These Regulations are enacted pursuant to the stipulations set forth in Paragraph 5, Article 80 of the Income Tax Act.

The investigation and audit of a case applicable under an agreement for the avoidance of double taxation with respect to taxes on income (hereinafter referred to as the “DTA”) shall be conducted in accordance with the provisions of the DTA signed between a country or territory and the Republic of China (hereinafter referred to as the “ROC”). Any such matter not provided for in the DTA shall be governed by the stipulations of the Taxpayer Rights Protection Act, the Tax Collection Act, the Income Tax Act, the Income Basic Tax Act, these Regulations, and relevant laws and regulations. However, where the stipulations of the Income Tax Act or other laws providing reduction of or exemption from income tax that are more favorable than those contained in the provisions under the DTA, the most favorable provisions shall apply.

For the purposes of these Regulations:
1. The term “DTA” means any income tax treaty, agreement, or arrangement (including its full text, exchange of letter, annex, protocol, and any other similar international paper documents) signed by the ROC with the other Contracting State and brought into force in accordance with Article 5 of the Tax Collection Act, Article 124 of the Income Tax Act, or other relevant laws, including the comprehensive taxation agreement and the reciprocal exemption agreement on income derived from the operation of shipping and air transport.
2. The term “the other Contracting State” means a country or jurisdiction with which the ROC has signed a DTA.
3. The term “both Contracting States” means the ROC and the other Contracting State.
4. The term “competent authority” means, with respect to the ROC, the Ministry of Finance, or the designated agency or person in accordance with the provisions in association with the term competent authority under a DTA; with respect to the other Contracting State, the designated agency or person in accordance with the provisions in association with the term competent authority under a DTA.
5. The term “enterprise of the other Contracting State” means an enterprise carried on by a resident of the other Contracting State.
6. The term “limited tax rate” means the tax imposed on income, payments, or revenues by the ROC or the other Contracting State shall not exceed a certain percentage of the gross amount of such income, payments, or revenues in accordance with the provisions of a DTA.

Persons to be covered by the application of a DTA shall be limited to those residents of the ROC and residents of the other Contracting State. However, in the case that the applicable DTA provides otherwise, provisions thereof shall prevail.
When a resident of the other Contracting State is subject to income tax in accordance with the stipulations under the Income Tax Act, the Income Basic Tax Act, and relevant laws and regulations, a reduction of or exemption from the imposition of such a tax may be provided pursuant to the provisions of an applicable DTA.
When a resident of the ROC is subject to income tax in accordance with the stipulations under the Income Tax Act, the Income Basic Tax Act as well as relevant laws and regulations, and a double taxation associating with the aforementioned taxation arises where the other Contracting State has imposed taxes on that resident pursuant to the provisions of an applicable DTA, such double taxation may be relieved in accordance with the provisions of such DTA or stipulations of other tax laws.
When an investigator appointed by the tax collection authority concerned or the Taxation Administration of the Ministry of Finance investigates or audits the constituent elements and facts of a case that applies to a DTA, such investigator shall base these on the existence of actual economic relationships, and their related interests derived from such economic benefits.
Where an investigator appointed by the tax collection authority concerned or the Taxation Administration of the Ministry of Finance investigates or audits all relevant facts and circumstances concerning a case that applies to a DTA in compliance with the provisions of the preceding paragraph, and such investigator considers it is reasonable to conclude that (1) one of the principal purposes of the relevant transaction or arrangement was, directly or indirectly, for a benefit under such DTA to be obtained (e.g., to avoid or reduce a tax liability, to defer a tax payment, or to refund a paid tax), and (2) granting such a benefit would not be in accordance with the object and purpose of the relevant provisions of such DTA from which the benefit was applied, in such a case the investigator may address the case in accordance with the relevant anti-abuse provisions provided under such DTA. In the case that the applicable DTA is absent an anti-abuse provision, the investigator may address the case in accordance with the stipulations of the Taxpayer Rights Protection Act or other laws and regulations that are regulated for dealing with a tax avoidance scheme.