The Foreign Ministry stated on Thursday that the Taiwan-South Korea Avoidance of Double Taxation Agreement (ADTA) will officially apply from January 1st next year. The ADTA aims to improve the investment environments and ensure tax fairness in both countries.
After seven years of negotiations and signing an agreement in November 2021, both nations completed their domestic legislative processes. The ADTA grants tax exemption on business profits for Taiwanese enterprises in South Korea and vice versa without a permanent establishment. Both nations have mutually reduced withholding tax rates on dividends, interest, and royalties to 10 percent.
Without the ADTA, South Korea would apply a 22 percent tax on non-resident income from these sources, while Taiwan has varying rates, including 20 percent on royalty income, 21 percent on dividends, and 15 percent on certain interest types.
As Taiwan and South Korea are each other's 5th-largest trading partners and deeply interconnected in the semiconductor and information technology communication (ICT) industries, the ADTA is expected to enhance industry collaboration and facilitate exchange. This agreement, the second comprehensive income tax treaty for Taiwan in Northeast Asia after Japan, is poised to create a more favorable investment environment, further expanding bilateral economic ties and mutual welfare.