Taiwan Legal And Regulatory Updates - September 2019.
Legal News & Analysis - Asia Pacific - Taiwan - Tax
9 October, 2019
Management and Taxation of Repatriated Offshore Funds Act Officially Implemented
The Management and Taxation of Repatriated Offshore Funds Act (the “Act”), which had been passed by the Legislative Yuan and promulgated by the President, as well as the various related regulations issued respectively by the Ministry of Economic Affairs, the Financial Supervisory Commission and the Ministry of Finance, came into force on August 15, 2019.
The Act provides that the offshore funds repatriated by individuals or the offshore income repatriated by profit-making businesses may enjoy the below-mentioned tax incentives. For the funds repatriated between August 15, 2019 and August 14, 2020, the tax rate shall be 8 percent; and for the funds repatriated between August 15, 2020 and August 14, 2021, the tax rate shall be 10 percent. Further, for encouraging the repatriated funds be used for direct investments or investments in important strategic industries via domestic venture capital or private equity funds, 50% of the tax paid accordingly may be refunded by making an application after the investment is completed,.
The Act also requires that the repatriated funds be deposited in a foreign currency deposit account. Up to 5% of such deposited fund may be used freely. If a portion of the deposited fund is to be used for financial investments, up to 25% of the amount of which shall be re-deposited to a trust account or a discretionary securities account, and be withdrawn for financial investment subject to an annual withdrawl limit. (Dennis C.)
The Legislative Yuan passed an amendment to the Income Tax Act, adding the Celebrity’s Clause and the special deduction for long-term care. The amendment became effective retroactively as of January 1, 2019.
An amendment to Article 14 of the Income Tax Act, famously known as the “Celebrity’s Clause”, was passed by The Legislative Yuan and promulgated by the president. According to the amended article, future wage earners may elect to use the “itemized deduction” method when the necessary expenditure of earning salaries is higher than the amount of standard deduction. The provable itemized deduction must meet the following conditions:
(1) the deduction shall be limited to three categories of expenditure, namely, the occupational outfits, the professional education or training and the occupational tools, all of which shall be directly related to the tax payer’s occupation or profession,
(2) the allowable deduction for each of the three categories shall not exceed 3% of each tax payer’s annual wage income.
If a wage earner has elected to deduct expenditure using the itemized deduction method based on Article 14, the special deduction for employment income prescribed in Article 17, Paragraph 1, Subparagraph 2, Item 3-2 shall not be applicable when calculating the tax payable under Article 15 and the net consolidated income under Article 17.
In addition, the long-term care expense was added to the allowable deduction in the amended Article 17 of the Income Tax Act. An annual limit of NT$120,000 deduction for long term care expense is allowed for each qualified disabled person. (Yijia Chao)
The Legislative Yuan Passed the Amendment to the National Security Act
The Legislative Yuan passed an amendment to the National Security Act. The highlights of the amendment include:
(1) declaring that the national security covers the necessary scope of the Internet; and
(2) depriving the current or retired military, public and teaching personnel and the personnel of state-owned enterprises who have been finally convicted of the crime of detecting, collecting, delivering or transmitting confidential documents, pictures, information or articles of official business, or developing an organization for the administration, military, political party, or any other official organization of a foreign country or the Mainland Area, of the right to receive retirement pensions and recovering the previously received pensions from the aforesaid persons.
(Roam Huang / Trainee Lawyer)
The Code of Criminal Procedure Amended To Prevent Fleeing of Criminal Defendants during Investigation, Trial and Enforcement
In order to prevent a criminal defendant from absconding prosecution, trail or enforcement, implement the nation’s penal power, and improve the mechanism of preventing absconding of criminal defendants, the Legislative Yuan passed an amendment to the Code of Criminal Procedure on July 17, 2019. The highlights of the amendment include:
(1) when a criminal defendant is not or no longer detained during the investigation or trial stage, the prosecutor or the court may order the criminal defendant to comply with alternative measures such as monitoring by technical devices, restriction of area of activity, submission of passports or other travel documents, or prohibition from disposing specific property;
(2) the court may order a criminal defendant to attend the court on the judgment date to prevent absconding;
(3) if a criminal defendant does not comply with the aforementioned order, the prosecutor or the court may arrest such defendant without a warrant, or detain or re-detain such defendant;
(4) if necessary, the enforcement prosecutor may enforce a prison sentence before receiving the judgment file from the court; and
(5) if there exist sufficient ground to believe that a criminal defendant who has been sentenced for death, life imprisonment or imprisonment of two years or more may abscond, the enforcement prosecutor may arrest such defendant without a warrant. (Roam Huang / Trainee Lawyer)
The Legislative Yuan passed an Amendment to the Securities and Exchange Act
The Legislative Yuan recently passed the amendment to Article 14-5 and Article 36 of the Securities and Exchange Act for implementing corporate governance, clarifying the responsibilities of financial reports makers and enhancing the internal managing procedure of financial reports. The amendment requires that the financial reports to be submitted to the auditing committee and the board of directors of a publicly traded company and the financial reports to be submitted to the board of directors of a publicly traded company within 45 days of the end of the first, second, and third quarters of each fiscal year be signed or sealed by the chairperson, the operating officer, and the chief accounting officer of the company. (Linda Huang)
The Amendment to the Part of Family of the Civil Code was Passed
The Legislative Yuan recently passed the amendment to the Part of Family of the Civil Code, adding “the appointed assistant, the voluntary custodien, and the other interested parties” as the qualified applicants of a declaration of guardianship.
The amendment also establishes an adult voluntary custody system by inserting related provisions in Articles 1113-2 to 1113-10 of the Civil Code. (Linda Huang)
The Financial Supervisory Commission (“FSC”) promulgated the “Guidelines for Banks to Apply for Trial Businesses” (“GBATB”)
The FSC promulgated the GBATB on June 19, 2019 (Ref. No.: Jin-Guan-Yin-Kong–Zhi No. 10802700400) to encourage banks to apply for trial businesses on items not restricted by laws or regulations. The FSC may order banks to abide by relevant restrictions based on the nature of the trial business. The scope of the trial businesses includes:
(1) an expansion of the business item which has been approved, other general business items approved by the competent authority that are listed among the business items specified in laws or regulations, or those not specifically regulated in technical operation regulations such as the Regulations Governing Safety Control Operation in Electronic Banking Services by Financial Institutions;
(2) trial business items for which transaction or operation models have not been applied by another bank or have been applied for but not yet officially operated;
(3) trial business items that are same as the innovation experiment matters already approved under the Financial Technology Development and Innovative Experimentation Act, provided that they do not violate any prohibition under the applicable laws or regulations;
(4) no application for trial business items shall be made for matters prohibited by laws or regulations; and as to those matters, an application shall be made pursuant to Article 25 of the Financial Technology Development and Innovative Experimentation Act.
Electronic payment institutions, electronic stored value card issuers, trust enterprises, bills finance companies and credit cooperatives may refer to the provision of GBATB to apply for trial businesses. (Ju-Ya Lu, Esq.)
The FSC promulgated the “Guidelines for Insurance Enterprises to Apply for Operating Trial Business.” (the “Guidelines”)
For allowing the insurance enterprises to develop and provide innovative insurance products and services, encouraging innovation by the insurance industry, enhancing compatibility and customers rights, the FSC promulgated the Guidelines on August 13, 2019. According to the Guidelines, the trial businesses that insurance enterprises may apply for include the following:
(1) the business items which insurance enterprises may operate under the current laws and regulations;
(2) trial business items for which transaction or operation models have not been applied for by another insurance enterprise or have been applied for but not yet officially operated;
(3) trial business items that are same as the innovation experiment matters already approved under the Financial Technology Development and Innovative Experimentation Act; namely, if a financial business item is permitted by FSC to enter innovative experimentation, other insurance enterprises may still apply to operate such item as a trial business provided that it is not prohibited by any applicable laws or regulations;
(4) no application for trial business shall be made for items prohibited by laws or regulations; and as to those matter, application shall be made pursuant to Article 25 of the Financial Technology Development and Innovative Experimentation Act, and the trial business item shall be operated only after acquiring permission from the FSC together with other relevant authoritis for exemption from such prohibition of laws or regulations.
The Guidelines is different from the Financial Technology Development and Innovative Experimentation Act in that the latter accepts financial institutes as well as non-financial institutes to apply for trial businesses, contains no requirement that the trial business item not be prohibited under laws, regulations or orders, and provides a long trial period of 1 year, while the former is only applicable to the insurance enterprises, requires that the trial business not be prohibited under other laws or regulations, and provides a trial period of only 6 months. (Yijia Chao)
The FSC amended the “Rules Governing the Administration of Electronic Payment Institutions” (the “Rules”)
For meeting the business needs of electronic payment institutions, enhancing the completeness of services and convenience of using electronic payment, the FSC promulgated the amend Rules on July 2, 2019 (Ref. No.: Jin-Guan-Yin-Piao–Zhi No. 10802720010). The highlights of the amendment include:
(1) allowing messaging service between users of electronic payment institutions;
(2) permitting electronic payment institutions to issue electronic payment account stored value cards;
(3) amending the items to be recorded in payment instruction and relaxing the regulation on inapplicability of payment instructions and reconfirmation;
(4) allowing electronic payment institutions to offer agency service of receiving payments of substantive transactions;
(5) introducing the function of electronic advance payment. (Ju-Ya Lu, Esq.)
The FSC promulgated the amended Article 6, 7 and 8 of the “Regulations Governing Concurrent Serving Restrictions and Matters for Compliance by the Responsible Persons of Electronic Stored Value Card Issuers” (the “Regulations”)
On July 11, 2019, the FSC promulgated the amended Articles 6, 7 and 8 of the Regulations (Ref. No.: Jin-Guan-Yin-Piao–Zhi No. 10802721690). The highlights of the amendment include:
(1) the responsible person of an issuer may concurrently hold the post of a contracted institution;
(2) where the total paid-in capital of an issuer is NT$ 2 billion or more, its chairperson and general manager shall not be the same person; provided, however, an exception may be granted by the competent authority in the event that the chairperson or the general manager is unable to perform his/her duties by reason of resignation, or that the chairperson or the general manager is replaced or dismissed by the competent authority, or that the chairperson or the general manager cannot perform his/her duties due to a substantial unforeseen circumstance. (Ju-Ya Lu, Esq.)
For further information, please contact:
C. Y. Huang, Partner, Tsar & Tsai Law Firm