2022 Taiwan and Saudi Arabia Tax Treaty in Effect

On November 2021, Ministry of Finance in Taiwan announced the tax treaty with Saudi Arabia is about to be in effect from January 2022. This treaty is not only the 34th effective one for Taiwan, but also the first one for Taiwan to officially connect with Middle East. Currently, the investment items with Saudi Arabia includes engineering, electric engineering, chemistry and computer parts. Upon the treaty in effect, it is undoubted that the trading activities will be more beneficial for both parties.

According to the data from Ministry of Finance in Taiwan , the total trading amount between Taiwan and Saudi Arabia is TWD 5,140,000,000 by the past 8 months approximately, which percentage surges 25.2%. The export of products from Taiwan to Saudi Arabia are automobiles, motorcycles, steel materials; Reversely, the export of product from Saudi Arabia to Taiwan is oil majorly. From the statement issued by Ministry of Finance in Taiwan, a project “Saudi Vision 2030” is currently on the way, which aims at broadening the construction of infrastructures, rising the percentage of domestic investment from foreign investors and increasing the non-oil income. As the tax treaty becomes effective, the technical exchange and cooperation of industries are going to develop and connect much stronger than ever before.

The purpose of the tax treaty between Taiwan and Saudi Arabia this time is to deduct the taxes incurred from income of profit-seeking enterprises and investment. On the side of income from profit-seeking enterprises, the Taiwan businessmen who run their business without permanent establishment can be exempted from taxation of income. For instance, a Taiwan company provides a Saudi Arabia company with the technical services without permanent establishment. The agent of this Taiwan company  has been on duty for 12 months in Saudi Arabia, but the incumbency of provision of services in Saudi Arabia less than 6 months, so the Taiwan company is eligible for exemption of taxes in Saudi Arabia, which is more preferential than the initial 15% withholding tax rate. On the other side, the maximum rate of taxation for dividends increases 12.5%, interest in 10% (Free for the particular interest), royalties in 4% or 10%.

In addition, the tax treaty between Taiwan and United Kingdom is revised the related provisions pursuant to “Base Erosion and Profit Shifting (BEPS)”. Besides, to comply with the policy “Real Estate Investment Trust (REITs)”,the maximum rate of taxation for REITs for the distribution of dividends from United Kingdom becomes 15%, which is higher than the dividends from other countries in 10%, but which is not prevalent with the investment of retirement fund applicable to 10%. This is the first official tax treaty revised by protocol in history, but the treaty is still expected to get the approval of congress in United Kingdom to become effective officially.