Ernst & Young recently conducted a seminar focusing on the U.S.-Taiwan Rapid Double Tax Relief Act and strategies for Taiwanese businesses considering U.S. investments. The firm highlighted the evolving international tax landscape and the U.S. response to the OECD’s Pillar II, aiming to attract foreign investors through enhanced incentives. The anticipated act is poised to address the high tax challenges faced by Taiwanese investors in the U.S., potentially lowering the effective tax rates and increasing the tax threshold for U.S.-sourced income, thereby reducing the overall tax liabilities for these companies.
Key insights were shared by Jason Yen, who noted the bipartisan support for the bill in the U.S. Senate, despite delays linked to its association with other contentious tax measures. The urgency of passing the bill is underscored by the upcoming U.S. elections, which might push the completion of the legislation to post-2024, thus postponing the benefits intended for Taiwanese enterprises.
Additionally, the seminar explored the strategic considerations for Taiwanese investors, such as the potential restructuring of investment models and the relevance of holding companies under the new tax regime. With the expected reduction in withholding tax rates between Taiwan and the U.S., the traditional tax advantages of using holding companies may diminish, necessitating a reevaluation of their economic justifications.
Ernst & Young also highlighted various U.S. tax incentives, like the Inflation Reduction Act and investment tax credits, which could offer further financial relief to Taiwanese firms. As the U.S. gears up for the presidential election, the future of Pillar II remains uncertain, with recommendations for businesses to proactively prepare for potential tax changes and ensure compliance with the evolving tax requirements.
