Canada Tax Treaties with Taiwan

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Manager Cindy Victoria Speaks in Bahasa, English, and Chinese.
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Tw-Q-10:
台灣母公司在加拿大是否可以依DTA申請沒有常設機構(PE)下零稅率?
Taiwan Parent Company, can apply for zero tax rate without PE under DTA in Canada?

Tw-A-10:
Yes.
Taiwan has DTA with Canada, and if Taiwan Legal Resident company is without PE (Permanent Establishment), it will be redeemed as “non-Canada Domestic Sourced Income”.
That means Canada will levy zero-tax.
However, Taiwan Legal Resident company still needs to send zero-tax application to Canada Tax Bureau for being approved.

Tw-Q-20:
台灣母公司在加拿大設立了加拿大子公司，台灣母公司替子公司服務收入能否申請零稅率?
When Taiwan Parent Company as an Investor, set up a Canada subsidiary, and provide services from Taiwan to Canada Subsidiary, can apply for zero tax rate without PE under DTA in Canada?

Tw-A-20:
According to DTA Article 5 item 7, a Canada subsidiary will not be treated as PE of Taiwan Parent company as an investor because it is a separate legal entity.
That means if a Canada Subsidiary pay service fee to Taiwan Parent Company through service contract signed between subsidiary and Taiwan Parent company
as an investor, Taiwan Parent Company can apply zero tax.
As for if paid amount being reasonable, it will get involved TP (Transfer Pricing) judgement by Canada Tax Bureau.

Tw-Q-30
加拿大依DTA沒有PE下零稅率申請的程序為何?
What is the procedure for Canada to apply for zero tax rate under DTA without PE?

Tw-A-30
A non-resident may be able to claim an exemption from Canadian income tax on such business profits if the non-resident is a resident of a country with which Canada has entered a double-tax treaty and does not maintain a permanent establishment in Canada.
If you receive Canadian-source income exempt from tax in Canada because of a tax treaty, you can ask the payer not to withhold tax.

Fill up a standardized treaty-based Regulation 105 waiver application form (Form R105) which are available from any Tax Service Office (TSO) or Centre of Expertise (CoE) and is available from the CRA website at: Canada.ca/revenue-agency.
Submit at least 30 days prior to the initial payment for the related services.
If the officials at the tax office agree you qualify, they will send you a waiver letter to give to your payer.
Only when a waiver is issued by the TSO or CoE, may the waiver applicant make full payment to the recipient(s) without withholding.

Refer to the website for information:
https://www.canada.ca/en/revenue-agency/services/tax/international-non-residents/information-been-moved/rendering-services-canada/where-send-completed-waiver-non-resident-employer-certification-applications.html

Submit the application via My Account.

Tw-Q-40
台灣母公司有加拿大來源所得的各項所得扣繳稅率為何?
When Taiwan Resident company having Canada domestic sourced income, what are the withholding tax rates for various incomes in Canada?

Tw-A-40:
Taiwan has DTA with Canada, and if you are with PE (Permanent Establishment) in Canada, your income will be considered as Canada domestic sourced income.
As for levying Tax Rate, please be aware:
if Canada Tax rate > DTA Rate, adopt DTA Rate; if Canada Tax rate < DTA Rate, adopt Canada Rate.

If DTA applied, the DTA rates between Taiwan and Canada are as below:

*The withholding tax rate under domestic law may apply rather than the treaty rate where the domestic law rate is lower than the treaty rate.

Tw-Q-50
當台灣稅務居民有加拿大來源所得，依DTA優惠稅率申請的程序為何?
When Taiwan Tax Resident has Canada domestic sourced income, what is Canada’s application procedure based on the DTA preferential tax rate?

Tw-A-50:
While the use of Form NR301 is not mandatory for payers to withhold at a reduced rate, it indicates what to expect from CRA before withholding at a reduced rate.
Fill up Form NR301 Declaration of eligibility for benefits (reduced tax) under a tax treaty for a non-resident person.
Without Form NR301, the payer may not be allowed to use the entitlement of treaty benefits for the application of less than the full 25% Part XIII tax rate.
A completed NR301 form is valid for 3 years.
If the form is signed under a duly authorized power of attorney for the beneficial owner, attach a copy of the power of attorney form when email the NR301.

Even if you do not get Form NR301 to support the beneficial owner’s country of residence and eligibility for tax benefits, you may apply a tax treaty rate if all the following are true:

1. Obtained complete address of residence that are not post-office boxes or care-of addresses.
2. The payee is an individual.
3. No reason to suspect the information is inaccurate, misleading, or the payee is not entitled to the tax treaty benefit.
4. There are procedures in place so that changes in the payee’s information will result in a review of the withholding tax rate.

Summary of Tax Treaty between Canada and Taiwan

The Canadian Trade Office in Taipei and The Taipei Economic and Cultural Office in Canada concluded and signed an Agreement for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income (Double Taxation Agreements, DTA), on 15 January 2016 and takes effects from 1 January 2017.

Permanent Establishment

Article 5 states the term permanent establishment (PE) means a fixed place of business which generally includes the followings:

*A place of management
*A branch
*An office
*A factory
*A workshop
*The furnishing of consultancy services through employees or other personnel for periods aggregating more than 183 days.

Withholding Tax

*Article 7 of DTA between Canada and Taiwan explained, Canada may not tax payments on business profits rendered by Taiwan corporation unless it is attributable to the permanent establishment situated in the relevant territory.

*In Article 10, dividends paid by Canada company to a resident of Taiwan shall be charged at 10% if the beneficial owner is a company that holds directly or indirectly at least 20% of the capital of the company paying the dividends, and 15% for other cases.

*In Article 11 states that interest arising in Canada may be taxed in Canada according to the laws applicable in Canada, the tax so charged shall not exceed 10% of the gross amount of the interest.

*Article 12 explained royalties means payment for the use of, or the right to use, any copyright, patent, trademark, design or model, plan, secret formula or process, or computer software, or for the use of, or the right to use industrial, commercial, or scientific equipment, or for information concerning industrial, commercial, or scientific experience.

*Technical services are covered in Article 7. Canada may not tax payments on technical services rendered by Taiwan corporation unless it is attributable to the permanent establishment situated in Canada.

*Article 14 of DTA between Canada and Taiwan explained, Canada corporations may not tax payments for professional service rendered by a Taiwanese resident unless the Taiwanese resident has a fixed place or stay in Canada for 183 days or more.
An independent profession includes physicians, lawyers, engineers, architects, dentists, and accountants.

Elimination of Double Taxation

Article 22 of the DTA states that double taxation shall be eliminated by allowing tax credit to be made available to the home resident territory.
It shall be credited against the tax levied in the first-mentioned territory on that resident.
However, the amount of credit shall not exceed the amount of the tax in the first-mentioned territory.

Exchange of Information

Article 25 states that the competent authorities of the territories shall exchange such information relevant to the provision of this Agreement.

Please be aware below Warning:
The above contents are digested by Evershine R&D and Education Center in October 2021.
Regulations might be changed as time goes forward and different scenarios will adopt different options.
Before choosing options, please contact us or consult with your trusted professionals in this area.

Contact Us

Toronto Evershine BPO Service Limited Corp.
Email: yto4ww@evershinecpa.com
Manager Cindy Victoria Speak in Bahasa, English, and Chinese.
Whats App +886-989-808-249
wechatid: victoria141193

For how to exchange data files between your Finance Accounting System and Evershine Cloud Accounting Information System, please send an email to HQ4yto@evershinecpa.com
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Linkedin address: Dale Chen

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(version: 2024/07)

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