H.R. 33 — United States-Taiwan Expedited Double-Tax Relief Act

This section inserts new section 894A in the Internal Revenue Code to establish special U.S. income tax rules for qualified residents of Taiwan. It (1) reduces the withholding tax rate on certain U.S.-source interest (other than original issue discount), dividends, royalties, and other passive income to the applicable percentage—10% generally, or 15% for dividends (10% if the recipient is a Taiwanese corporation holding at least 10% of the paying corporation's stock for 12 months)—with exceptions for non-qualified REIT dividends, section 897 dispositions, expatriated entity payments, and REMIC excess inclusions; (2) exempts qualified wages paid by non-U.S. persons (not borne by a U.S. permanent establishment) from tax and withholding, excluding directors' fees, entertainer/athlete income, student/trainee income, pensions, and U.S. government wages; (3) exempts entertainer or athlete gross receipts from U.S. personal activities up to $30,000 annually (excluding qualified wages or U.S. permanent establishment income); and (4) taxes effectively connected income of a U.S. permanent establishment at regular U.S. rates under sections 1, 11, 55, or 59A (in lieu of sections 871(b) and 882).

This section defines terms used in this title, including “Agreement” as the tax agreement authorized by section 203(a); “appropriate congressional committees” as the Senate Committees on Foreign Relations and Finance and the House Committee on Ways and Means; “approval legislation” as legislation approving the Agreement; and “implementing legislation” as legislation making changes to the Internal Revenue Code of 1986 necessary to implement the Agreement.

This section authorizes the President to negotiate and enter into a tax agreement with Taiwan subsequent to a determination under new IRC §894A(e)(1) (as added by the United States-Taiwan Expedited Double-Tax Relief Act). The agreement must (1) conform to provisions customarily in U.S. bilateral income tax conventions (as exemplified by the 2016 U.S. Model Income Tax Convention) and exclude elements outside its scope; (2) may incorporate existing double taxation agreements or U.S. law applicable to U.S. and Taiwan residents; (3) include a statement that it is entered into pursuant to the United States-Taiwan Tax Agreement Authorization Act; and (4) condition entry into force on enactment of approval and implementing legislation under §207 and Treasury Secretary confirmation of Taiwan's approval and implementing steps.

This section establishes congressional consultation requirements for U.S.-Taiwan negotiations on the Agreement. It requires (1) the President to notify the appropriate congressional committees at least 15 calendar days before commencing negotiations; (2) briefings to those committees on negotiation status, including elements under negotiation, not later than 90 days after commencement and every 180 days thereafter until the Agreement is entered into; and (3) consultations by the Secretary of the Treasury, in coordination with the Secretary of State, including meetings upon request with committee chairmen or ranking members and close consultations on the Agreement's nature, consistency with section 203(b), and implementation, such as effects on existing laws, proposed legislative changes, and administrative actions.

This section establishes conditions prohibiting entry into force of the Agreement unless (1) the President publishes its text on a publicly available Department of the Treasury website at least 60 days prior to entry and (2) Congress enacts approval legislation and implementing legislation pursuant to section 207. It authorizes the President to bring the Agreement into force upon such enactment and the Secretary of the Treasury's confirmation that Taiwan's relevant authority has approved it and taken required implementation steps.

This section requires the President (or designee) to submit to Congress, not later than 270 days after entering into the Agreement, (1) the final text of the Agreement and (2) a technical explanation of the Agreement. It further requires the Secretary of the Treasury, within the same timeframe, to submit (1) a description of changes to existing laws necessary for U.S. consistency with the Agreement and (2) a statement of anticipated administrative actions to implement the Agreement.

This section requires approval legislation for the U.S.-Taiwan Tax Agreement to include a specific statement approving the agreement as submitted under section 206 of the United States-Taiwan Tax Agreement Authorization Act; directs referral of approval legislation to the Senate Committee on Foreign Relations and the House Committee on Ways and Means; and directs referral of implementing legislation to the Senate Committee on Finance and the House Committee on Ways and Means.

This section provides that no provision of the Agreement or its approval legislation inconsistent with the Internal Revenue Code of 1986 shall have effect. It further specifies that nothing in this title amends or modifies any U.S. law or limits any authority under U.S. law unless specifically provided therein.

This section authorizes subsequent tax agreements relative to Taiwan that supplement or supersede the agreement approved pursuant to section 207 by including them within the definitions of "tax agreement" in section 203(a) and "Agreement." It further directs that the provisions of this title, including section 204, apply separately to each such tax agreement.

This section states congressional findings regarding U.S. bilateral income tax conventions (tax treaties) to address double taxation—more than 60 of which are in force—and the inability to enter into such a treaty with Taiwan due to its unique international status. It establishes U.S. policy to (1) provide additional bilateral tax relief with respect to Taiwan, beyond that in new IRC §894A (as added by the United States-Taiwan Expedited Double-Tax Relief Act), only after entry into force of the Agreement under section 205 and consistent therewith; and (2) continue bilateral tax relief with sovereign states through tax treaties subject to Senate advice and consent to ratification.