Answer ... For a domestic non-bank lender which is a Taiwan resident or a profit-seeking enterprise with a fixed place of business in Taiwan, the withholding tax rate for interest is 10%, but this is applicable to corporate borrowers only. Individual borrowers are not required to withhold tax on interest.
For a foreign lender which is a non-Taiwan resident or a profit-seeking enterprise without a fixed place of business in Taiwan, the withholding tax rate for interest applicable to a corporate borrower is 20%; but if the interest derives from short-term commercial papers, securitised instruments, government/corporate/financial institution bonds or conditional transactions, the withholding tax is 15%. Moreover, most of the tax treaties provide for a reduced income tax withholding rate of 10%. Taiwan has signed tax treaties with 33 jurisdictions: Australia, Austria, Belgium, Canada, the Czech Republic, Denmark, Eswatini, France, Gambia, Germany, Hungary, India, Indonesia, Israel, Italy, Japan, Kiribati, Luxembourg, North Macedonia, Malaysia, the Netherlands, New Zealand, Paraguay, Poland, Senegal, Singapore, Slovakia, South Africa, Sweden, Switzerland, Thailand, the United Kingdom and Vietnam.
Where the portion of the proceeds is to indemnify the principal of the loan made by the lender, it will not be subject to income tax. If the portion of the proceeds is to indemnify the default interest sustained by the lender, it may be subject to income tax. Moreover, if the proceeds include a penalty pursuant to an agreement between the lender and the borrower, that penalty will be subject to income tax unless the lender can prove that the penalty is to indemnify losses suffered by the lender.
No tax is applicable to foreign investments, loans, mortgages or other security documents for the purpose of their effectiveness or registration.