SIA Urges Congress to Resolve Double Taxation Between U.S. and Taiwan

by Molly O’Leary, Director of Government Affairs

SIA President and CEO John Neuffer on Sept. 18 sent a letter to congressional leaders expressing the urgency of resolving double taxation between the U.S. and Taiwan, among other related tax matters. Despite being top trading partners, the U.S. and Taiwan lack a formal tax treaty to resolve taxation issues between the two jurisdictions. The letter comes as the industry is set to make substantial investments in U.S. semiconductor manufacturing, spurred by the landmark CHIPS and Science Act signed into law last year. The law provides $52 billion in government investments to reinvigorate domestic semiconductor production and innovation.

In the letter sent to Speaker Kevin McCarthy (R-Calif.), Senate Democratic Majority Leader Chuck Schumer (D-N.Y.), Senate Republican Minority Leader Mitch McConnell (R-Ky.), and House Democratic Minority Leader Hakeem Jeffries (D-N.Y.), SIA expressed the urgency of resolving U.S.-Taiwan tax matters for the semiconductor industry:

Semiconductors are one of America’s top export industries and a key driver of America’s economic strength, national security, and global competitiveness. As you know, Taiwan plays a critical role in the global semiconductor ecosystem and is a top trading partner for U.S. semiconductor companies. To enhance the competitiveness of semiconductor companies in both the U.S. and Taiwan and support the significant investment in the semiconductor industry in the U.S. following passage of the CHIPS and Science Act, a tax agreement between the U.S. and Taiwan has become a pressing matter and is essential to the success of the new law.

Without a tax treaty in place, companies doing business between the U.S. and Taiwan encounter unnecessary and burdensome barriers to trade. Companies may be subject to double taxation and complications with facilitating multinational sales, and many U.S. or Taiwanese employees on work travel or temporary assignment may be subject to duplicative and complicated income tax regimes. In the letter, SIA expresses support of the much-needed congressional effort to advance legislation that will achieve the same policy objectives as would a formal treaty between the United States and Taiwan.

The Senate Finance Committee has taken a positive step forward in addressing these issues by unanimously approving a bill—the U.S.-Taiwan Expedited Double Tax Relief Act—that would do exactly that. If passed, the bill would go into effect once Taiwan enacts parallel changes to its tax laws. The Senate Foreign Relations Committee has also advanced legislation (S. 1457) to provide for the conclusion of a tax agreement between the U.S. and Taiwan. Companion legislation to both bills is being considered in the House by the Ways and Means Committee and the House Foreign Affairs Committee.