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.

Where a resident of the other Contracting State derives income from performing professional services or other activities of an independent character within the territory of the ROC which is subject to income tax according to the provisions in association with the term independent personal services under a DTA, the taxable income may be determined by the deduction of relevant costs and expenses from the remuneration of such services or activities, if the relevant accounting books or documents of evidence can be provided in accordance with the stipulations of the Income Tax Act and relevant laws or regulations.
In the case that the aforementioned professional services or other activities of an independent character are partially rendered outside the territory of the ROC, the resident of the other Contracting State may apply with the tax collection authority where the payer of such income is located to be taxed only on the income derived from services or activities rendered within the territory of the ROC, if the relevant contracts and documents pertaining to the calculation of the income can be provided.

Where a resident of the other Contracting State derives salaries, wages, and other similar remuneration in respect of an employment, such remuneration shall refer to income deriving from the period of employment of that resident. The income from employment shall be calculated as ROC-sourced, being subject to income tax based on the proportion of the days of that resident’s actual presence for exercising the employment in the territory of the ROC to the associated period of employment. However, in the case that the ratio of the contribution attributed to the employment exercised within the territory of the ROC is higher than the aforementioned proportion, this ratio of the contribution shall be used as basis for the calculation of the income from employment from ROC source.