Regulations Governing Application of Agreements for the Avoidance of Double Taxation with Respect to Taxes on Income Article 28

Where an enterprise of the other Contracting State carries on business in the territory of the ROC through a permanent establishment situated therein, the business profits which are attributed to such permanent establishment shall be determined in accordance with the following provisions and be subject to income tax accordingly:1. The permanent establishment shall be treated as if it were a distinct and separate enterprise engaged in the same or similar activities under the same or similar conditions and dealing wholly independently with the enterprise of the other Contracting State of which it is a permanent establishment. In addition, the profits attributable to that permanent establishment shall be determined in accordance with the provisions of the Regulations Governing Assessment of Profit-Seeking Enterprise Income Tax on Non-Arm’s-Length Transfer Pricing, and transfer pricing documentation that provides sufficient evidence to substantiate the attributed profits are at arm’s-length shall be prepared for the audit of the tax collection authority. However, where the enterprise of the other Contracting State attributes to such permanent establishment its overall profits deriving from sale of goods or products, or provision of services within the territory of the ROC, that overall profits may be so attributed without being subject to the requirement of preparing the transfer pricing documentation.2. Where the enterprise of the other Contracting State, in accordance with the provisions in association with the term business profits under a DTA, is allowed as deductions expenses which are incurred for the purposes of the operation of the permanent establishment in determining the profits of a permanent establishment, such determination shall be governed by the stipulations of the Income Tax Act, the Guidelines for Examination of Profit-Seeking Enterprise Income Tax, the Regulations Governing Assessment of Profit-Seeking Enterprise Income Tax on Non-Arm’s-Length Transfer Pricing, and other relevant laws or regulations.