The U.S. and Taiwan do not have a formal income tax treaty

The United States does not have an income tax treaty with Taiwan. This is a direct result of U.S. diplomatic recognition of the People's Republic of China in 1979, which led to the suspension of formal diplomatic ties with Taiwan. Without official government-to-government relations, the two cannot negotiate or sign a bilateral tax treaty.

This absence creates real consequences for people and businesses with income in both countries. Americans working in Taiwan, Taiwanese nationals earning U.S. income, and companies operating in both places face potential double taxation on the same earnings—something a tax treaty would normally prevent.

The situation has remained unchanged through 2026, and no treaty is currently under negotiation. However, both the U.S. and Taiwan have developed workarounds and parallel systems to reduce the tax burden where possible.

Key Takeaways

  • The U.S. recognizes mainland China, not Taiwan, so no formal income tax treaty exists between the U.S. and Taiwan.
  • Without a treaty, Americans in Taiwan and Taiwanese earning U.S. income may owe taxes to both countries on the same money.
  • Taiwan allows a foreign tax credit that can offset some U.S. taxes paid, though the rules differ from standard treaty provisions.
  • The American Institute in Taiwan (AIT) and the Taiwan Economic and Cultural Representative Office (TECRO) handle practical tax matters informally.
  • Individuals and businesses should work with a tax professional familiar with both U.S. and Taiwan tax law to avoid overpaying.

How the lack of a treaty affects your taxes

When two countries have an income tax treaty, they agree on rules about who gets to tax certain income and how much. A treaty typically prevents double taxation, determines which country has primary taxing rights, and sets rates for things like dividends and royalties. The U.S. has these treaties with over 60 countries—but Taiwan is not one of them.

Without a treaty, both the U.S. and Taiwan can tax the same income at full rates. An American living in Taiwan and earning a salary there may owe U.S. federal income tax on that salary (because the U.S. taxes citizens on worldwide income) and also owe Taiwan income tax. Taiwan does offer a foreign tax credit, which allows you to reduce your Taiwan tax bill by the amount of U.S. tax you paid, but this is not as comprehensive as a treaty provision would be.

The reverse situation—a Taiwanese national earning U.S. income—also creates complications. Taiwan taxes residents on worldwide income, so a Taiwanese person with U.S. employment income or investment income faces potential taxation in both countries.

Taiwan's foreign tax credit and how it works

Taiwan's tax system includes a foreign tax credit mechanism that provides some relief. If you paid income tax to another country (including the U.S.), you can claim a credit against your Taiwan income tax liability. This is not automatic—you must report the foreign tax paid and request the credit when you file your Taiwan tax return.

The credit is limited to the lesser of the foreign tax actually paid or the Taiwan tax that would be due on that same income. This means the credit cannot exceed what Taiwan would have charged you anyway. For someone with significant U.S. tax liability, this may not fully eliminate double taxation, especially if U.S. tax rates are higher than Taiwan's on that particular income.

You will need documentation of the U.S. taxes you paid—typically your U.S. tax return and proof of payment. Taiwan's National Tax Bureau (稅務局) can provide guidance on how to claim the credit, though the process requires filing in Chinese or working with a local tax advisor.

The U.S. Foreign Earned Income Exclusion as an alternative

Americans living and working abroad, including in Taiwan, may be able to use the Foreign Earned Income Exclusion (FEIE) to reduce their U.S. tax burden. For 2026, this exclusion allows you to exclude a set amount of foreign earned income from U.S. taxation if you meet either the Physical Presence Test or the Bona Fide Residence Test.

The Physical Presence Test requires you to be outside the U.S. for at least 330 days in a 12-month period. The Bona Fide Residence Test requires you to be a tax resident of a foreign country for an uninterrupted tax year. If you may have access to, you can exclude your foreign earned income up to the annual limit—this applies only to wages and self-employment income, not investment income or passive income.

This exclusion does not eliminate Taiwan taxes, but it can significantly reduce your U.S. federal tax bill. You still must file a U.S. tax return to claim the exclusion, and you must report foreign bank accounts and financial assets if they exceed certain thresholds.

How the American Institute in Taiwan handles tax matters

Because the U.S. and Taiwan have no formal diplomatic relationship, tax matters between the two countries are handled through the American Institute in Taiwan (AIT), a private nonprofit corporation that functions as the de facto U.S. embassy. AIT does not provide tax information or process tax returns, but it can direct you to resources and clarify which country's tax authority has jurisdiction over specific situations.

Similarly, the Taiwan Economic and Cultural Representative Office (TECRO) in the U.S. serves as Taiwan's de facto embassy. TECRO can answer questions about Taiwan's tax treatment of U.S. residents and provide information about Taiwan's tax system.

For practical help, both offices maintain lists of tax professionals and accountants who specialize in U.S.-Taiwan tax matters. These professionals understand the quirks of filing in both countries without a treaty and can help you structure your income and deductions to minimize double taxation legally.

What to do if you earn income in both countries

If you have income in both the U.S. and Taiwan, start by determining your tax residency status in each country. The U.S. taxes all citizens on worldwide income regardless of where they live. Taiwan taxes residents (people who spend more than 183 days there in a calendar year) on worldwide income and non-residents only on Taiwan-source income.

Next, gather documentation of income from both countries and any taxes already paid. You will need your U.S. tax return, proof of U.S. taxes paid, your Taiwan income statement (if you worked in Taiwan), and proof of Taiwan taxes paid. Then, file your return in the country where you are required to file first—most tax professionals recommend filing your U.S. return first, then your Taiwan return, so you can claim the foreign tax credit on the Taiwan side.

Working with a tax professional who knows both systems is not optional if your situation is complex. The cost of professional help is usually far less than the cost of overpaying taxes or facing penalties for incorrect filing in either country.

Businesses operating in both countries

U.S. companies with operations in Taiwan and Taiwanese companies with U.S. operations face similar treaty-related challenges. Without a treaty, transfer pricing disputes, dividend taxation, and withholding tax rates are not governed by a bilateral agreement. This creates uncertainty and potential for double taxation on corporate profits.

The U.S. Internal Revenue Service (IRS) and Taiwan's National Tax Bureau each have their own rules about how to allocate income between countries. A U.S. company with a subsidiary in Taiwan must navigate both countries' rules on intercompany transactions, and the two countries may disagree on how much profit should be taxed where.

Businesses should work with international tax counsel before establishing operations in the other country. Proper structuring—through choice of entity, transfer pricing documentation, and advance planning—can reduce exposure to double taxation, even without a treaty.

Frequently Asked Questions

Will the U.S. and Taiwan sign a tax treaty in the future?

A treaty would require formal diplomatic recognition, which the U.S. does not currently extend to Taiwan due to its 1979 recognition of mainland China. While U.S.-Taiwan relations have grown closer in recent years, a formal income tax treaty remains unlikely without a significant shift in U.S. foreign policy toward China and Taiwan.

Can I claim Taiwan taxes paid as a deduction on my U.S. return?

Yes, you can claim foreign taxes paid as either a credit or a deduction on your U.S. return, but a credit is almost always better because it reduces your tax dollar-for-dollar rather than just reducing your taxable income. You cannot claim both a credit and a deduction for the same taxes—you must choose one method.

Do I have to file taxes in Taiwan if I am a U.S. citizen living there?

If you are a resident of Taiwan (spending more than 183 days there in a calendar year), you must file a Taiwan tax return on your worldwide income. You also must file a U.S. return because the U.S. taxes citizens on worldwide income. Both filings are required.

What if I worked in Taiwan but am now back in the U.S.—do I still owe Taiwan taxes?

You owe Taiwan taxes only on income earned while you were a Taiwan resident. Once you leave and are no longer a resident, you owe Taiwan tax only on Taiwan-source income (like rental income from Taiwan property). You should file a final Taiwan return for the year you left to close out your tax residency status.

Is there a tax treaty between Taiwan and other countries?

Yes, Taiwan has income tax treaties with several countries, including Japan, Germany, Singapore, and others. However, the absence of U.S. recognition means Taiwan cannot negotiate a treaty with the U.S. government, even though it has successfully done so with other nations.