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24 May, 2017
Changes in law and regulations
Amendment to the Estate and Gift Tax Act provide progressive tax rates ─ On April 25, 2017, the Legislative Yuan approved the amendments to the Estate and Gift Tax Act, where the current 10% uni-rate for estate tax and gift tax is replaced by a progressive tax rate system with rates at 10%, 15% and 20%. The increased tax revenue as a result of the higher rates will be allocated entirely to long-term care spending.
Amendment to the Income Basic Tax Act expends the CFC rules to individual shareholders─ On April 21, 2017, the Legislative Yuan approved the Income Basic Tax Act amendment, which provides that the “Controlled Foreign Company” (“CFC”) rules will be applicable to individual shareholders of foreign company as an additional anti-avoidance measure. In the future, if an individual residient in Taiwan and his/her related parties own, either directly or indirectly, an aggregate of 50% or more shares or capital of a foreign company which is organized in a low tax rate jurisdiction, or have significant influence over such a foreign company and he/she, together with his/her spouse and second degree relatives, collectively hold 10% or more shares or capital in that foreign company, said individual shareholder shall include the earning of the foreign company, prorated by his/her shareholding percentage therein, as offshore income for purpose of calculation of his/her alternative minimum tax.
The Financial Supervisory Commission (“FSC”) announced partial amendments to the “Implementation Rules of Internal Audit and Internal Control System of Financial Holding Companies and Banking Industries” – Notable amendments thereof include: (1) the board of directors shall be ultimately responsible for the internal control system; (2) the director’s code of conduct shall include director’s duty to adequately and swiftly handle and notify the situation where the company could sustain material damages; (3) the accountant audit of internal control system shall include both domestic and foreign business units of the company; (4) the internal audit unit shall timely report to the directors and the supervisors in accordance with the “materiality principle” after completion of, or receipt of the inspection report from, any domestic or foreign competent authorities.
The National Communication Committee (“NCC”) promogated the Regulations Governing the Resolution of Dispute between the Television System Operator and Channel Provider – The Cable Radio and Television Act provides that interested parties may request the competent authority to mediate disputes concerning channel transmission, terms of authorization, and determination of the number of households between system operator and channel provider, or disputes among system operators. For supplementing enforcement of the law, the NCC promulgated the “Regulations Governing Resolution by the NCC of Dispute between Television System Operator and Channel Provider”. Any affoementioned type of dispute can be submitted to the NCC for mediation by request, and upon conclusion of such mediation, the result will be binding upon the participating parties.
Legal news and case development
Public traded company shall indicate the number of directors and supervisors to be elected in advance of shareholders meeting when number of directors or supervisors set in the articles of incorporation is a range and not a fixed number — On February 20, 2017, the Ministry of Economic Affairs issued a ruling, stating that public companies shall indicate the number of directors and supervisors to be elected in the notice of shareholders meeting when the number of directors or supervisors provided for in the articles of incorporation is a range rather than a fixed number. If the articles of incorporation is amended to change the number of directors or supervisors in a shareholders meeting, the new number shall not take effect until the next shareholders meeting for election of directors and supervisors.
The amount of foreign investment on private convertible bonds is not subject to the 30% cap of net inflow remittance – The sum of the investments by overseas Chinese and foreign nationals in corporate bonds, financial bonds or other commodities used to be added to the amount of the premiums and the net settlement amount paid for derivative commodities transactions, and the total amount of which were subject to the 30% cap of the net inflow remittance. On March 13, 2017, the Financial Supervisory Commission issued a new ruling that such investments in private convertible bonds would no longer be subject to the 30% cap.
The FSC listed the fields that insurance companies may invest under “Other Uses of Fund in Collaberation with Government Policy”. – The FSC issued a letter on March 21, 2017, listing therein the 7 types of projects which insurance companies may invest under “Other Uses of Fund in Collaberation with Government Policy”. The 7 types are green energy technology, Asian Silicon Valley (IOT), medical biotechnology, national defense industry, smart machine, modern agriculture and recycling industry. It was effective immediately after the letter was issued.
Commentary
New regulations on business tax upon cross-border e-commerce enterprises
To follow the global trends and to balance the tax burden between domestic and foreign business entities, the new Value-added and Non-value-added Business Tax Act (the “BTA”) was revised in the end of 2016, and enacted on May 1st.
In the previous Taiwan BTA, foreign enterprises, institutions, groups, or organizations, without a fixed place of business in Taiwan, did not have to register as tax payers and pay the business tax. The business tax for the selling of electronic services in Taiwan was paid by the consumers. From May 1st, 2017, foreign enterprises, institutions, groups, or organizations, without a fixed place of business in Taiwan, shall register as tax payers to the competent authority, if they sell electronic services to domestic individuals, and their annual turnover exceed 480,000 NTD.
According to the draft articles of the implementation rules of the BTA, “electronic services” refers to services downloaded from the internet to PCs or mobile devices, services used solely on the internet, or other services acquired from the internet or by other electronic means. For example, it is deemed as selling electronic services to sell online games, apps, messenger stickers, e-books to domestic consumers.
For further information, please contact:
C. Y. Huang, Partner, Tsar & Tsai Law Firm
CYHuang@TsarTsai.com.tw
