IB 

Union Calendar No. 249 

118TH CONGRESS 

1ST SESSION H. R. 5988 

[Report No. 118–309] 

To amend the Internal Revenue Code of 1986 to provide special rules for 

the taxation of certain residents of Taiwan with income from sources 

within the United States. 

IN THE HOUSE OF REPRESENTATIVES 

OCTOBER 19, 2023 

Mr. SMITH of Missouri (for himself, Mr. NEAL, Mr. SMITH of Nebraska, Mr. 

KELLY of Pennsylvania, Mr. SCHWEIKERT, Mr. LAHOOD, Mr. SMUCKER, 

Mr. MURPHY, Mr. KUSTOFF, Ms. TENNEY, Mr. MOORE of Utah, Mrs. 

STEEL, Mr. CAREY, Ms. SA ́NCHEZ, Ms. DELBENE, Ms. CHU, and Mr. 

WENSTRUP) introduced the following bill 

OCTOBER 25, 2023 

Referred to the Committee on Ways and Means 

DECEMBER 12, 2023 

Additional sponsors: Mr. GOMEZ, Ms. PLASKETT, Mr. KILDEE, Ms. 

MALLIOTAKIS, Ms. VAN DUYNE, Mr. FITZPATRICK, Mr. 

KRISHNAMOORTHI, Mr. MOULTON, Ms. SHERRILL, Mrs. FISCHBACH, Mr. 

PANETTA, Mr. HERN, Mr. FINSTAD, Mr. ELLZEY, Mr. GOTTHEIMER, 

Mrs. CAMMACK, and Mr. OWENS

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DECEMBER 12, 2023 

Reported with an amendment, committed to the Committee of the Whole 

House on the State of the Union, and ordered to be printed 

[Strike out all after the enacting clause and insert the part printed in italic] 

[For text of introduced bill, see copy of bill as introduced on October 19, 2023] 

A BILL 

To amend the Internal Revenue Code of 1986 to provide 

special rules for the taxation of certain residents of Taiwan with income from sources within the United States. 

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1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 

3 TITLE I—UNITED STATES-TAI4 WAN EXPEDITED DOUBLE-TAX 

5 RELIEF ACT 

6 SEC. 101. SHORT TITLE. 

7 This title may be cited as the ‘‘United States-Taiwan 

8 Expedited Double-Tax Relief Act’’. 

9 SEC. 102. SPECIAL RULES FOR TAXATION OF CERTAIN RESI10 DENTS OF TAIWAN. 

11 (a) IN GENERAL.—Subpart D of part II of subchapter 

12 N of chapter 1 of the Internal Revenue Code of 1986 is 

13 amended by inserting after section 894 the following new 

14 section: 

15 ‘‘SEC. 894A. SPECIAL RULES FOR QUALIFIED RESIDENTS OF 

16 TAIWAN. 

17 ‘‘(a) CERTAIN INCOME FROM UNITED STATES

18 SOURCES.— 

19 ‘‘(1) INTEREST, DIVIDENDS, AND ROYALTIES, 

20 ETC.— 

21 ‘‘(A) IN GENERAL.—In the case of interest 

22 (other than original issue discount), dividends, 

23 royalties, amounts described in section 

24 871(a)(1)(C), and gains described in section 

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1 871(a)(1)(D) received by or paid to a qualified 

2 resident of Taiwan— 

3 ‘‘(i) sections 871(a), 881(a), 1441(a), 

4 1441(c)(5), and 1442(a) shall each be ap5 plied by substituting ‘the applicable per6 centage (as defined in section 

7 894A(a)(1)(C))’ for ‘30 percent’ each place 

8 it appears, and 

9 ‘‘(ii) sections 871(a), 881(a), and 

10 1441(c)(1) shall each be applied by sub11 stituting ‘a United States permanent estab12 lishment of a qualified resident of Taiwan’ 

13 for ‘a trade or business within the United 

14 States’ each place it appears. 

15 ‘‘(B) EXCEPTIONS.— 

16 ‘‘(i) IN GENERAL.—Subparagraph (A) 

17 shall not apply to— 

18 ‘‘(I) any dividend received from 

19 or paid by a real estate investment 

20 trust which is not a qualified REIT 

21 dividend, 

22 ‘‘(II) any amount subject to sec23 tion 897, 

24 ‘‘(III) any amount received from 

25 or paid by an expatriated entity (as 

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1 defined in section 7874(a)(2)) to a for2 eign related person (as defined in sec3 tion 7874(d)(3)), and 

4 ‘‘(IV) any amount which is in5 cluded in income under section 860C to 

6 the extent that such amount does not 

7 exceed an excess inclusion with respect 

8 to a REMIC. 

9 ‘‘(ii) QUALIFIED REIT DIVIDEND.—For 

10 purposes of clause (i)(I), the term ‘qualified 

11 REIT dividend’ means any dividend re12 ceived from or paid by a real estate invest13 ment trust if such dividend is paid with re14 spect to a class of shares that is publicly 

15 traded and the recipient of the dividend is 

16 a person who holds an interest in any class 

17 of shares of the real estate investment trust 

18 of not more than 5 percent. 

19 ‘‘(C) APPLICABLE PERCENTAGE.—For pur20 poses of applying subparagraph (A)(i)— 

21 ‘‘(i) IN GENERAL.—Except as provided 

22 in clause (ii), the term ‘applicable percent23 age’ means 10 percent. 

24 ‘‘(ii) SPECIAL RULES FOR DIVI25 DENDS.— In the case of any dividend in reVerDate Sep 11 2014 20:24 Dec 14, 2023 Jkt 049200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6203 E:\BILLS\H5988.RH H5988
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1 spect of stock received by or paid to a quali2 fied resident of Taiwan, the applicable per3 centage shall be 15 percent (10 percent in 

4 the case of a dividend which meets the re5 quirements of subparagraph (D) and is re6 ceived by or paid to an entity taxed as a 

7 corporation in Taiwan). 

8 ‘‘(D) REQUIREMENTS FOR LOWER DIVIDEND

9 RATE.— 

10 ‘‘(i) IN GENERAL.—The requirements 

11 of this subparagraph are met with respect 

12 to any dividend in respect of stock in a cor13 poration if, at all times during the 12- 

14 month period ending on the date such stock 

15 becomes ex-dividend with respect to such 

16 dividend— 

17 ‘‘(I) the dividend is derived by a 

18 qualified resident of Taiwan, and 

19 ‘‘(II) such qualified resident of 

20 Taiwan has held directly at least 10 

21 percent (by vote and value) of the total 

22 outstanding shares of stock in such cor23 poration. 

24 For purposes of subclause (II), a person 

25 shall be treated as directly holding a share 

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1 of stock during any period described in the 

2 preceding sentence if the share was held by 

3 a corporation from which such person later 

4 acquired that share and such corporation 

5 was, at the time the share was acquired, 

6 both a connected person to such person and 

7 a qualified resident of Taiwan. 

8 ‘‘(ii) EXCEPTION FOR RICS AND

9 REITS.—Notwithstanding clause (i), the re10 quirements of this subparagraph shall not 

11 be treated as met with respect to any divi12 dend paid by a regulated investment com13 pany or a real estate investment trust. 

14 ‘‘(2) QUALIFIED WAGES.— 

15 ‘‘(A) IN GENERAL.—No tax shall be imposed 

16 under this chapter (and no amount shall be 

17 withheld under section 1441(a) or chapter 24) 

18 with respect to qualified wages paid to a quali19 fied resident of Taiwan who— 

20 ‘‘(i) is not a resident of the United 

21 States (determined without regard to sub22 section (c)(3)(E)), or 

23 ‘‘(ii) is employed as a member of the 

24 regular component of a ship or aircraft op25 erated in international traffic. 

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1 ‘‘(B) QUALIFIED WAGES.— 

2 ‘‘(i) IN GENERAL.—The term ‘qualified 

3 wages’ means wages, salaries, or similar re4 munerations with respect to employment in5 volving the performance of personal services 

6 within the United States which— 

7 ‘‘(I) are paid by (or on behalf of) 

8 any employer other than a United 

9 States person, and 

10 ‘‘(II) are not borne by a United 

11 States permanent establishment of any 

12 person other than a United States per13 son. 

14 ‘‘(ii) EXCEPTIONS.—Such term shall 

15 not include directors’ fees, income derived as 

16 an entertainer or athlete, income derived as 

17 a student or trainee, pensions, amounts 

18 paid with respect to employment with the 

19 United States, any State (or political sub20 division thereof), or any possession of the 

21 United States (or any political subdivision 

22 thereof), or other amounts specified in regu23 lations or guidance under subsection 

24 (f)(1)(F). 

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1 ‘‘(3) INCOME DERIVED FROM ENTERTAINMENT

2 OR ATHLETIC ACTIVITIES.— 

3 ‘‘(A) IN GENERAL.—No tax shall be imposed 

4 under this chapter (and no amount shall be 

5 withheld under section 1441(a) or chapter 24) 

6 with respect to income derived by an entertainer 

7 or athlete who is a qualified resident of Taiwan 

8 from personal activities as such performed in the 

9 United States if the aggregate amount of gross 

10 receipts from such activities for the taxable year 

11 do not exceed $30,000. 

12 ‘‘(B) EXCEPTION.—Subparagraph (A) shall 

13 not apply with respect to— 

14 ‘‘(i) income which is qualified wages 

15 (as defined in paragraph (2)(B), deter16 mined without regard to clause (ii) thereof), 

17 or 

18 ‘‘(ii) income which is effectively con19 nected with a United States permanent es20 tablishment. 

21 ‘‘(b) INCOME CONNECTED WITH A UNITED STATES

22 PERMANENT ESTABLISHMENT OF A QUALIFIED RESIDENT

23 OF TAIWAN.— 

24 ‘‘(1) IN GENERAL.— 

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1 ‘‘(A) IN GENERAL.—In lieu of applying sec2 tions 871(b) and 882, a qualified resident of 

3 Taiwan that carries on a trade or business with4 in the United States through a United States 

5 permanent establishment shall be taxable as pro6 vided in section 1, 11, 55, or 59A, on its taxable 

7 income which is effectively connected with such 

8 permanent establishment. 

9 ‘‘(B) DETERMINATION OF TAXABLE IN10 COME.—In determining taxable income for pur11 poses of paragraph (1), gross income includes 

12 only gross income which is effectively connected 

13 with the permanent establishment. 

14 ‘‘(2) TREATMENT OF DISPOSITIONS OF UNITED

15 STATES REAL PROPERTY.—In the case of a qualified 

16 resident of Taiwan, section 897(a) shall be applied— 

17 ‘‘(A) by substituting ‘carried on a trade or 

18 business within the United States through a 

19 United States permanent establishment’ for ‘were 

20 engaged in a trade or business within the United 

21 States’, and 

22 ‘‘(B) by substituting ‘such United States 

23 permanent establishment’ for ‘such trade or busi24 ness’. 

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1 ‘‘(3) TREATMENT OF BRANCH PROFITS TAXES.— 

2 In the case of any corporation which is a qualified 

3 resident of Taiwan, section 884 shall be applied— 

4 ‘‘(A) by substituting ‘10 percent’ for ‘30 

5 percent ’ in subsection (a) thereof, and 

6 ‘‘(B) by substituting ‘a United States per7 manent establishment of a qualified resident of 

8 Taiwan’ for ‘the conduct of a trade or business 

9 within the United States’ in subsection (d)(1) 

10 thereof. 

11 ‘‘(4) SPECIAL RULE WITH RESPECT TO INCOME

12 DERIVED FROM CERTAIN ENTERTAINMENT OR ATH13 LETIC ACTIVITIES.— 

14 ‘‘(A) IN GENERAL.—Paragraph (1) shall 

15 not apply to the extent that the income is de16 rived— 

17 ‘‘(i) in respect of entertainment or ath18 letic activities performed in the United 

19 States, and 

20 ‘‘(ii) by a qualified resident of Taiwan 

21 who is not the entertainer or athlete per22 forming such activities. 

23 ‘‘(B) EXCEPTION.—Subparagraph (A) shall 

24 not apply if the person described in subpara25 graph (A)(ii) is contractually authorized to desVerDate Sep 11 2014 20:24 Dec 14, 2023 Jkt 049200 PO 00000 Frm 00011 Fmt 6652 Sfmt 6203 E:\BILLS\H5988.RH H5988
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1 ignate the individual who is to perform such ac2 tivities. 

3 ‘‘(5) SPECIAL RULE WITH RESPECT TO CERTAIN

4 AMOUNTS.—Paragraph (1) shall not apply to any in5 come which is wages, salaries, or similar remunera6 tion with respect to employment or with respect to 

7 any amount which is described in subsection 

8 (a)(2)(B)(ii). 

9 ‘‘(c) QUALIFIED RESIDENT OF TAIWAN.—For purposes 

10 of this section— 

11 ‘‘(1) IN GENERAL.—The term ‘qualified resident 

12 of Taiwan’ means any person who— 

13 ‘‘(A) is liable to tax under the laws of Tai14 wan by reason of such person’s domicile, resi15 dence, place of management, place of incorpora16 tion, or any similar criterion, 

17 ‘‘(B) is not a United States person (deter18 mined without regard to paragraph (3)(E)), and 

19 ‘‘(C) in the case of an entity taxed as a cor20 poration in Taiwan, meets the requirements of 

21 paragraph (2). 

22 ‘‘(2) LIMITATION ON BENEFITS FOR CORPORATE

23 ENTITIES OF TAIWAN.— 

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1 ‘‘(A) IN GENERAL.—Subject to subpara2 graphs (E) and (F), an entity meets the require3 ments of this paragraph only if it— 

4 ‘‘(i) meets the ownership and income 

5 requirements of subparagraph (B), 

6 ‘‘(ii) meets the publicly traded require7 ments of subparagraph (C), or 

8 ‘‘(iii) meets the qualified subsidiary re9 quirements of subparagraph (D). 

10 ‘‘(B) OWNERSHIP AND INCOME REQUIRE11 MENTS.—The requirements of this subparagraph 

12 are met for an entity if— 

13 ‘‘(i) at least 50 percent (by vote and 

14 value) of the total outstanding shares of 

15 stock in such entity are owned directly or 

16 indirectly by qualified residents of Taiwan, 

17 and 

18 ‘‘(ii) less than 50 percent of such enti19 ty’s gross income (and in the case of an en20 tity that is a member of a tested group, less 

21 than 50 percent of the tested group’s gross 

22 income) is paid or accrued, directly or indi23 rectly, in the form of payments that are de24 ductible for purposes of the income taxes 

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1 imposed by Taiwan, to persons who are 

2 not— 

3 ‘‘(I) qualified residents of Taiwan, 

4 or 

5 ‘‘(II) United States persons who 

6 meet such requirements with respect to 

7 the United States as determined by the 

8 Secretary to be equivalent to the re9 quirements of this subsection (deter10 mined without regard to paragraph 

11 (1)(B)) with respect to residents of 

12 Taiwan. 

13 ‘‘(C) PUBLICLY TRADED REQUIREMENTS.— 

14 An entity meets the requirements of this sub15 paragraph if— 

16 ‘‘(i) the principal class of its shares 

17 (and any disproportionate class of shares) 

18 of such entity are primarily and regularly 

19 traded on an established securities market 

20 in Taiwan, or 

21 ‘‘(ii) the primary place of management 

22 and control of the entity is in Taiwan and 

23 all classes of its outstanding shares de24 scribed in clause (i) are regularly traded on 

25 an established securities market in Taiwan. 

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1 ‘‘(D) QUALIFIED SUBSIDIARY REQUIRE2 MENTS.—An entity meets the requirement of this 

3 subparagraph if— 

4 ‘‘(i) at least 50 percent (by vote and 

5 value) of the total outstanding shares of the 

6 stock of such entity are owned directly or 

7 indirectly by 5 or fewer entities— 

8 ‘‘(I) which meet the requirements 

9 of subparagraph (C), or 

10 ‘‘(II) which are United States 

11 persons the principal class of the 

12 shares (and any disproportionate class 

13 of shares) of which are primarily and 

14 regularly traded on an established se15 curities market in the United States, 

16 and 

17 ‘‘(ii) the entity meets the requirements 

18 of clause (ii) of subparagraph (B). 

19 ‘‘(E) ONLY INDIRECT OWNERSHIP THROUGH

20 QUALIFYING INTERMEDIARIES COUNTED.— 

21 ‘‘(i) IN GENERAL.—Stock in an entity 

22 owned by a person indirectly through 1 or 

23 more other persons shall not be treated as 

24 owned by such person in determining 

25 whether the person meets the requirements 

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1 of subparagraph (B)(i) or (D)(i) unless all 

2 such other persons are qualifying inter3 mediate owners. 

4 ‘‘(ii) QUALIFYING INTERMEDIATE OWN5 ERS.—The term ‘qualifying intermediate 

6 owner’ means a person that is— 

7 ‘‘(I) a qualified resident of Tai8 wan, or 

9 ‘‘(II) a resident of any other for10 eign country (other than a foreign 

11 country that is a foreign country of 

12 concern) that has in effect a com13 prehensive convention with the United 

14 States for the avoidance of double tax15 ation. 

16 ‘‘(iii) SPECIAL RULE FOR QUALIFIED

17 SUBSIDIARIES.—For purposes of applying 

18 subparagraph (D)(i), the term ‘qualifying 

19 intermediate owner’ shall include any per20 son who is a United States person who 

21 meets such requirements with respect to the 

22 United States as determined by the Sec23 retary to be equivalent to the requirements 

24 of this subsection (determined without reVerDate Sep 11 2014 20:24 Dec 14, 2023 Jkt 049200 PO 00000 Frm 00016 Fmt 6652 Sfmt 6203 E:\BILLS\H5988.RH H5988
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1 gard to paragraph (1)(B)) with respect to 

2 residents of Taiwan. 

3 ‘‘(F) CERTAIN PAYMENTS NOT INCLUDED.— 

4 In determining whether the requirements of sub5 paragraph (B)(ii) or (D)(ii) are met with re6 spect to an entity, the following payments shall 

7 not be taken into account: 

8 ‘‘(i) Arm’s-length payments by the en9 tity in the ordinary course of business for 

10 services or tangible property. 

11 ‘‘(ii) In the case of a tested group, 

12 intra-group transactions. 

13 ‘‘(3) DUAL RESIDENTS.— 

14 ‘‘(A) RULES FOR DETERMINATION OF STA15 TUS.— 

16 ‘‘(i) IN GENERAL.—An individual who 

17 is an applicable dual resident and who is 

18 described in subparagraph (B), (C), or (D) 

19 shall be treated as a qualified resident of 

20 Taiwan. 

21 ‘‘(ii) APPLICABLE DUAL RESIDENT.— 

22 For purposes of this paragraph, the term 

23 ‘applicable dual resident’ means an indi24 vidual who— 

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1 ‘‘(I) is not a United States cit2 izen, 

3 ‘‘(II) is a resident of the United 

4 States (determined without regard to 

5 subparagraph (E)), and 

6 ‘‘(III) would be a qualified resi7 dent of Taiwan but for paragraph 

8 (1)(B). 

9 ‘‘(B) PERMANENT HOME.—An individual is 

10 described in this subparagraph if such indi11 vidual— 

12 ‘‘(i) has a permanent home available to 

13 such individual in Taiwan, and 

14 ‘‘(ii) does not have a permanent home 

15 available to such individual in the United 

16 States. 

17 ‘‘(C) CENTER OF VITAL INTERESTS.—An 

18 individual is described in this subparagraph if— 

19 ‘‘(i) such individual has a permanent 

20 home available to such individual in both 

21 Taiwan and the United States, and 

22 ‘‘(ii) such individual’s personal and 

23 economic relations (center of vital interests) 

24 are closer to Taiwan than to the United 

25 States. 

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1 ‘‘(D) HABITUAL ABODE.—An individual is 

2 described in this subparagraph if— 

3 ‘‘(i) such individual— 

4 ‘‘(I) does not have a permanent 

5 home available to such individual in 

6 either Taiwan or the United States, or 

7 ‘‘(II) has a permanent home 

8 available to such individual in both 

9 Taiwan and the United States but 

10 such individual’s center of vital inter11 ests under subparagraph (C)(ii) cannot 

12 be determined, and 

13 ‘‘(ii) such individual has a habitual 

14 abode in Taiwan and not the United States. 

15 ‘‘(E) UNITED STATES TAX TREATMENT OF

16 QUALIFIED RESIDENT OF TAIWAN.—Notwith17 standing section 7701, an individual who is 

18 treated as a qualified resident of Taiwan by rea19 son of this paragraph for all or any portion of 

20 a taxable year shall not be treated as a resident 

21 of the United States for purposes of computing 

22 such individual’s United States income tax li23 ability for such taxable year or portion thereof. 

24 ‘‘(4) RULES OF SPECIAL APPLICATION.— 

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1 ‘‘(A) DIVIDENDS.—For purposes of apply2 ing this section to any dividend, paragraph 

3 (2)(D) shall be applied without regard to clause 

4 (ii) thereof. 

5 ‘‘(B) ITEMS OF INCOME EMANATING FROM

6 AN ACTIVE TRADE OR BUSINESS IN TAIWAN.— 

7 For purposes of this section— 

8 ‘‘(i) IN GENERAL.—Notwithstanding 

9 the preceding paragraphs of this subsection, 

10 if an entity taxed as a corporation in Tai11 wan is not a qualified resident of Taiwan 

12 but meets the requirements of subpara13 graphs (A) and (B) of paragraph (1), any 

14 qualified item of income such entity derived 

15 from the United States shall be treated as 

16 income of a qualified resident of Taiwan. 

17 ‘‘(ii) QUALIFIED ITEMS OF INCOME.— 

18 ‘‘(I) IN GENERAL.—The term 

19 ‘qualified item of income’ means any 

20 item of income which emanates from, 

21 or is incidental to, the conduct of an 

22 active trade or business in Taiwan 

23 (other than operating as a holding 

24 company, providing overall super25 vision or administration of a group of 

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1 companies, providing group financing, 

2 or making or managing investments 

3 (unless such making or managing in4 vestments is carried on by a bank, in5 surance company, or registered securi6 ties dealer in the ordinary course of its 

7 business as such)). 

8 ‘‘(II) SUBSTANTIAL ACTIVITY RE9 QUIREMENT.—An item of income 

10 which is derived from a trade or busi11 ness conducted in the United States or 

12 from a connected person shall be a 

13 qualified item of income only if the 

14 trade or business activity conducted in 

15 Taiwan to which the item is related is 

16 substantial in relation to the same or 

17 a complementary trade or business ac18 tivity carried on in the United States. 

19 For purposes of applying this sub20 clause, activities conducted by persons 

21 that are connected to the entity de22 scribed in clause (i) shall be deemed to 

23 be conducted by such entity. 

24 ‘‘(iii) EXCEPTION.—This subparagraph 

25 shall not apply to any item of income deVerDate Sep 11 2014 20:24 Dec 14, 2023 Jkt 049200 PO 00000 Frm 00021 Fmt 6652 Sfmt 6203 E:\BILLS\H5988.RH H5988
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1 rived by an entity if at least 50 percent (by 

2 vote or value) of such entity is owned (di3 rectly or indirectly) or controlled by resi4 dents of a foreign country of concern. 

5 ‘‘(d) OTHER DEFINITIONS AND SPECIAL RULES.—For 

6 purposes of this section— 

7 ‘‘(1) UNITED STATES PERMANENT ESTABLISH8 MENT.— 

9 ‘‘(A) IN GENERAL.—The term ‘United 

10 States permanent establishment’ means, with re11 spect to a qualified resident of Taiwan, a perma12 nent establishment of such resident which is 

13 within the United States. 

14 ‘‘(B) SPECIAL RULE.—The determination of 

15 whether there is a permanent establishment of a 

16 qualified resident of Taiwan within the United 

17 States shall be made without regard to whether 

18 an entity which is taxed as a corporation in 

19 Taiwan and which is a qualified resident of Tai20 wan controls or is controlled by— 

21 ‘‘(i) a domestic corporation, or 

22 ‘‘(ii) any other person that carries on 

23 business in the United States (whether 

24 through a permanent establishment or oth25 erwise). 

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1 ‘‘(2) PERMANENT ESTABLISHMENT.— 

2 ‘‘(A) IN GENERAL.—The term ‘permanent 

3 establishment’ means a fixed place of business 

4 through which a trade or business is wholly or 

5 partly carried on. Such term shall include— 

6 ‘‘(i) a place of management, 

7 ‘‘(ii) a branch, 

8 ‘‘(iii) an office, 

9 ‘‘(iv) a factory, 

10 ‘‘(v) a workshop, and 

11 ‘‘(vi) a mine, an oil or gas well, a 

12 quarry, or any other place of extraction of 

13 natural resources. 

14 ‘‘(B) SPECIAL RULES FOR CERTAIN TEM15 PORARY PROJECTS.— 

16 ‘‘(i) IN GENERAL.—A building site or 

17 construction or installation project, or an 

18 installation or drilling rig or ship used for 

19 the exploration or exploitation of the sea bed 

20 and its subsoil and their natural resources, 

21 constitutes a permanent establishment only 

22 if it lasts, or the activities of the rig or ship 

23 lasts, for more than 12 months. 

24 ‘‘(ii) DETERMINATION OF 12-MONTH

25 PERIOD.—For purposes of clause (i), the peVerDate Sep 11 2014 20:24 Dec 14, 2023 Jkt 049200 PO 00000 Frm 00023 Fmt 6652 Sfmt 6203 E:\BILLS\H5988.RH H5988
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1 riod over which a building site or construc2 tion or installation project of a person lasts 

3 shall include any period of more than 30 

4 days during which such person does not 

5 carry on activities at such building site or 

6 construction or installation project but con7 nected activities are carried on at such 

8 building site or construction or installation 

9 project by one or more connected persons. 

10 ‘‘(C) HABITUAL EXERCISE OF CONTRACT

11 AUTHORITY TREATED AS PERMANENT ESTAB12 LISHMENT.—Notwithstanding subparagraphs (A) 

13 and (B), where a person (other than an agent of 

14 an independent status to whom subparagraph 

15 (D)(ii) applies) is acting on behalf of a trade or 

16 business of a qualified resident of Taiwan and 

17 has and habitually exercises an authority to con18 clude contracts that are binding on the trade or 

19 business, that trade or business shall be deemed 

20 to have a permanent establishment in the coun21 try in which such authority is exercised in re22 spect of any activities that the person undertakes 

23 for the trade or business, unless the activities of 

24 such person are limited to those described in sub25 paragraph (D)(i) that, if exercised through a 

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1 fixed place of business, would not make this fixed 

2 place of business a permanent establishment 

3 under the provisions of that subparagraph. 

4 ‘‘(D) EXCLUSIONS.— 

5 ‘‘(i) IN GENERAL.—Notwithstanding 

6 subparagraphs (A) and (B), the term ‘per7 manent establishment’ shall not include— 

8 ‘‘(I) the use of facilities solely for 

9 the purpose of storage, display, or de10 livery of goods or merchandise belong11 ing to the trade or business, 

12 ‘‘(II) the maintenance of a stock 

13 of goods or merchandise belonging to 

14 the trade or business solely for the pur15 pose of storage, display, or delivery, 

16 ‘‘(III) the maintenance of a stock 

17 of goods or merchandise belonging to 

18 the trade or business solely for the pur19 pose of processing by another trade or 

20 business, 

21 ‘‘(IV) the maintenance of a fixed 

22 place of business solely for the purpose 

23 of purchasing goods or merchandise, or 

24 of collecting information, for the trade 

25 or business, 

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1 ‘‘(V) the maintenance of a fixed 

2 place of business solely for the purpose 

3 of carrying on, for the trade or busi4 ness, any other activity of a pre5 paratory or auxiliary character, or 

6 ‘‘(VI) the maintenance of a fixed 

7 place of business solely for any com8 bination of the activities mentioned in 

9 subclauses (I) through (V), provided 

10 that the overall activity of the fixed 

11 place of business resulting from this 

12 combination is of a preparatory or 

13 auxiliary character. 

14 ‘‘(ii) BROKERS AND OTHER INDE15 PENDENT AGENTS.—A trade or business 

16 shall not be considered to have a permanent 

17 establishment in a country merely because 

18 it carries on business in such country 

19 through a broker, general commission agent, 

20 or any other agent of an independent sta21 tus, provided that such persons are acting 

22 in the ordinary course of their business as 

23 independent agents. 

24 ‘‘(3) TESTED GROUP.—The term ‘tested group’ 

25 includes, with respect to any entity taxed as a corVerDate Sep 11 2014 20:24 Dec 14, 2023 Jkt 049200 PO 00000 Frm 00026 Fmt 6652 Sfmt 6203 E:\BILLS\H5988.RH H5988
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1 poration in Taiwan, such entity and any other entity 

2 taxed as a corporation in Taiwan that— 

3 ‘‘(A) participates as a member with such 

4 entity in a tax consolidation, fiscal unity, or 

5 similar regime that requires members of the 

6 group to share profits or losses, or 

7 ‘‘(B) shares losses with such entity pursuant 

8 to a group relief or other loss sharing regime. 

9 ‘‘(4) CONNECTED PERSON.—Two persons shall be 

10 ‘connected persons’ if one owns, directly or indirectly, 

11 at least 50 percent of the interests in the other (or, 

12 in the case of a corporation, at least 50 percent of the 

13 aggregate vote and value of the corporation’s shares) 

14 or another person owns, directly or indirectly, at least 

15 50 percent of the interests (or, in the case of a cor16 poration, at least 50 percent of the aggregate vote and 

17 value of the corporation’s shares) in each person. In 

18 any case, a person shall be connected to another if, 

19 based on all the relevant facts and circumstances, one 

20 has control of the other or both are under the control 

21 of the same person or persons. 

22 ‘‘(5) FOREIGN COUNTRY OF CONCERN.—The term 

23 ‘foreign country of concern’ has the meaning given 

24 such term under paragraph (7) of section 9901 of the 

25 William M. (Mac) Thornberry National Defense AuVerDate Sep 11 2014 20:24 Dec 14, 2023 Jkt 049200 PO 00000 Frm 00027 Fmt 6652 Sfmt 6203 E:\BILLS\H5988.RH H5988
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1 thorization Act for Fiscal Year 2021 (15 U.S.C. 

2 4651(7)), as added by section 103(a)(4) of the CHIPS 

3 Act of 2022). 

4 ‘‘(6) PARTNERSHIPS; BENEFICIARIES OF ES5 TATES AND TRUSTS.—For purposes of this section— 

6 ‘‘(A) a qualified resident of Taiwan which 

7 is a partner of a partnership which carries on 

8 a trade or business within the United States 

9 through a United States permanent establish10 ment shall be treated as carrying on such trade 

11 or business through such permanent establish12 ment, and 

13 ‘‘(B) a qualified resident of Taiwan which 

14 is a beneficiary of an estate or trust which car15 ries on a trade or business within the United 

16 States through a United States permanent estab17 lishment shall be treated as carrying on such 

18 trade or business through such permanent estab19 lishment. 

20 ‘‘(7) DENIAL OF BENEFITS FOR CERTAIN PAY21 MENTS THROUGH HYBRID ENTITIES.—For purposes of 

22 this section, rules similar to the rules of section 894(c) 

23 shall apply. 

24 ‘‘(e) APPLICATION.— 

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1 ‘‘(1) IN GENERAL.—This section shall not apply 

2 to any period unless the Secretary has determined 

3 that Taiwan has provided benefits to United States 

4 persons for such period that are reciprocal to the ben5 efits provided to qualified residents of Taiwan under 

6 this section. 

7 ‘‘(2) PROVISION OF RECIPROCITY.—The Presi8 dent or his designee is authorized to exchange letters, 

9 enter into an agreement, or take other necessary and 

10 appropriate steps relative to Taiwan for the recip11 rocal provision of the benefits described in this sec12 tion. 

13 ‘‘(f) REGULATIONS OR OTHER GUIDANCE.— 

14 ‘‘(1) IN GENERAL.—The Secretary shall issue 

15 such regulations or other guidance as may be nec16 essary or appropriate to carry out the provisions of 

17 this section, including such regulations or guidance 

18 for— 

19 ‘‘(A) determining— 

20 ‘‘(i) what constitutes a United States 

21 permanent establishment of a qualified resi22 dent of Taiwan, and 

23 ‘‘(ii) income that is effectively con24 nected with such a permanent establish25 ment, 

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1 ‘‘(B) preventing the abuse of the provisions 

2 of this section by persons who are not (or who 

3 should not be treated as) qualified residents of 

4 Taiwan, 

5 ‘‘(C) requirements for record keeping and 

6 reporting, 

7 ‘‘(D) rules to assist withholding agents or 

8 employers in determining whether a foreign per9 son is a qualified resident of Taiwan for pur10 poses of determining whether withholding or re11 porting is required for a payment (and, if with12 holding is required, whether it should be applied 

13 at a reduced rate), 

14 ‘‘(E) the application of subsection 

15 (a)(1)(D)(i) to stock held by predecessor owners, 

16 ‘‘(F) determining what amounts are to be 

17 treated as qualified wages for purposes of sub18 section (a)(2), 

19 ‘‘(G) determining the amounts to which sub20 section (a)(3) applies, 

21 ‘‘(H) defining established securities market 

22 for purposes of subsection (c), 

23 ‘‘(I) the application of the rules of sub24 section (c)(4)(B), 

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1 ‘‘(J) the application of subsection (d)(6) 

2 and section 1446, 

3 ‘‘(K) determining ownership interests held 

4 by residents of a foreign country of concern, and 

5 ‘‘(L) determining the starting and ending 

6 dates for periods with respect to the application 

7 of this section under subsection (e), which may 

8 be separate dates for taxes withheld at the source 

9 and other taxes. 

10 ‘‘(2) REGULATIONS TO BE CONSISTENT WITH

11 MODEL TREATY.—Any regulations or other guidance 

12 issued under this section shall, to the extent practical, 

13 be consistent with the provisions of the United States 

14 model income tax convention dated February 7, 

15 2016.’’. 

16 (b) CONFORMING AMENDMENT TO WITHHOLDING

17 TAX.—Subchapter A of chapter 3 of the Internal Revenue 

18 Code of 1986 is amended by adding at the end the following 

19 new section: 

20 ‘‘SEC. 1447. WITHHOLDING FOR QUALIFIED RESIDENTS OF 

21 TAIWAN. 

22 ‘‘For reduced rates of withholding for certain residents 

23 of Taiwan, see section 894A.’’. 

24 (c) CLERICAL AMENDMENTS.— 

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1 (1) The table of sections for subpart D of part 

2 II of subchapter N of chapter 1 of the Internal Rev3 enue Code of 1986 is amended by inserting after the 

4 item relating to section 894 the following new item: 

‘‘Sec. 894A. Special rules for qualified residents of Taiwan.’’. 

5 (2) The table of sections for subchapter A of 

6 chapter 3 of such Code is amended by adding at the 

7 end the following new item: 

‘‘Sec. 1447. Withholding for qualified residents of Taiwan.’’. 

8 TITLE II—UNITED STATES-TAI9 WAN TAX AGREEMENT AU10 THORIZATION ACT 

11 SEC. 201. SHORT TITLE. 

12 This title may be cited as the ‘‘United States-Taiwan 

13 Tax Agreement Authorization Act’’. 

14 SEC. 202. DEFINITIONS. 

15 In this title: 

16 (1) AGREEMENT.—The term ‘‘Agreement’’ means 

17 the tax agreement authorized by section 203(a). 

18 (2) APPROPRIATE CONGRESSIONAL COMMIT19 TEES.—The term ‘‘appropriate congressional commit20 tees’’ means— 

21 (A) the Committee on Foreign Relations 

22 and the Committee on Finance of the Senate; 

23 and 

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1 (B) the Committee on Ways and Means of 

2 the House of Representatives. 

3 (3) APPROVAL LEGISLATION.—The term ‘‘ap4 proval legislation’’ means legislation that approves 

5 the Agreement. 

6 (4) IMPLEMENTING LEGISLATION.—The term 

7 ‘‘implementing legislation’’ means legislation that 

8 makes any changes to the Internal Revenue Code of 

9 1986 necessary to implement the Agreement. 

10 SEC. 203. AUTHORIZATION TO NEGOTIATE AND ENTER 

11 INTO AGREEMENT. 

12 (a) IN GENERAL.—Subsequent to a determination 

13 under section 894A(e)(1) of the Internal Revenue Code of 

14 1986 (as added by the United States-Taiwan Expedited 

15 Double-Tax Relief Act), the President is authorized to nego16 tiate and enter into a tax agreement relative to Taiwan. 

17 (b) ELEMENTS OF AGREEMENT.— 

18 (1) CONFORMITY WITH BILATERAL INCOME TAX

19 CONVENTIONS.—The President shall ensure that— 

20 (A) any provisions included in the Agree21 ment conform with provisions customarily con22 tained in United States bilateral income tax 

23 conventions, as exemplified by the 2016 United 

24 States Model Income Tax Convention; and 

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1 (B) the Agreement does not include elements 

2 outside the scope of the 2016 United States 

3 Model Income Tax Convention. 

4 (2) INCORPORATION OF TAX AGREEMENTS AND

5 LAWS.—Notwithstanding paragraph (1), the Agree6 ment may incorporate and restate provisions of any 

7 agreement, or existing United States law, addressing 

8 double taxation for residents of the United States and 

9 Taiwan. 

10 (3) AUTHORITY.—The Agreement shall include 

11 the following statement: ‘‘The Agreement is entered 

12 into pursuant to the United States-Taiwan Tax 

13 Agreement Authorization Act.’’ 

14 (4) ENTRY INTO FORCE.—The Agreement shall 

15 include a provision conditioning entry into force 

16 upon— 

17 (A) enactment of approval legislation and 

18 implementing legislation pursuant to section 

19 207; and 

20 (B) confirmation by the Secretary of the 

21 Treasury that the relevant authority in Taiwan 

22 has approved and taken appropriate steps re23 quired to implement the Agreement. 

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1 SEC. 204. CONSULTATIONS WITH CONGRESS. 

2 (a) NOTIFICATION UPON COMMENCEMENT OF NEGO3 TIATIONS.—The President shall provide written notification 

4 to the appropriate congressional committees of the com5 mencement of negotiations between the United States and 

6 Taiwan on the Agreement at least 15 calendar days before 

7 commencing such negotiations. 

8 (b) CONSULTATIONS DURING NEGOTIATIONS.— 

9 (1) BRIEFINGS.—Not later than 90 days after 

10 commencement of negotiations with respect to the 

11 Agreement, and every 180 days thereafter until the 

12 President enters into the Agreement, the President 

13 shall provide a briefing to the appropriate congres14 sional committees on the status of the negotiations, 

15 including a description of elements under negotiation. 

16 (2) MEETINGS AND OTHER CONSULTATIONS.— 

17 (A) IN GENERAL.—In the course of negotia18 tions with respect to the Agreement, the Sec19 retary of the Treasury, in coordination with the 

20 Secretary of State, shall— 

21 (i) meet, upon request, with the chair22 man or ranking member of any of the ap23 propriate congressional committees regard24 ing negotiating objectives and the status of 

25 negotiations in progress; and 

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1 (ii) consult closely and on a timely 

2 basis with, and keep fully apprised of the 

3 negotiations, the appropriate congressional 

4 committees. 

5 (B) ELEMENTS OF CONSULTATIONS.—The 

6 consultations described in subparagraph (A) 

7 shall include consultations with respect to— 

8 (i) the nature of the contemplated 

9 Agreement; 

10 (ii) how and to what extent the con11 templated Agreement is consistent with the 

12 elements set forth in section 203(b); and 

13 (iii) the implementation of the con14 templated Agreement, including— 

15 (I) the general effect of the con16 templated Agreement on existing laws; 

17 (II) proposed changes to any ex18 isting laws to implement the con19 templated Agreement; and 

20 (III) proposed administrative ac21 tions to implement the contemplated 

22 Agreement. 

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1 SEC. 205. APPROVAL AND IMPLEMENTATION OF AGREE2 MENT. 

3 (a) IN GENERAL.—The Agreement may not enter into 

4 force unless— 

5 (1) the President, at least 60 days before the day 

6 on which the President enters into the Agreement, 

7 publishes the text of the contemplated Agreement on 

8 a publicly available website of the Department of the 

9 Treasury; and 

10 (2) there is enacted into law, with respect to the 

11 Agreement, approval legislation and implementing 

12 legislation pursuant to section 207. 

13 (b) ENTRY INTO FORCE.—The President may provide 

14 for the Agreement to enter into force upon— 

15 (1) enactment of approval legislation and imple16 menting legislation pursuant to section 207; and 

17 (2) confirmation by the Secretary of the Treas18 ury that the relevant authority in Taiwan has ap19 proved and taken appropriate steps required to imple20 ment the Agreement. 

21 SEC. 206. SUBMISSION TO CONGRESS OF AGREEMENT AND 

22 IMPLEMENTATION POLICY. 

23 (a) SUBMISSION OF AGREEMENT.—Not later than 270 

24 days after the President enters into the Agreement, the 

25 President or the President’s designee shall submit to Con26 gress— 

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1 (1) the final text of the Agreement; and 

2 (2) a technical explanation of the Agreement. 

3 (b) SUBMISSION OF IMPLEMENTATION POLICY.—Not 

4 later than 270 days after the President enters into the 

5 Agreement, the Secretary of the Treasury shall submit to 

6 Congress— 

7 (1) a description of those changes to existing 

8 laws that the President considers would be required in 

9 order to ensure that the United States acts in a man10 ner consistent with the Agreement; and 

11 (2) a statement of anticipated administrative ac12 tion proposed to implement the Agreement. 

13 SEC. 207. CONSIDERATION OF APPROVAL LEGISLATION 

14 AND IMPLEMENTING LEGISLATION. 

15 (a) IN GENERAL.—The approval legislation with re16 spect to the Agreement shall include the following: ‘‘Con17 gress approves the Agreement submitted to Congress pursu18 ant to section 206 of the United States-Taiwan Tax Agree19 ment Authorization Act on llll.’’, with the blank 

20 space being filled with the appropriate date. 

21 (b) APPROVAL LEGISLATION COMMITTEE REFER22 RAL.—The approval legislation shall— 

23 (1) in the Senate, be referred to the Committee 

24 on Foreign Relations; and 

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1 (2) in the House of Representaives, be referred to 

2 the Committee on Ways and Means. 

3 (c) IMPLEMENTING LEGISLATION COMMITTEE REFER4 RAL.—The implementing legislation shall— 

5 (1) in the Senate, be referred to the Committee 

6 on Finance; and 

7 (2) in the House of Representatives, be referred 

8 to the Committee on Ways and Means. 

9 SEC. 208. RELATIONSHIP OF AGREEMENT TO INTERNAL 

10 REVENUE CODE OF 1986. 

11 (a) INTERNAL REVENUE CODE OF 1986 TO CON12 TROL.—No provision of the Agreement or approval legisla13 tion, nor the application of any such provision to any per14 son or circumstance, which is inconsistent with any provi15 sion of the Internal Revenue Code of 1986, shall have effect. 

16 (b) CONSTRUCTION.—Nothing in this title shall be con17 strued— 

18 (1) to amend or modify any law of the United 

19 States; or 

20 (2) to limit any authority conferred under any 

21 law of the United States, 

22 unless specifically provided for in this title. 

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1 SEC. 209. AUTHORIZATION OF SUBSEQUENT TAX AGREE2 MENTS RELATIVE TO TAIWAN. 

3 (a) IN GENERAL.—Subsequent to the enactment of ap4 proval legislation and implementing legislation pursuant 

5 to section 207— 

6 (1) the term ‘‘tax agreement’’ in section 203(a) 

7 shall be treated as including any tax agreement rel8 ative to Taiwan which supplements or supersedes the 

9 Agreement to which such approval legislation and im10 plementing legislation relates, and 

11 (2) the term ‘‘Agreement’’ shall be treated as in12 cluding such tax agreement. 

13 (b) REQUIREMENTS, ETC., TO APPLY SEPARATELY.— 

14 The provisions of this title (including section 204) shall be 

15 applied separately with respect to each tax agreement re16 ferred to in subsection (a). 

17 SEC. 210. UNITED STATES TREATMENT OF DOUBLE TAX18 ATION MATTERS WITH RESPECT TO TAIWAN. 

19 (a) FINDINGS.—Congress makes the following findings: 

20 (1) The United States addresses issues with re21 spect to double taxation with foreign countries by en22 tering into bilateral income tax conventions (known 

23 as tax treaties) with such countries, subject to the ad24 vice and consent of the Senate to ratification pursu25 ant to article II of the Constitution. 

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1 (2) The United States has entered into more 

2 than sixty such tax treaties, which facilitate economic 

3 activity, strengthen bilateral cooperation, and benefit 

4 United States workers, businesses, and other United 

5 States taxpayers. 

6 (3) Due to Taiwan’s unique status, the United 

7 States is unable to enter into an article II tax treaty 

8 with Taiwan, necessitating an agreement to address 

9 issues with respect to double taxation. 

10 (b) STATEMENT OF POLICY.—It is the policy of the 

11 United States to— 

12 (1) provide for additional bilateral tax relief 

13 with respect to Taiwan, beyond that provided for in 

14 section 894A of the Internal Revenue Code of 1986 (as 

15 added by the United States-Taiwan Expedited Dou16 ble-Tax Relief Act), only after entry into force of an 

17 Agreement, as provided for in section 205, and only 

18 in a manner consistent with such Agreement; and 

19 (2) continue to provide for bilateral tax relief 

20 with sovereign states to address double taxation and 

21 other related matters through entering into bilateral 

22 income tax conventions, subject to the Senate’s advice 

23 and consent to ratification pursuant to article II of 

24 the Constitution. 

Union Calendar No. 249 

118TH CONGRESS 

1ST SESSION H. R. 5988 

[Report No. 118–309] 

A BILL 

To amend the Internal Revenue Code of 1986 to 

within the United States. residents of Taiwan with income from sources provide special rules for the taxation of certain 

DECEMBER 12, 2023 

Reported with an amendment, committed to the Comand ordered to be printed mittee of the Whole House on the State of the Union,