Study On The Double Taxation Between The Mainland And Taiwan

With the opening of the "three direct links" between the Mainlandand Taiwan, Economic and trade cooperation between two sides is facingthe unprecedented opportunity. But with the deeper economic and tradecooperation between two sides, double taxation is becoming a more andmore important problem, especially the double taxation in individualincome tax and enterprise income tax. The income of enterprise andindividual presents as: operating profit、investment income、individuallabor remuneration etc. Due to the difference between the Mainland andTaiwan, there might be some confliction on the imposition of taxjurisdiction.So the income across the Mainland and Taiwan would betaxed both by the two sides-that’s the double taxation we discussed. Forthe taxpayer, double taxation will increase their burden and affect theirenthusiasm for investment and operation of their business. Therefore, it’simportant to avoid the double taxation between two separate customsterritory.At the present time, Both Mainland and Taiwan have passed relatedlaws which determined that we can apply the foreign income tax credit legal system of the two sides to solve the double taxation between the twosides. However, the application of income tax credit legal system of thetwo sides is not that successful due to the deference between their incometax system and the lack of effective coordination. With the deepereconomic and trade cooperation between two sides, more and morepeople and scholars advice that the Mainland and Taiwan should sign theAgreement on Avoiding Double Taxation which is similar to theagreements between Mainland and Hong Kong or Mainland and Macao.There are also some scholars broached the framework and tentative ideasof the Agreement on Avoiding Double Taxation between the two sides.But besides politic reasons, if the two sides want to solve the problem ofdouble taxation, a clear understanding of the differences between theincome tax systems must be having first before reaching an agreementbetween the two sides.This essay expound the confliction on the imposition of taxjurisdiction and the differences between the income tax system, thusfurther enlarging on the deeper theoretical questions and some pressingconcerns in practice. Analyzing the international tax convention and theagreements between Mainland and Hong Kong or Mainland and Macao,this paper brings up some suggestions on how to avoid double taxationand preliminary opinions on the future agreement.