[Taxation] Foreign Tax Credit

According to tax treaty which is to avoid double taxation, three methods for foreign tax credit can be applied: 1. Direct Foreign Tax Credit: Withholding tax imposed on dividends in foreign countries can be used in parent country for corporate tax credit. 2. Indirect Foreign Tax Credit: Corporate tax, including withholding tax on dividends, paid in foreign countries can be used in parent country for corporate tax credit. 3. Tax Sparing Credit: Tax exemption applied in foreign countries, which can be regarded as tax payment in foreign countries, can be used in parent country for corporate tax credit. Direct Foreign Tax Credit is applied in ROC according to tax laws. Only withholding tax on dividends paid in foreign countries by Taiwan enterprise could be used for corporate tax credit in ROC. However, Indirect Foreign Tax Credit is applied in Mainland China. Income tax, withholding tax on including dividends and corporate tax, paid in foreign countries by Chinese enterprises could be used for corporate tax credit in China. MOF intends to allow Taiwan enterprises in Mainland China to apply Indirect Foreign Tax Credit to encourage Taiwan enterprises to remit dividends back to Taiwan.