Taiwan Continues Pressure on US to Resolve "Double Taxation" Issue

As the Biden administration in the United States pours more than 50 trillion won into large-scale semiconductor support funds, Taiwanese semiconductor companies are continuing to pressure for a resolution to the 'double taxation' issue that is holding them back.

In December last year, U.S. President Joe Biden toured the construction site of the TSMC factory in Arizona.
[Image source=Reuters Yonhap News]

According to the Wall Street Journal (WSJ) on the 27th (local time), Bowei Lee, chairman of LCY Chemical, a chemical supplier to Taiwan's TSMC, recently said that the double taxation issue is "the biggest obstacle to investment in Taiwan." LCY is considering investing in the U.S. as TSMC builds a new plant in Arizona. However, if this happens, they are concerned about the double taxation issue, where they have to pay taxes to both the Taiwanese and U.S. governments on the profits earned from the U.S. plant.

The reason Taiwan faces the double taxation issue is that the U.S. and Taiwan have not separately signed a tax treaty. The U.S. has tax treaties with countries that also have major semiconductor companies, such as South Korea, China, Japan, and the European Union (EU). As a result, Taiwanese companies doing business in the U.S. must pay taxes to both the U.S. and Taiwan.

In fact, Chairman Lee explained that if they build the new plant, they must pay taxes to the federal and state governments, followed by the city government, and if profits are sent back to Taiwan, they must also pay a 30% withholding tax on the after-tax profits. Additionally, in Taiwan, they must pay corporate tax and dividend tax as well.

Recently, Taiwan has been urging the U.S. government to provide tax benefits for its companies, as the U.S. is strengthening its semiconductor alliance with Taiwan to counter China. Earlier this month, Taiwanese President Tsai Ing-wen visited the U.S. and mentioned the need to resolve the double taxation issue. Although TSMC declined to respond to WSJ's inquiry, it had previously stated last year that some Taiwanese suppliers find it difficult to build new plants in the U.S. due to the double taxation problem.

However, despite Taiwan's demands, the U.S. has not promised to resolve the double taxation issue, WSJ reported. U.S. Treasury Secretary Janet Yellen appeared before Congress last month and said, "We know it is an important issue," and that they would review it, but since recognizing Taiwan's sovereignty and signing a separate treaty is inevitably a sensitive issue due to China, it is expected to be difficult to resolve easily.

This content was produced with the assistance of AI translation services.