Date: October 5, 2023
John Neuffer, President and CEO of the Semiconductor Industry Association (SIA), penned a letter to Congressional leaders on September 18, emphasizing the urgency of resolving dual taxation and other related tax issues between the United States and Taiwan. Despite being significant trade partners, the absence of a formal tax agreement has led to tax-related challenges between the two jurisdictions.
The letter comes in response to the impetus provided by the enactment of the "Chips and Science Act" last year, which encourages substantial investments in the U.S. semiconductor manufacturing industry. As per the provisions of this act, the government is investing $52 billion to revitalize domestic semiconductor production and innovation.
In the letter addressed to Speaker Kevin McCarthy (Republican, California), Senate Majority Leader Chuck Schumer (Democrat, New York), Senate Minority Leader Mitch McConnell (Republican, Kentucky), and House Minority Leader Hakeem Jeffries (Democrat, New York), SIA stressed the necessity of addressing tax issues in the U.S.-Taiwan semiconductor industry:
Semiconductors stand as one of the largest export industries in the United States, crucially driving economic strength, national security, and global competitiveness. Taiwan plays a vital role in the global semiconductor ecosystem and serves as the largest trading partner for U.S. semiconductor companies. To enhance the competitiveness of U.S. and Taiwanese semiconductor enterprises and support significant investments in the U.S. semiconductor industry following the enactment of the "Chips and Science Act," a tax agreement between the U.S. and Taiwan has become imperative and is crucial for the successful implementation of the new legislation.
Without a tax agreement, companies conducting business between the U.S. and Taiwan may face unnecessary and cumbersome trade barriers. The impact could include double taxation, complexities in cross-border sales, and challenges for employees from the U.S. or Taiwan dealing with repetitive and intricate income tax systems during business trips or temporary assignments. In the letter, SIA expressed support for legislative efforts urgently needed to align with the same policy goals as the formal treaty signed between the U.S. and Taiwan, driven by Congress.
The Senate Finance Committee has taken a proactive step in addressing these issues, unanimously approving the "U.S.-Taiwan Expedited Dual Tax Relief Act," a bill designed to resolve the problem. If approved, the act will come into effect after Taiwan makes parallel modifications to its tax laws. The Senate Foreign Relations Committee is also advancing legislation (S. 1457) specifying the negotiation of a tax treaty between the U.S. and Taiwan. Complementary legislation for these bills is under consideration by the House Ways and Means Committee and the House Foreign Affairs Committee, marking a substantial move towards resolving tax issues in the U.S.-Taiwan semiconductor industry.
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