Lexgroup Newsletter (Issue No. 306)

Date: Nov 2018

Labor

1. Amendment to "Common Principle of Calculation of Fines for Violations of Labor Standards Act"

On 4 September, 2018, the Ministry of Labor (MOL) announced the amendment to "Common Principle of Calculation of Fines for Violations of Labor Standards Act" (the Principle), which took effect on 1 October, 2018.  We summarize the key points of the amendment below:

(1) If a company listed on Taiwan Stock Exchange or OTC market violates the Article 32 (working time), Article 34 (rotation shift) or Article 36 (one regular day off and one rest day) of the Labor Standards Act (LSA), the competent authority shall evaluate its financial ability to fine the company between NT$20,000 and NT$1,000,000 according to Paragraph 1, Article 79 of LSA, and may increase the penalty by an additional 50% above the maximum amount of the legal fine pursuant to Paragraph 4 of the same Article.

(2) Because the "Enforcement Rules of the Labor Standards Act" has provided the definition of "the size of businesses" after the amendment on February 27, 2018, the MOL amended the definition of "the size of businesses" under the Principle accordingly.

Reported by: David Tsai / Paul Hsu

Offshore Fund

2. Amendments to "Application Form for the Scope of Offshore Funds for Consultation" and "Template for Securities Investment Consultation Agreement"

On 2 October 2018, the Securities Investment Trust & Consultation Association of R.O.C. (SITCA) announced the amended "Application Form for the Scope of Offshore Funds for Consultation" (Application Form) and "Template for Securities Investment Consultation Agreement" (SICE Agreement Template) so as to cope with the relaxation of the qualification requirements for conducting consulting business for offshore funds.

Additionally, the SITCA also reminds that if the scope of offshore funds is approved by the master agent rather than by each offshore fund, in the event that the master agent is transferred afterwards where the new master agent has never applied to be a master agent before, the SICE shall promptly report to the SICTA so as to continue the aforesaid consulting service. 

Reported by: Jeffrey Liu/ Jack Tai

3. Extension of the Implementation of Requirement on Declaration for Fee Structure of Back-End Load Share Class 

The Financial Supervisory Commission (FSC) issued a ruling on 2 October 2018 in response to the Trust Association of R.O.C., which specifies that the time to implement the requirement that sales agents of offshore funds shall request investors to sign a declaration in relation to fee structure of back-end load share class has been deferred to the end of December 2018.

Reported by: Jeffrey Liu / Caitlyn Kao

Insurance

4. Strengthening Control Mechanisms of Anti-Money Laundering and Counter-Terrorism Financing of Insurance Enterprises

On 2 October 2018, the FSC issued a ruling to strengthen the control mechanisms of anti-money laundering and counter-terrorism financing of insurance enterprises.  The key points are summarized below:

(1) Taiwan insurance enterprise, insurance agent company, insurance broker company and insurance notary company which has branch or subsidiary in China or the insurance related institution investing in China shall report to the competent authority in accordance with the time limit and procedures of the relevant provisions of the "Scope of Material Contingencies to be Reported by Insurance Enterprises" and the "Regulations Governing Permission of Insurance Business Transactions and Investment Between the Taiwan Area and the China Area".

(2) Before Taiwan's insurance enterprise, insurance agent company, insurance broker company and insurance notary company investing in the related insurance institutions in China, they shall take into consideration of the ability, experience and compliance of implementing the anti-money laundering and counter-terrorism financing.  After the investment, they shall continue tracking the implementation of the anti-money laundering and counter-terrorism financing and shall include it into the internal control and audit system.

Reported by: David Tsai / Aaron Lai

Taxation

5. Ruling regarding the Credit Card Issuer Business Tax Reporting of the Exchange Commission for Receiving and Transferring Payment by the Acquiring Institution to the Contracted Merchant

On 3 October 2018, the Ministry of Finance issued a ruling regarding the credit card issuer business tax reporting of the exchange commission for receiving from and transferring payment by the acquiring institution to the contracted merchant.  We summarized the key points below:

(1) For the domestic credit card issuer collects the exchange commission paid by the foreign acquiring institution for payment to the contracted merchant, the credit card issuer may according to Paragraph 2, Article 7 of the Value-added and Non-value-added Business Tax Act (" Business Tax Act") and Paragraph 2, Article 11 of the Enforcement Rules of Value-added and Non-value-added Business Tax Act declare a zero tax rate by attaching relevant supporting documents.

(2) The exchange commission collected by the foreign credit card issuer paid by the domestic acquiring institution for payment to the domestic contracted merchant is the consideration for the sales of services to the domestic business operators.  If the domestic acquiring institution collects the exchange commission on behalf of the domestic contracted merchant, it shall report the business tax in accordance with Article 36 of the Business Tax Act.

(3) For the cases not concluded before the issuance of this ruling, the provisions of this ruling shall still apply and for those who have overpaid taxes, the taxes shall be refunded. 

Reported by: Stacy Lo / Eliza Lee

6. Amendment to Regulations Governing Application of Investment Tax Credits to Small and Medium Enterprises Participation in Research and Development

The Executive Yuan passed an amendment to the Regulations Governing Application of Tax Credits of Investment for Expenditures of Research and Development (R&D) by Small and Medium Enterprises (SMEs) on 3 October 2018.  We summarize major points below:

(1) Except for certain exceptions, only expenditures of R&D activities in Taiwan can be recognized.

(2) R&D expenditures of the SMEs in relation to participating in R&D with domestic and foreign colleges or research institutions can be recognized.

(3) R&D expenditures eligible for tax deduction for investment shall be based on the amount finally approved by the tax collection authority.  Therefore, the SMEs shall apply for review opinion on their qualifications and if the R&D activities is in compliance with the regulation, which shall then be forwarded to the tax collection authority at the registration place of the SMEs for confirmation. 

(4) For the SMEs failing to be qualified under the requirements, the central competent authority will only issue the letter of review opinion on their qualifications to the tax collection authority which will inform the SMEs of the result together with the review opinion.

Reported by: Mike Lu / Hsiyen Hsu

Internet

7. The amendment to "Matters should be Described and should not be Described in the Standard Terms and Conditions of Online Games"

On 8 October 2018, the Ministry of Economic Affairs (MOEA) announced the amendment to the "Matters should be Described and should not be Described in the Standard Terms and Conditions of Online Games," which is renamed to "Matters should be Described and should not be Described in the Standard Terms and Conditions of Internet-Connected Gaming Service" and will take effect on 8 January 2019.  The key amendments, among others, include:

(1) If game service providers render to consumers additional points, commodities or other services in games, they shall state the payment terms and commodity-related information on the official websites, log-in page or the purchase page.

(2) Personal information should be protected in accordance with relevant laws and regulations.

(3) Game service providers may not provide assistance to handle the disputes between consumers and third parties.

(4) Setting expiry date on purchased award points is banned.

Reported by: Kangshen Liu / Paul Hsu

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