HR 33 · 119th CongressPassed Chamber

To amend the Internal Revenue Code of 1986 to provide special rules for the taxation of certain residents of Taiwan with income from sources within the United States.

Latest updateJan 15, 2025

Passed/agreed to in House: On passage Passed by the Yeas and Nays: 423 - 1 (Roll no. 15). (text: CR H160-164)

Taxation

Sponsor

Jason Smith

Introduced

January 3, 2025

Latest action

January 16, 2025

Legislative Progress

How far this bill has traveled through Congress

Introduced

Bill filed in chamber

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Reviewed & reported

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House or Senate vote

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President

Sent to White House

Enacted

Signed into law

Introduced

Bill filed in chamber

Committee

Reviewed & reported

Passed Chamber

House or Senate vote

Passed Both

House & Senate agree

President

Sent to White House

Enacted

Signed into law

Latest Action

Received in the Senate and Read twice and referred to the Committee on Finance.

Plain-Language Summary

AI Generated

Under current U.S. tax law, residents of Taiwan who earn income from U.S. sources face the same withholding and tax rates as other foreign nationals. The Internal Revenue Code generally imposes a 30 percent withholding tax on interest, dividends, and royalties paid to foreign persons, and taxes foreign corporations on U.S.-source business income at regular corporate rates. Taiwan residents working in the United States or earning investment income are subject to these standard rules, which can result in double taxation if Taiwan also taxes the same income.

This bill amends the Internal Revenue Code by inserting a new section 894A that establishes preferential tax treatment for qualified residents of Taiwan. The Department of the Treasury will apply reduced withholding rates—10 percent on most investment income (interest, dividends, royalties) and 15 percent on certain dividends—rather than the standard 30 percent. The bill also exempts qualified wages earned by Taiwan residents who are not U.S. residents from withholding entirely, and excludes entertainment or athletic income under $30,000 from taxation. For Taiwan residents operating a U.S. business through a permanent establishment, the bill allows taxation under regular U.S. corporate rates rather than the higher rates normally applied to foreign corporations, and reduces the branch profits tax from 30 percent to 10 percent.

Implementation occurs upon enactment, with the Treasury Department authorized to issue regulations clarifying definitions and procedures. The bill creates eligibility requirements: individuals must be taxed as residents of Taiwan and not be U.S. persons; corporations must meet ownership tests (at least 50 percent Taiwan-owned), be publicly traded in Taiwan, or qualify as subsidiaries of qualifying entities. The reduced rates apply only to income not effectively connected with a U.S. permanent establishment, except where specified. Revenue effects depend on the volume of Taiwan-source investment and business activity in the United States, and the provision operates as a bilateral tax preference without requiring reciprocal action by Taiwan.

Key Provisions

1Reduces withholding tax rates on interest, dividends, and royalties paid to qualified Taiwan residents from 30 percent to 10 percent (or 15 percent for certain dividends), and eliminates withholding on qualified wages earned by non-resident Taiwan employees.
2Exempts entertainment and athletic income earned by qualified Taiwan residents from taxation if annual gross receipts do not exceed $30,000, provided the income is not effectively connected with a U.S. permanent establishment.
3Allows qualified Taiwan residents operating a U.S. business through a permanent establishment to be taxed under regular U.S. corporate income tax rates rather than the higher rates applied to foreign corporations, and reduces the branch profits tax from 30 percent to 10 percent.
4Establishes eligibility criteria requiring that qualified residents be taxed as residents of Taiwan, not be U.S. persons, and (for corporate entities) meet ownership, public trading, or subsidiary requirements to prevent treaty benefits from flowing to non-Taiwan entities.
5Directs the Treasury Department to issue regulations defining qualified residents, permanent establishments, and other terms, and to determine equivalent U.S. requirements for American persons seeking comparable treatment.

★ Why this matters

Tax withholding rates on investment income and wages paid to Taiwan residents will decrease substantially, reducing the after-tax cost of doing business with or employing Taiwan nationals in the United States. U.S. companies paying dividends or interest to Taiwan investors will remit less to the federal government, and Taiwan residents earning U.S. wages or entertainment income will face lower or zero tax liability. The branch profits tax reduction lowers the effective tax burden on Taiwan corporations operating U.S. subsidiaries, potentially making U.S. investment more attractive to Taiwan-based businesses.

● Who this affects

Taiwan residents and Taiwan-incorporated corporations earning U.S.-source income are the direct beneficiaries. U.S. corporations and financial institutions paying dividends, interest, or royalties to Taiwan investors will experience reduced withholding obligations. Taiwan employees working in the United States, Taiwan-based entertainers and athletes performing in the U.S., and Taiwan companies operating U.S. permanent establishments will see lower tax burdens. U.S. workers and domestic investors may face indirect effects if the preferential rates shift investment or employment patterns toward Taiwan nationals or entities.

Bill Text

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<DOC>
119th CONGRESS
  1st Session
                                 H. R. 33

                   IN THE SENATE OF THE UNITED STATES

                            January 16, 2025

     Received; read twice and referred to the Committee on Finance

                                 AN ACT

 
To amend the Internal Revenue Code of 1986 to provide special rules for 
 the taxation of certain residents of Taiwan with income from sources 
                       within the United States.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

     TITLE I--UNITED STATES-TAIWAN EXPEDITED DOUBLE-TAX RELIEF ACT

SEC. 101. SHORT TITLE.

    This title may be cited as the ``United States-Taiwan Expedited 
Double-Tax Relief Act''.

SEC. 102. SPECIAL RULES FOR TAXATION OF CERTAIN RESIDENTS OF TAIWAN.

    (a) In General.--Subpart D of part II of subchapter N of chapter 1 
of the Internal Revenue Code of 1986 is amended by inserting after 
section 894 the following new section:

``SEC. 894A. SPECIAL RULES FOR QUALIFIED RESIDENTS OF TAIWAN.

    ``(a) Certain Income From United States Sources.--
            ``(1) Interest, dividends, and royalties, etc.--
                    ``(A) In general.--In the case of interest (other 
                than original issue discount), dividends, royalties, 
                amounts described in section 871(a)(1)(C), and gains 
                described in section 871(a)(1)(D) received by or paid 
                to a qualified resident of Taiwan--
                            ``(i) sections 871(a), 881(a), 1441(a), 
                        1441(c)(5), and 1442(a) shall each be applied 
                        by substituting `the applicable percentage (as 
                        defined in section 894A(a)(1)(C))' for `30 
                        percent' each place it appears, and
                            ``(ii) sections 871(a), 881(a), and 
                        1441(c)(1) shall each be applied by 
                        substituting `a United States permanent 
                        establishment of a qualified resident of 
                        Taiwan' for `a trade or business within the 
                        United States' each place it appears.
                    ``(B) Exceptions.--
                            ``(i) In general.--Subparagraph (A) shall 
                        not apply to--
                                    ``(I) any dividend received from or 
                                paid by a real estate investment trust 
                                which is not a qualified REIT dividend,
                                    ``(II) any amount subject to 
                                section 897,
                                    ``(III) any amount received from or 
                                paid by an expatriated entity (as 
                                defined in section 7874(a)(2)) to a 
                                f…

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Angela Alsobrooks

D-Maryland

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To amend the Internal Revenue Code of 1986 to provide special rules for the taxation of certain residents of Taiwan with income from sources within the United States.

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Plain-Language Summary

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● Who this affects

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To amend the Internal Revenue Code of 1986 to provide special rules for the taxation of certain residents of Taiwan with income from sources within the United States.

Legislative Progress

Plain-Language Summary

Key Provisions

★ Why this matters

● Who this affects

Bill Text

Where Senate senators currently stand

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Opposition

No Position

Party Positions

Democratic Party

Republican Party

Take Action

Active Organizations