American business organisations expressed measured optimism Monday that a long-stalled bilateral income tax framework with Taiwan may gain renewed momentum following the Agreement on Reciprocal Trade signed earlier in 2026, with representatives indicating progress is underway on a deal that would eliminate dual taxation and reduce barriers to US corporate investment in Taiwan's semiconductor ecosystem.

  • The US and Taiwan signed the Agreement on Reciprocal Trade in January 2026, reducing US tariffs on Taiwanese goods below 15%, creating a more constructive bilateral framework for further negotiations.
  • Under the January trade deal, Taiwanese companies committed to at least $250 billion in direct US investments in semiconductor, energy, and AI sectors.
  • No bilateral income tax treaty currently exists between the US and Taiwan, exposing US companies to taxation in both jurisdictions and creating a structural competitive disadvantage relative to companies from treaty countries.
  • Congressional approval is required for any formal tax treaty, a process that has historically extended similar bilateral agreements by several years.

The absence of a tax treaty has historically disadvantaged US firms operating in Taiwan's semiconductor and electronics manufacturing ecosystem relative to companies from jurisdictions with bilateral tax arrangements in place. The structural friction is most acute for companies with large Taiwanese operational footprints, where duplicative tax obligations add directly to effective cost of capital.

The Agreement on Reciprocal Trade signed in January improved the bilateral relationship meaningfully compared to the strained environment following the broad tariff announcements of 2025. Business group representatives described the ART as setting good parameters for advancing a tax framework, while cautioning that the phrase "making progress" has been used regarding the tax treaty for many years without producing a finalised agreement.

The semiconductor supply chain argument, reinforced by the US commitment to reduce single-geography production dependence, provides substantive policy justification for congressional engagement on the issue beyond pure tax mechanics.