The Taiwanese tax deducted from interest at the agreement rate of 10 per cent qualifies for credit as a direct tax.
The reduction to the above rate is not given if the interest is effectively connected (see INTM153110 fifth sub-para.) with a business carried on by the United Kingdom resident recipient through a permanent establishment in Taiwan or with a fixed base in Taiwan from which they perform professional services.
However no tax should be deducted by Taiwan from interest
- paid to and beneficially owned by the United Kingdom government or a United Kingdom local authority, or an agency or instrumentality of the United Kingdom government or local authority;
- paid in respect of loans made, and loans debt-claims or credit guaranteed or insured by an approved agency or instrumentality of that other territory. The United Kingdom Export Credits Guarantee Department is specified as an approved agency/ instrumentality for this purpose.