Taiwan Legal And Regulatory Updates - April 2019.
Legal News & Analysis - Asia Pacific - Taiwan - Regulatory & Compliance - Tax
5 April, 2019
The Ministry of Finance (“MOF”) spelt out the income tax exemption aspect of the funds remitted by Taiwanese businessmen from overseas －To avoid misunderstanding by Taiwanese businessmen that overseas funds remitted back to Taiwan would all be treated as overseas income and subect to income taxation, the MOF issued an administrative interpretation No. 10704681060 on January 31, 2019 to indicate the types of the overseas funds that would not be taxed as overseas income. They include: (1) funds that are not overseas income; (2) overseas income upon which the Income Basic Tax has been levied; and (3) overseas income upon which no Income Basic Tax has been levied but the tax collection period thereof has expired. Taiwanese businessmen may submit evidence of the source of funds to prove the nature of the remitted overseas funds. If the funds are not overseas income, such as overseas investment principal, capital reduction refund, overseas borrowing, etc., they will not be subject to income tax. (Marilyn Wu)
The “Regulations Governing Foreign Exchange Business of Banking Enterprises” was amended to include the qualifications and conditions of the Internet-only banks to become an authorized bank － For regulating the establishment of the Internet-only bank, the Central Bank amended the “Regulations Governing Foreign Exchange Business of Banking Enterprises” on February 15, 2019, which provides that the Internet-only bank must satisfy the following requirements to become an authorized bank: 1. maintaining the own capital to risk-weighted assets ratio in compliance with the regulations promulgated by the competent authority; 2. deploying sufficient personnel to conduct foreign exchange business; and 3. committing no violation of any relevant financial regulations duing the most recent one year period, or, if there exists any violation, having made concrete improvement which have been accepted by the competent authority. In the event that an authorized bank or an Internet-only bank permits the customers to conduct foreign exchange activities by electronic or communication device, it shall allow the customers to make foreign exchange settlement via the Internet.(Andy Lee)
The Financial Supervision Commission (“FSC”) promulgated the minimum total endowment to establish a foundation, the cash ratio thereof, and the restriction on investment by foundations －The FSC issued an administrative order (Ref. No. Chin-Guan-Fa-Zi 10801004410) on January 23, 2019, which provides that the minimum total endowment to establish a foundation shall be NT$ 30 million, and no less than 90 percent of such endowment shall be in the form of cash. When a foundation makes investment with its assets, it shall establish an internal investment evaluation measure, and shall only invest in domestic stock equity funds, exchange- traded domestic stock index funds (ETFs) and unsecured corporate bonds issued by the companies of higher credit grades as evaluated by credit rating agencies. The amount of investment by a foundation shall not exceed 20% of its total registered assets.(Andy Lee)
The FSC recently expands the scope of corporations required to establish independent directors and audit committee – For strenghtening corporate governance, the FSC recently issued an administrative interpretation to expand the scope of corporations required to establish independent directors and audit committee. For instence, beginning January 1, 2020, any non-financial sector companies listed on the emerging stock market will be required to provide in articles of organizarion that at least 2 independent directors shall be appointed and the number of independent directors shall be no less than one-fifth of the total number of the board of directors.
In addition, any non-financial sector companies listed on the stock (or over-the-counter) market whose paid-in capital reach NT$ 2 billion shall establish an audit committee to replace supervisors. The listed non-financial sector companies whose paid-in capital are less than NT$ 2 billion shall establish an audit committee to replace supervisors by January 1, 2020. The companies of financial sector whose shares are 100 % held by financial holding company may choose from establishing an audit committee or electing supervisors.
To allow sufficient time for various companies to fullfil their obligations, the aforementioned requirements will be enforced in stages. For those companies listed in the emerging stock market where the terms of service of their directors and supervisiors will not expire before 2020, the aforementioned requirements may be implemented upon the expiration of such terms. The listed non-financial sector companies whose paid-in capital reach NT$ 2 billion but no more than NT$ 10 billion may establish audit committee by the end of 2018. The listed non-financial sector companies whose paid-in capital are less than NT$ 2 billion shall extablish audit committee to replace supervisors beginning January 1, 2020; and, if the terms of service of the directors and supervisiors thereof do not expire before 2020, they shall extablish audit committee to replace supervisors after expiration of the terms. (Chia-chi Chen)
The FSC amended the relevant regulations regarding issuance and transfer of employee stock option certificates –
In the past, a public traded company could only issue employee stock option certificates to its employees or the employees of its subsidiary companies; and the same holds trute when a listed company purchased its own stock and transfered such stock to its employees or the employees of its subsidiary companies. The FSC recently issued an administrative interpretation to amend the recipients of such certificates to the issuer’s or transferor’s employees and the employees of its domestic or foreign subsidiary companies and companies controlled by it. The meaning of the subsidiary or controlled companies affiliated company has been defined in Article 369-2, Article 369-3, Paragraph 2 of Article 369-9, and Article 369-11 of the Company Act.
In addition, the FSC requires companies to clearly provide the employee eligibility and the conditions of such subscription in the subscription rules, or the employee qualification and scope of the transfer in the transfer rules (including the standard and definition of employees). In the event that the eligible employees of such issuance or transfer are the employees of subsidiary or controlled companies as mentioned above, it is required that a CPA be engaged to comment on the employee qualification and condition and a report thereof be submitted to the board of directors, provided, however, that the abovementioned required is not applicable to the employees of the subsidiary or controlled companies referred to in Paragraph 1, Article 369-2 of Company Act. (Chia-chi Chen)
The FSC increases the investment ratio that offshore funds are permitted to invest in the securities issued in the Mainland Area –
The FSC recently increased the investment ratio that offshore funds are permitted to invest in the securities issued in the Mainland Area from 10% of the net asset value of the offshore funds to 20% thereof. Further, the offshore funds may only invest in the securities listed on stock market and bond market between banks in the Mainland Area.
However, such limitations are not applicable to the offshore exchange traded funds that approved by the FSC to be listed or traded on TWSE. The offshore funds eligible for the “Plan to Encourage Stronger Business Ties in Taiwan for Offshore Funds” (“Plan”) may, upon approval by the FSC, invest up to 40% of the allowed maximum total investment amount specified in the Plan. (Chia-chi Chen)
The MOEA announced the 2019 FiT rates – The MOEA completed the review process of the Feed in Tariff rates (“FiT rates”) for renewable energy on February 25, 2019. The announced rates are lower than those of 2018. For offshore wind energy, either a fixed-rate for 20 years (NT$5.5160/kwh) or a phase rate (NT$6.1710/kwh for the first 10 years, and NT$3.5685kwh for the last 10 years) is applicable. The FiT rates for solar photovoltaic are categorized into two semi-annual rates, namely: the first half year (NT$4.1094/kwh~NT$5.7983/kwh) and the second half year (NT$4.0379/kwh~NT$5.7983/kwh). A new category for the projects synchronized with ultra-high voltage power transmission was also created. (Ellen Peng)
For further information, please contact:
C. Y. Huang, Partner, Tsar & Tsai Law Firm