. Like branch profits tax, branch-level interest tax also equalizes the tax burden between foreign subsidiaries and foreign branches, furthering the goal of tax equality. This thesis explores U.S. tax laws on branch profits tax and branch-level interest tax. Examples, with calculation explanation, are introduced to provide a concise and straightforward access to understand the application of tax laws. Based on the research findings, recommendations, relevant for tackling practical problems in Taiwan, are proposed for further tax reform to create a reasonable tax structure in the near future.