A Study on the Concept of Permanent Establishment in the Profit-Seeking Enterprise Income Tax in Taiwan

“Permanent establishment”(hereinafter: PE) has played a significant role in the profit-seeking income tax in Taiwan for non-residents. It can be divided into two categories i.e., permanent establishment under actual tax treaties (hereinafter: tax treaty PE) and permanent establishment in the income tax law (hereinafter: domestic PE). As far as tax treaty PE is concerned, unless otherwise mentioned, this concept should be interpreted based on Article 5 of the OECD Model Convention, under which the physical PE, project PE and agency PE are inserted and the requirements of the three types of PE are expressly mentioned. Tax treaty PE influences the non-resident taxation first on tax jurisdiction and secondly on tax object. Pursuant to the tax ruling of the Ministry of Finance, it even has an impact on tax assessment and collection. As for domestic PE, it is referred as to the place of business and the business agent in Article 10 of Taiwan’s income tax law. Although domestic PE mainly and directly influences the non-resident taxation on tax assessment and collection, it also has an impact on tax base as well as tax rate. In comparision, the scope of domestic PE is border than that of tax treaty PE. Further, whenever all of the same terms in the definition of tax treaty PE provision and domestic PE provision are interpreted as the same meanings, the two concepts overlap.