‘‘(II) which are United States 
persons the principal class of the 
shares (and any disproportionate class 
of shares) of which are primarily and 
regularly traded on an established se-
curities market in the United States, 
and 
‘‘(ii) the entity meets the require-
ments of clause (ii) of subparagraph (B). 
‘‘(E) 
ONLY
INDIRECT
OWNERSHIP 
THROUGH
QUALIFYING
INTERMEDIARIES 
COUNTED.— 
‘‘(i) IN GENERAL.—Stock in an entity 
owned by a person indirectly through 1 or 
more other persons shall not be treated as 
owned by such person in determining 
whether the person meets the requirements 
of subparagraph (B)(i) or (D)(i) unless all 
such other persons are qualifying inter-
mediate owners. 
‘‘(ii) 
QUALIFYING
INTERMEDIATE 
OWNERS.—The 
term 
‘qualifying 
inter-
mediate owner’ means a person that is— 
‘‘(I) a qualified resident of Tai-
wan, or 
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‘‘(II) a resident of any other for-
eign country (other than a foreign 
country that is a foreign country of 
concern) that has in effect a com-
prehensive convention with the United 
States for the avoidance of double tax-
ation. 
‘‘(iii) SPECIAL RULE FOR QUALIFIED 
SUBSIDIARIES.—For purposes of applying 
subparagraph (D)(i), the term ‘qualifying 
intermediate owner’ shall include any per-
son who is a United States person who 
meets such requirements with respect to 
the United States as determined by the 
Secretary to be equivalent to the require-
ments of this subsection (determined with-
out regard to paragraph (1)(B)) with re-
spect to residents of Taiwan. 
‘‘(F) 
CERTAIN
PAYMENTS
NOT
IN-
CLUDED.—In determining whether the require-
ments of subparagraph (B)(ii) or (D)(ii) are 
met with respect to an entity, the following pay-
ments shall not be taken into account: 
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‘‘(i) Arm’s-length payments by the en-
tity in the ordinary course of business for 
services or tangible property. 
‘‘(ii) In the case of a tested group, 
intra-group transactions. 
‘‘(3) DUAL RESIDENTS.— 
‘‘(A) RULES FOR DETERMINATION OF STA-
TUS.— 
‘‘(i) IN GENERAL.—An individual who 
is an applicable dual resident and who is 
described in subparagraph (B), (C), or (D) 
shall be treated as a qualified resident of 
Taiwan. 
‘‘(ii) APPLICABLE DUAL RESIDENT.— 
For purposes of this paragraph, the term 
‘applicable dual resident’ means an indi-
vidual who— 
‘‘(I) is not a United States cit-
izen, 
‘‘(II) is a resident of the United 
States (determined without regard to 
subparagraph (E)), and 
‘‘(III) would be a qualified resi-
dent of Taiwan but for paragraph 
(1)(B). 
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‘‘(B) PERMANENT
HOME.—An individual 
is described in this subparagraph if such indi-
vidual— 
‘‘(i) has a permanent home available 
to such individual in Taiwan, and 
‘‘(ii) does not have a permanent home 
available to such individual in the United 
States. 
‘‘(C) CENTER OF VITAL INTERESTS.—An 
individual is described in this subparagraph if— 
‘‘(i) such individual has a permanent 
home available to such individual in both 
Taiwan and the United States, and 
‘‘(ii) such individual’s personal and 
economic relations (center of vital inter-
ests) are closer to Taiwan than to the 
United States. 
‘‘(D) HABITUAL ABODE.—An individual is 
described in this subparagraph if— 
‘‘(i) such individual— 
‘‘(I) does not have a permanent 
home available to such individual in 
either Taiwan or the United States, or 
‘‘(II) has a permanent home 
available to such individual in both 
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Taiwan and the United States but 
such individual’s center of vital inter-
ests under subparagraph (C)(ii) can-
not be determined, and 
‘‘(ii) such individual has a habitual 
abode in Taiwan and not the United 
States. 
‘‘(E) UNITED STATES TAX TREATMENT OF 
QUALIFIED
RESIDENT
OF
TAIWAN.—Notwith-
standing section 7701, an individual who is 
treated as a qualified resident of Taiwan by 
reason of this paragraph for all or any portion 
of a taxable year shall not be treated as a resi-
dent of the United States for purposes of com-
puting such individual’s United States income 
tax liability for such taxable year or portion 
thereof. 
‘‘(4) RULES OF SPECIAL APPLICATION.— 
‘‘(A) DIVIDENDS.—For purposes of apply-
ing this section to any dividend, paragraph 
(2)(D) shall be applied without regard to clause 
(ii) thereof. 
‘‘(B) ITEMS OF INCOME EMANATING FROM 
AN ACTIVE TRADE OR BUSINESS IN TAIWAN.— 
For purposes of this section— 
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‘‘(i) IN
GENERAL.—Notwithstanding 
the preceding paragraphs of this sub-
section, if an entity taxed as a corporation 
in Taiwan is not a qualified resident of 
Taiwan but meets the requirements of sub-
paragraphs (A) and (B) of paragraph (1), 
any qualified item of income such entity 
derived from the United States shall be 
treated as income of a qualified resident of 
Taiwan. 
‘‘(ii) QUALIFIED ITEMS OF INCOME.— 
‘‘(I) IN
GENERAL.—The term 
‘qualified item of income’ means any 
item of income which emanates from, 
or is incidental to, the conduct of an 
active trade or business in Taiwan 
(other than operating as a holding 
company, providing overall supervision 
or administration of a group of com-
panies, providing group financing, or 
making or managing investments (un-
less such making or managing invest-
ments is carried on by a bank, insur-
ance company, or registered securities 
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dealer in the ordinary course of its 
business as such)). 
‘‘(II) SUBSTANTIAL ACTIVITY RE-
QUIREMENT.—An 
item 
of 
income 
which is derived from a trade or busi-
ness conducted in the United States 
or from a connected person shall be a 
qualified item of income only if the 
trade or business activity conducted in 
Taiwan to which the item is related is 
substantial in relation to the same or 
a complementary trade or business ac-
tivity carried on in the United States. 
For purposes of applying this sub-
clause, activities conducted by persons 
that are connected to the entity de-
scribed in clause (i) shall be deemed 
to be conducted by such entity. 
‘‘(iii) 
EXCEPTION.—This 
subpara-
graph shall not apply to any item of in-
come derived by an entity if at least 50 
percent (by vote or value) of such entity is 
owned (directly or indirectly) or controlled 
by residents of a foreign country of con-
cern. 
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‘‘(d) OTHER DEFINITIONS AND SPECIAL RULES.— 
For purposes of this section— 
‘‘(1) UNITED STATES PERMANENT ESTABLISH-
MENT.— 
‘‘(A) IN
GENERAL.—The term ‘United 
States permanent establishment’ means, with 
respect to a qualified resident of Taiwan, a per-
manent establishment of such resident which is 
within the United States. 
‘‘(B) SPECIAL RULE.—The determination 
of whether there is a permanent establishment 
of a qualified resident of Taiwan within the 
United States shall be made without regard to 
whether an entity which is taxed as a corpora-
tion in Taiwan and which is a qualified resident 
of Taiwan controls or is controlled by— 
‘‘(i) a domestic corporation, or 
‘‘(ii) any other person that carries on 
business in the United States (whether 
through a permanent establishment or oth-
erwise). 
‘‘(2) PERMANENT ESTABLISHMENT.— 
‘‘(A) IN GENERAL.—The term ‘permanent 
establishment’ means a fixed place of business 
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through which a trade or business is wholly or 
partly carried on. Such term shall include— 
‘‘(i) a place of management, 
‘‘(ii) a branch, 
‘‘(iii) an office, 
‘‘(iv) a factory, 
‘‘(v) a workshop, and 
‘‘(vi) a mine, an oil or gas well, a 
quarry, or any other place of extraction of 
natural resources. 
‘‘(B) SPECIAL RULES FOR CERTAIN TEM-
PORARY PROJECTS.— 
‘‘(i) IN GENERAL.—A building site or 
construction or installation project, or an 
installation or drilling rig or ship used for 
the exploration or exploitation of the sea 
bed and its subsoil and their natural re-
sources, constitutes a permanent establish-
ment only if it lasts, or the activities of the 
rig or ship lasts, for more than 12 months. 
‘‘(ii) DETERMINATION
OF
12-MONTH 
PERIOD.—For purposes of clause (i), the 
period over which a building site or con-
struction or installation project of a person 
lasts shall include any period of more than 
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30 days during which such person does not 
carry on activities at such building site or 
construction or installation project but 
connected activities are carried on at such 
building site or construction or installation 
project by one or more connected persons. 
‘‘(C) HABITUAL EXERCISE OF CONTRACT 
AUTHORITY TREATED AS PERMANENT ESTAB-
LISHMENT.—Notwithstanding 
subparagraphs 
(A) and (B), where a person (other than an 
agent of an independent status to whom sub-
paragraph (D)(ii) applies) is acting on behalf of 
a trade or business of a qualified resident of 
Taiwan and has and habitually exercises an au-
thority to conclude contracts that are binding 
on the trade or business, that trade or business 
shall be deemed to have a permanent establish-
ment in the country in which such authority is 
exercised in respect of any activities that the 
person undertakes for the trade or business, un-
less the activities of such person are limited to 
those described in subparagraph (D)(i) that, if 
exercised through a fixed place of business, 
would not make this fixed place of business a 
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permanent establishment under the provisions 
of that subparagraph. 
‘‘(D) EXCLUSIONS.— 
‘‘(i) IN
GENERAL.—Notwithstanding 
subparagraphs (A) and (B), the term ‘per-
manent establishment’ shall not include— 
‘‘(I) the use of facilities solely for 
the purpose of storage, display, or de-
livery of goods or merchandise belong-
ing to the trade or business, 
‘‘(II) the maintenance of a stock 
of goods or merchandise belonging to 
the trade or business solely for the 
purpose of storage, display, or deliv-
ery, 
‘‘(III) the maintenance of a stock 
of goods or merchandise belonging to 
the trade or business solely for the 
purpose of processing by another 
trade or business, 
‘‘(IV) the maintenance of a fixed 
place of business solely for the pur-
pose of purchasing goods or merchan-
dise, or of collecting information, for 
the trade or business, 
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‘‘(V) the maintenance of a fixed 
place of business solely for the pur-
pose of carrying on, for the trade or 
business, any other activity of a pre-
paratory or auxiliary character, or 
‘‘(VI) the maintenance of a fixed 
place of business solely for any com-
bination of the activities mentioned in 
subclauses (I) through (V), provided 
that the overall activity of the fixed 
place of business resulting from this 
combination is of a preparatory or 
auxiliary character. 
‘‘(ii) BROKERS
AND
OTHER
INDE-
PENDENT
AGENTS.—A trade or business 
shall not be considered to have a perma-
nent establishment in a country merely be-
cause it carries on business in such coun-
try through a broker, general commission 
agent, or any other agent of an inde-
pendent status, provided that such persons 
are acting in the ordinary course of their 
business as independent agents. 
‘‘(3) TESTED GROUP.—The term ‘tested group’ 
includes, with respect to any entity taxed as a cor-
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