US-Taiwan tax treaty 2026: What Americans in Taiwan must know

The US and Taiwan do not have a formal income tax treaty.

Because no tax treaty between Taiwan and the US exists, American expats in Taiwan must rely on the Foreign Tax Credit on Form 1116 or the Foreign Earned Income Exclusion on Form 2555 to reduce or eliminate double taxation.

H.R. 33, the United States-Taiwan Expedited Double-Tax Relief Act, passed the House 423–1 on January 15, 2025 – the most significant legislative development in decades. The companion bill, S. 199, remains pending in the Senate Finance Committee as of September 2026.

 

 

Does the US have a tax treaty with Taiwan?

The United States does not have a formal income tax treaty with Taiwan. The US does not officially recognize Taiwan as a sovereign nation under the One China Policy, which prevents standard treaty negotiations.

Under the Taiwan Relations Act of 1979, US relations with Taiwan are conducted through the American Institute in Taiwan and the Taipei Economic and Cultural Representative Office – not through formal diplomatic channels.

Because Article II of the Constitution requires Senate advice and consent to ratify a treaty, no standard bilateral tax treaty can be concluded without recognition.

The absence of a US-Taiwan double tax treaty creates three direct consequences for US taxpayers:

1. No reduced withholding rates on cross-border income such as dividends, interest, and royalties.
2. No tie-breaker residency rules to resolve dual-resident status between the two jurisdictions.
3. No treaty-based exemptions or mutual agreement procedures for resolving disputes.

For US expats, this means Taiwan applies its full domestic withholding rates to your income. You carry the burden of claiming relief on the US side through IRS-approved mechanisms.

See our TFX guide to US tax preparation in Taiwan for a full overview of filing obligations.

H.R. 33: The United States-Taiwan expedited double-tax relief act explained

H.R. 33 passed the House with overwhelming bipartisan support – 423 to 1 – on January 15, 2025. It would grant Taiwan treaty-like tax benefits without requiring formal diplomatic recognition.

The bill creates a new IRC Section 894A, which would reduce US withholding rates on US-source income paid to qualified Taiwan residents on a reciprocal basis.

A separate title of the bill authorizes the President to negotiate a broader tax agreement with Taiwan through the American Institute in Taiwan. The Taiwan-US tax treaty gap would be partially closed through domestic legislation rather than a bilateral agreement.

H.R. 33 addresses four categories of relief:

1. Reduced US withholding rates on Taiwan residents – H.R. 33 would cut the 30% US withholding tax on US-source dividends, interest, and royalties paid to qualified Taiwan residents to 15% for dividends and 10% for interest and royalties, tracking the 2016 US Model Tax Treaty. This relief runs in the opposite direction from the Taiwan-side withholding described earlier in this guide: It would not by itself lower what Taiwan withholds from Americans' Taiwan-source income. That would happen only once Taiwan enacts equivalent relief for US persons, which the bill's reciprocity requirement is designed to trigger.
2. Residency tie-breaker rules – qualified Taiwan residents would gain treaty-like residency determination when dual-resident status arises.
3. Permanent establishment definitions – Taiwan businesses would be taxed on US income only when they maintain a PE in the US, replacing the lower "trade or business" threshold.
4. Mutual agreement procedures – a second title authorizes the President to negotiate a bilateral tax agreement through AIT/TECRO, subject to Congressional approval.

The Taiwan-US tax treaty status in 2026 remains unchanged. Senate companion bill S. 199 was introduced January 23, 2025, by Senate Finance Chairman Mike Crapo and referred to the Finance Committee, where it remains as of September 2026.

Benefits under H.R. 33 would take effect only on a reciprocal basis, once Taiwan grants equivalent treatment to US persons.

Double taxation between the US and Taiwan: The core problem

Without a treaty to allocate taxing rights, the same dollar of income earned in Taiwan can be taxed twice – once by Taiwan and once by the IRS – unless the taxpayer proactively claims available US relief mechanisms.

Based on a common TFX client scenario: A US citizen employed in Taipei earning NT$3,000,000 in salary faces ROC income tax at Taiwan's progressive rates of 5%–40%. That same income is also subject to US federal income tax on worldwide income. Both countries assert the right to tax, and no treaty exists to coordinate which country taxes first or limits its claim.

Three income types are most affected by the double taxation between Taiwan and the US:

• Employment income – taxed at progressive rates in Taiwan and at US federal rates on the same wages.
• Dividends from Taiwan companies – subject to 21% Taiwan withholding and US income tax on the gross amount.
• Royalties – subject to 20% Taiwan withholding and full US taxation.

The relief tools available – the Foreign Tax Credit and the Foreign Earned Income Exclusion – do not coordinate automatically. You must actively claim them on your US return.

 

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Withholding tax rates on dividends, interest, and royalties from Taiwan

In the absence of a US-Taiwan tax treaty, Taiwan applies its full statutory withholding rates to payments made to US residents, with no reduced treaty rate available.

 

These are Taiwan domestic law rates under the ROC Income Tax Act for payments to non-residents. A reduced 15% interest rate applies only to certain bonds, short-term commercial paper, and repurchase-agreement transactions – not to general bank interest or loan interest.

There is no United States-Taiwan income tax treaty to reduce the dividend withholding rate for US investors holding shares in Taiwan-listed companies. The 21% withheld by Taiwan on dividends is not refundable through a treaty mechanism.

 

 

See our TFX guide to taxation of foreign dividends for the full US reporting rules on foreign dividend income.

Foreign tax credit: The primary relief tool for Taiwan expats

Form 1116 is the most direct tool available to US taxpayers in Taiwan, providing a dollar-for-dollar credit against US tax for qualifying income taxes paid to Taiwan. It directly reduces double taxation between Taiwan and the US on the same income.

Taiwan income taxes qualify as creditable under IRC Section 901 even without a treaty.

The credit is capped at the US tax attributable to your foreign-source income – you cannot credit more than you owe the IRS on that income.

Claiming the Foreign Tax Credit involves three steps:

1. Determine which Taiwan taxes paid are creditable under IRC Section 901. Income taxes and withholding taxes on dividends, interest, and royalties generally qualify. Taiwan's Land Value Increment Tax generally does not qualify as a creditable tax under IRC Section 901 – it's assessed on land-value appreciation at transfer, not on net income, so it doesn't meet the definition of a creditable income tax. Confirm treatment of any unusual Taiwan tax with a preparer before claiming it on Form 1116.
2. Separate your income into the correct Form 1116 baskets. General-category income covers wages, business income, and most earned income. Passive-category income covers dividends, interest, royalties, and rental income.
3. Complete Form 1116 for each applicable basket, calculate the limitation, and attach the form to your Form 1040.

 

 

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Foreign earned income exclusion: Can Taiwan expats qualify?

US citizens and resident aliens living in Taiwan can exclude up to $130,000 of foreign earned income for tax year 2025 from US taxable income. The exclusion is claimed on Form 2555.

To qualify, you must meet either the Bona Fide Residence Test or the Physical Presence Test and maintain a foreign tax home.

The FEIE only covers earned income – wages and self-employment income. Taiwan-source dividends, interest, and rental income remain fully taxable and require Form 1116 instead.

Without a Taiwan tax treaty to coordinate, there is no automatic mechanism to prevent double taxation on passive income.

The FEIE and the Foreign Tax Credit can be used together strategically. A common approach for Taiwan expats: exclude up to $130,000 of earned income under the FEIE, then claim the FTC on Form 1116 for Taiwan taxes paid on income above the exclusion cap and on all passive income.

Bona fide residence test vs. physical presence test for Taiwan

Two qualifying tests determine FEIE eligibility, and you only need to pass one:

• Bona Fide Residence Test – requires establishing genuine residency in Taiwan for an uninterrupted period that includes a full calendar tax year. The IRS evaluates factors including your visa status, housing, employment contracts, family ties, and intent to remain.
• Physical Presence Test – requires being physically present in a foreign country for at least 330 full days in any 12-month period. Days do not need to be consecutive, but partial days and days spent in the US do not count.

Most US expats in Taiwan qualify under the Physical Presence Test because Taiwan grants long-term residency visas – the Alien Resident Certificate – that support the 330-day requirement.

 

 

See our TFX guide to bona fide residence test vs. physical presence test for a full comparison of both qualifying methods.

Taiwan tax residency rules and the 183-day threshold

Taiwan's Income Tax Act uses a 183-day rule to determine tax residency. Individuals present in Taiwan for 183 or more days in a calendar year are treated as Taiwan tax residents and taxed on worldwide income at progressive rates of 5%–40%.

Those present fewer than 183 days are non-residents taxed only on Taiwan-source income at the flat withholding rates shown in the table above.

A US citizen who becomes a Taiwan tax resident faces taxation on worldwide income in both countries simultaneously. This makes the Foreign Tax Credit on Form 1116 the critical tool to prevent double taxation.

Taiwan tax residency triggers three obligations:

• Filing a Taiwan annual income tax return reporting worldwide income.
• Paying Taiwan progressive tax on global earnings, not just Taiwan-source income.
• Reporting Taiwan financial accounts and assets to the IRS under FBAR and FATCA rules, separate from Taiwan filing obligations.

FBAR and FATCA reporting for US expats with Taiwan bank accounts

US expats in Taiwan have two separate foreign account reporting obligations – one to the Treasury Department and one to the IRS. Both apply regardless of whether your accounts generate income.

FBAR – FinCEN Form 114

US citizens and residents must file FinCEN Form 114 if the aggregate value of all foreign financial accounts exceeds $10,000 at any point during the year.

The FBAR is filed electronically with the Treasury Department – not the IRS – and is due April 15, 2026, with an automatic extension to October 15, 2026.

FATCA – Form 8938

FATCA reporting on Form 8938 applies when specified foreign financial assets exceed these thresholds for filers living abroad:

• Single or married filing separately: $200,000 on the last day of the year or $300,000 at any time.
• Married filing jointly: $400,000 on the last day of the year or $600,000 at any time.

Form 8938 is filed with your Form 1040, unlike the FBAR.

Penalties for non-filing

Non-willful FBAR violations carry penalties of up to $16,536 per report. Willful violations carry penalties up to the greater of $165,353 or 50% of the account balance per violation.

Taiwan's FATCA compliance

Taiwan financial institutions are FATCA-compliant under a Model 2 intergovernmental agreement signed in December 2016 between AIT and TECRO.

Taiwan banks report US account holder information directly to the IRS under this arrangement. If you have accounts in Taiwan, the IRS likely already knows about them.

No totalization agreement with Taiwan: Social Security implications

The US and Taiwan do not have a Totalization Agreement.

US citizens employed in Taiwan may owe both US self-employment tax and Taiwan's labor insurance and National Health Insurance contributions on the same earnings, with no coordination mechanism.

Without a US-Taiwan Totalization Agreement, self-employed Americans in Taiwan can face double social insurance contributions – a cost that has no treaty-based relief mechanism.

Who is affected

• Self-employed US expats in Taiwan – owe US self-employment tax at 15.3% on top of Taiwan's labor insurance and NHI contributions.
• US employees of Taiwanese companies – employer withholds Taiwan social insurance, but the employee may still owe US self-employment tax depending on the arrangement.
• US company employees seconded to Taiwan – may owe social contributions in both countries unless the employer structures the arrangement to avoid overlap.

Unlike countries that have active totalization agreements with the US, Taiwan offers no Certificate of Coverage mechanism to claim exemption from either country's social insurance system.

Estate and gift tax considerations: No US-Taiwan estate tax treaty

The US and Taiwan do not have an estate tax treaty. US citizens with assets in Taiwan and Taiwanese nationals with US-situs assets may face estate tax exposure in both jurisdictions.

US estate tax exposure

US citizens are subject to federal estate tax on their worldwide assets regardless of where they live. The applicable exclusion amount for tax year 2025 is $13.99 million per individual.

Without a US-Taiwan estate tax treaty, Taiwan-situs assets receive no treaty-based exemption or credit coordination.

The IRS does not list an estate tax treaty between Taiwan and the United States.

The IRS estate and gift tax treaties page lists agreements with only 15 jurisdictions – Taiwan is not among them.

Taiwan estate tax

Taiwan's own estate tax is progressive at three rates: 10%, 15%, and 20%, with an exemption of approximately NT$13,330,000 for 2025. US citizens with assets in both jurisdictions may be subject to estate taxation in both countries, with no treaty to coordinate relief.

See our TFX guide to where to report foreign income on Form 1040 for line-by-line filing instructions.

Passive income from Taiwan: Dividends, interest, and rental income

Passive income from Taiwan sources – including dividends from Taiwan-listed companies, interest from Taiwan bank accounts, and rental income from Taiwan property – cannot be excluded under the FEIE. This income must be reported on Form 1040 Schedule B or Schedule E.

Taiwan-source dividends received by US taxpayers are subject to Taiwan withholding tax and US income tax, but the Taiwan tax withheld is generally creditable on Form 1116 in the passive income basket. No United States-Taiwan income tax treaty governs dividend withholding for these payments.

 

 

Streamlined filing procedures for Taiwan expats who are behind on taxes

US citizens living in Taiwan who have not filed US tax returns or FBAR reports may qualify for the IRS Streamlined Foreign Offshore Procedures.

The program covers three years of tax returns and six years of FBARs with no offshore penalty, provided the non-compliance was non-willful.

The Streamlined Foreign Offshore Procedures offer Taiwan-based US expats a penalty-free path to IRS compliance – but only if the failure to file was non-willful and the taxpayer is not already under IRS examination.

Non-willful means you did not file because you did not know about the requirement, misunderstood the rules, or made an honest mistake – not because you were trying to hide income from the IRS.

What the submission includes

• Three years of delinquent or amended federal income tax returns.
• Six years of delinquent FBARs, filed electronically through FinCEN's BSA E-Filing System.
• Form 14653 – a signed certification of non-willful conduct, submitted under penalty of perjury.
• All required information returns, including Form 8938 if applicable.

The IRS reviews the non-willful certification statement carefully. For qualifying foreign filers, the miscellaneous offshore penalty is 0%.

See our TFX guide to streamlined filing compliance procedures for a full walkthrough of eligibility and filing steps.

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IRS tax treaty table: Why Taiwan is not listed

The IRS tax treaty table omits Taiwan entirely – not because negotiations failed, but because the US government does not recognize Taiwan as a sovereign state eligible for a standard bilateral tax treaty.

The IRS tax treaty table omits Taiwan due to the diplomatic constraints of the Taiwan Relations Act of 1979 and the One China Policy. This absence has three practical consequences:

• No reduced withholding rates – US taxpayers receiving Taiwan-source dividends, interest, or royalties face full statutory rates.
• No treaty-based exemptions – common treaty provisions covering pensions, students, and government service do not apply.
• No mutual agreement procedure – there is no mechanism to resolve cross-border tax disputes between the US and Taiwan through competent authority negotiations.

No formal tax treaty between the US and Taiwan exists on any version of the IRS list, current or historical. H.R. 33 would address part of this gap legislatively rather than diplomatically, but it has not been enacted. Its withholding cuts apply to US-source income paid to qualified Taiwan residents. Lower Taiwan rates on Americans' Taiwan-source income would follow only if Taiwan enacts reciprocal relief.

Taiwan expat tax filing checklist: Forms you need without a treaty

A US expat in Taiwan filing for tax year 2025 may need up to six separate IRS forms and schedules, plus an FBAR filed with FinCEN – missing even one can trigger penalties or leave money on the table.

The following forms apply to most US expats in Taiwan filing tax year 2025 returns in 2026:

• Form 1040 – main US federal income tax return, reporting worldwide income.
• Form 2555 – claims the Foreign Earned Income Exclusion, if you meet the Physical Presence Test or Bona Fide Residence Test.
• Form 1116 – claims the Foreign Tax Credit for Taiwan income taxes paid. A separate Form 1116 is required for each income basket.
• FinCEN Form 114 – the FBAR, required if aggregate foreign account balances exceed $10,000 at any point during the year. Filed electronically with FinCEN, not the IRS.
• Form 8938 – FATCA reporting for specified foreign financial assets above the applicable threshold.
• Schedule B – required if you have foreign financial accounts, even if interest income is minimal, or Taiwan-source interest or dividend income. Part III asks the foreign account disclosure question.
• Schedule E – for reporting Taiwan-source rental income.

 

 

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