Lexgroup Newsletter (Issue No. 286)

Date: Jan 2018

Labor

1. Legislative Yuan passed the amendment to Article 61 of the Labor Standards Act

On December 8, 2017, the Legislative Yuan passed the amendment to Article 61 of the Labor Standards Act, which will take effect after the President's promulgation.  According to the amendment, employees or their survivors may establish special accounts in financial institutions for depositing occupational injury compensation, and the deposits in such accounts shall not be the object of offset, attachment, collateral or compulsory enforcement.

Reported by: David Tsai / Zachary Peng

Company Act

2. MOEA's ruling regarding Article 9 of the Company Act

The Ministry of Economic Affairs ("MOEA") issued a ruling in relation to Article 9 of the Company Act on November 28, 2017, that the rectification under the proviso of the third paragraph of the Article provides that where payment for shares receivable by a company is not actually paid for by its shareholders or has been paid for but are subsequently refunded, the responsible person of the company shall be subject to criminal liability.  After the judgment for such criminal sanction is final, the district attorney may notify the MOEA to revoke or invalidate the registration of that company provided, however, that this does not apply the scenario where the misconduct has been rectified before the judgment becomes final) only specifies that the share prices shall be paid up before the final judgment is rendered so that the payment is not required to be made at one time.  In addition, under Article 139 of the Company Act (where subscribers are obligated to pay for shares subscribed), the shareholders shall make the payment for the share subscribed and they are also obligated to make up the payment if there is any deficiency.  According to Article 311 of the Civil Code, such a payment for shares subscribed may be paid by a third party for the shareholder.  If the shareholder subscribing said shares transfers his/her/its share subscribed before paying the payment for shares, the payment obligation shall be subject to a civil relationship between the original shareholder and the transferee.

Reported by: Mike Lu / Angela Lin

Business Mergers and Acquisitions Act

3. Ruling of Ministry of Economic Affairs on Article 33 of Enterprises Mergers and Acquisitions Act

On December 6, 2017, the MOEA issued the following ruling according to Paragraph 3, Article 33 of the Enterprises Mergers and Acquisitions Act: "After a share exchange resolution is made by a company, the company shall make a public notice to shareholders and notify each shareholder and pledgee registered on the shareholders’ roster no later than 30 days prior to the record date of the share exchange for the following matters: 3. Shareholders shall deliver the share certificates held to the company one day before the record date of the share exchange otherwise the share certificates shall become null and void."  Given that the old share certificates will become null and void if the shareholder fails to deliver them to the company, the authentication bank handling the authentication of the new share certificates is not required to cut the old share certificate to invalidate them under Paragraph 2, Article 3 of the "Regulations Governing Authentication of Share Certificates".

Reported by: Mike Lu / Rady Lee

Taxation

4. Draft Regulations on Double Deduction on Expenditures of Research and Development by Individual or Company 

On December 6, 2017, the Ministry of Finance ("MOF") announced the amendment to the "Regulations on Double Deduction on Expenditures of Research and Development by Individual or Company".  After the amendment, favorable treatment under the Regulations may be extended to limited partnerships, in addition to individuals and companies.

Reported by: Mike Lu / Peter Huang          

5. Czech Republic and Taiwan executed "Agreement for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income" on December 12, 2017

Czech Republic and Taiwan executed the "Agreement for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income" on December 12, 2017 and the effective date will be confirmed after the necessary legislative process of both countries are completed.

This agreement will apply to tax residents, including individuals and enterprises, under tax law of either of the two countries. The tax deduction measures adopted may prevent business profit, investment income and gains derived from the securities transactions from double taxation. This agreement also stipulates Mutual Agreement Procedure to resolve disputes in relation to Transfer Pricing or other double taxation issues.

Reported by: Stacy Lo / Rady Lee

6. Inheritors May Pay the Estate Tax with Deposits of the Deceased

On December 6, 2017, the MOF announced that, an inheritor may apply for paying estate tax by using the deposits in financial institutions of the deceased.  With reference to Paragraph 7, Article 30 of the Estate and Gift Tax Act, the application may be submitted with consent of half of the inheritors whose holding of entitled portion is more than half of the total, or with consent of the inheritors representing over two-thirds of the entitled portion.

Reported by: Stacy Lo/ Peter Huang

7. Revocation of the Review Principles for Rendering and Receiving Tax Information Exchange Request under Tax Treaty

On December 7, 2017, the MOF announced that the Review Principles for Rendering and Receiving Tax Information Exchange Request under Tax Treaty will be abolished effective from December 9, 2017.

Reported by: Stacy Lo/ Peter Huang

Banking

8. Financial Supervisory Commission's Ruling on Paragraph 3, Article 15 of  Regulations Governing Institutions Engaging In Credit Card Business

The Financial Supervisory Commission ("FSC") issued a ruling on December 5, 2017, which provides that the credit card acquirers accepting other card acquirer institutions', electronic stored value card issuers' and electronic payment institutions’ appointment to provide the application for integrating delivery of transaction information are not required to apply to the FSC for approval according to Paragraph 3, Article 15 of the Regulations Governing Institutions Engaging In Credit Card Business, but shall report to the FSC for record within five (5) business days of the first operating day.

Reported by: Stacy Lo / Allen Lai

9. Draft Regulations on Application for Investment in Venture Capitals and Management Consulting Business of Commercial banks

The FSC has completed the process for announcement of the draft “Regulations on Application for Investment in Venture Capitals and Management Consulting Business of Commercial banks” and will soon publish for implement. The main points of the regulations are as follows:

(1) To stipulate that the venture capitals and management consulting business for establishing venture capitals fall under “other approved financial businesses by the competent authorities” under Paragraph 4, Article 74 of the Banking Act.

(2) To stipulate the investment cap and shareholding restrictions in venture capitals made by commercial banks.

(3) The responsible persons or employees of the commercial banks may not act as the managers of the venture capitals invested by such commercial banks.

(4) Where the commercial bank engages in loans or transactions other than loans with its invested venture capitals, management consulting business and business invested by the venture capitals, such transactions shall be processed according to the provisions of related party transactions under the Banking Act and the Financial Holding Company Act.

Reported by: Stacy Lo / Rady Lee

10. Amendment to the Scopes of Qualified Institutional Investors and Prescribed Level of Financial Capacity or Professional Expertise in the Financial Consumer Protection Act

On December 6, 2017, the FSC, based on the authorization of Paragraph 2, Article 4 of the Financial Consumer Protection Act (the "Act"), announced an amendment to the scopes of "qualified institutional investors" and "natural persons or juristic persons with a prescribed level of financial capacity or professional expertise" in the Act.

This amendment removes the separate definition of "a juristic persons with a prescribed level of financial capacity or professional expertise", and the requirements for professional juristic/natural persons in other relevant financial regulatory regulations will apply directly.  Further, the following are added into the relevant regulations to be referred to: Guidelines Governing Conduct of Suitability Evaluation of Funds for Clients by Securities Investment Trust / Consulting Enterprises of Securities Investment Trust & Consulting Association ("SITCA"), Regulations Governing the Conduct of Discretionary Investment Business by Securities Investment Trust Enterprises and Securities Investment Consulting Enterprises of SITCA, Standards for Internal Control Systems of Futures Trusts Enterprises of Chinese National Futures Association and Regulations Governing the Conduct of Discretionary Investment Business in Futures Trading by Managed Futures Enterprises of Chinese National Futures Association.

Reported by: Stacy Lo / Nereid Lin

Securities

11. Amendments to the "Regulations Governing Securities Firms"

On December 5, 2017, the FSC announced the amendments to the "Regulations Governing Securities Firms”.  The key points of the amendments are summarized below:

(1) To relax the ratio of net worth of total outstanding debts that securities firms may not exceed.

(2) To specify the use of special reserves.  If the accumulated amount of special reserves has reached 25% of paid-in capital, the exceeding part may be used for capitalization.

(3) To specify that the execution and hedge operation of a security firm in connection with financial derivatives may be excluded from the calculation of limit of holding equity securities issued by related parties.

(4) To relax the financial qualifications of a security firm to operate in trading financial derivatives at its business place.

(5) To add that where the settlement of exchange is required for the client's payment related to the trading of financial derivatives, such matter may be handled by the same securities firm engaged in spot foreign exchange.

(6) To stipulate that the bank account for settlement of the securities firm consigned for trading of securities is not limited to a current deposit account.

(7) To strengthen the relevant regulations on products examination and business handling of financial derivatives trading business of securities firms, and clarify relevant application procedures.

(8) To specify that the securities firms may apply to the FSC for increasing the amount of investment in overseas business and to specify the timing of post reports of material events of said overseas business.

Reported by: Jeffrey Liu / Jack Tai

IFRSs

12. International Financial Reporting Standards (''IFRS'')

On December 8, 2017, the FSC issued a ruling (with Ref No. Chin-Guan-Zheng-Cyuan-Zi-1060047129) to announce, according to the Regulations Governing the Preparation of Financial Reports by Securities Firms, the International Financial Reporting Standards (IFRS), International Accounting Standards (IAS), and Interpretations developed by the International Financial Reporting Interpretations Committee (IFRIC) or the former Standing Interpretations Committee (SIC) recognized by the FSC shall refer to the GAAP applicable in 2018, which will become effective on January 1, 2018.  The information will be announced on the IFRS Download Section of the Securities and Futures Bureau's Website.

Reported by: Jeffrey Liu / Edison Tang

Intellectual Property

13. Operational Directions Governing the Mutual Cooperation between Taiwan and the United Kingdom in the Field of Deposit of Biological Materials for the Purposes of Patent Procedure

On December 1, 2017, the Taiwan Intellectual Property Office ("TIPO") and the United Kingdom Intellectual Property Office ("UKIPO") signed a Memorandum of Understanding on "Mutual Cooperation in Biological Materials for the Purpose of Patent Procedure between Taiwan and the United Kingdom" and came into force on the same day.  The MOEA accordingly announced on December 4, 2017 "Operational Directions Governing the Mutual Cooperation between Taiwan and the United Kingdom in the Field of Deposit of Biological Materials for the Purposes of Patent Procedure" ("Directions"), effective as of December 1, 2017.  The main points of the Directions are as follows:

(1) Through the mutual cooperation between Taiwan and the UK, the deposit of biological materials made for the purposes of patent procedure at a Designated Depository by one side shall be recognized for the purposes of patent procedure by the specific patent agency of the other side.

(2) The scope of said recognition shall include the fact and date of deposit provided by the Designated Depository and the sample as furnished directly from the deposited biological materials.

(3) The Designated Depositories shall mean respectively the Food Industry Research and Development Institute ("FIRDI") in Taiwan and the depository institution(s) in the UK in line with the relevant provisions of the UK and in conformity with the following requirements: the institution (i) carries out the functions of receiving, accepting and storing biological materials and the furnishing of samples of such biological materials (whether generally or of a specific type); and (ii) conducts its affairs, in so far as they relate to the carrying out of those functions, in an objective and impartial manner.

(4) Where a deposit of biological materials has been made prior to the implementation of the Directions and the relevant patent application for invention is filed to the relevant specific agency after such implementation, the Directions may also apply.

Reported by: Jolene Wang / Linda Cheng

Food and Drug Administration

14. Draft Regulations Governing Food Allergen Labeling

The Ministry of Health and Welfare ("MOHW") announced on December 11, 2017, a draft set of Regulations Governing Food Allergen Labeling ("draft Regulations") for public consultation.  The previous set of regulations issued in 2015 will be revoked accordingly.  We summarize the draft Regulations below.

(1) Packaged foods containing the following allergens must be conspicuously labeled with warning information:

(i) Crustaceans and products thereof;

(ii) Mangoes and products thereof;

(iii) Peanuts and products thereof;

(iv) Sesame seeds, sunflower seeds and products thereof;

(v) Milks and products thereof, except lactitol derived from milks;

(vi) Eggs and products thereof;

(vii) Nuts (including almonds, hazelnuts, walnuts, cashews, pecans, Brazil nuts, pistachios, macadamia nuts, pine nuts, chestnuts, etc.) and products thereof;

(viii) Cereals containing gluten (including wheat, barley, rye, oats, etc.) and products thereof;

(ix) Soybeans and products thereof, except fully refined soybean oil and fat, mixed tocopherols and derivatives thereof, phytosterols, and phytosterol esters;

(x) Sulphur dioxide and sulphites (at concentrations of more than 10mg/kg in terms of the total SO2 in the final products); and

(xi) Salmon, mackerel, codfish, Patagonian toothfish (Dissostichus eleginoides), Greenland halibut (Reinhardtius hippoglossoides) and products thereof.

(2) The warning information of Allergens shall be labeled in one of the following ways:

(i) “The product contains Allergens”, “The product contains Allergens, not suitable for people with allergies”, or the like; or

(ii) Inclusion of Allergens in the product name.

Reported by: Jolene Wang / Crick Liang

Fair Trade Act

15. Explanation of the Fair Trade Commission's Regulations on Vertical Integrations or Joint Operation of Liquefied Petroleum Gas Filling Enterprises and Distributors

On December 12, 2017, the Fair Trade Commission promulgated amendments to the Explanation of the Fair Trade Commission's Regulations on Vertical Integrations or Joint Operation of Liquefied Petroleum Gas Filling Enterprises and Distributors, which took effect on the same day.  We summarize the key points below:

(1) "Vertical operation" refers to liquefied petroleum gas filling enterprises and distributors who run each other's business.

(2) "Joint operation" refers to the establishment of joint storage sites, joint purchase for distribution and other business operations among several liquefied petroleum gas distributors under a centralized command.

(3) In principle, the product market includes the filling market and distribution market of liquefied petroleum gas; the geographical market is limited to municipalities, counties or cities.

(4) Where liquefied petroleum gas filling enterprises or distributors engage in combination, concerted actions, restrictions on resale prices or other anticompetitive acts, Articles11, 15, 19 and 20 of the Fair Trade Act may apply.

Reported by: Kang-Shen Liu / Zachary Peng

Telecommunication

16. Preannouncement of Draft of Article 79-1 of "Regulations for Administration of the Third Generation Mobile Communications Business" and "Regulations for Administration of Mobile Broadband Businesses"

On November 30, 2017, the National Communications Commission ("NCC") made a preannouncement to add Article 79-1 to "Regulations for Administration of the Third Generation Mobile Communications Business" and "Regulations for Administration of Mobile Broadband Businesses."

The draft provides for a business termination mechanism due to expiration of license.  According to this draft, the business operator which will terminate its business due to expiration of license shall submit a business termination plan to the regulator 3 months prior to the expiration date, and shall notify the subscribers 1 month prior to the expiration date.  The business termination plan shall include the details to protect subscribers, such as refunds of security deposits or overpayment, amongst others.

Reported by: Kang-Shen Liu / Nereid Lin

Medical Care Act

17. Amendment to the Enforcement Rules of the Medical Care Act

On December 12, 2017, the Ministry of Health and Welfare announced an amendment to the Enforcement Rules of the Medical Care Act with the new Article 55-1 which provides that, as necessary, the competent authority may appoint its subordinate agency or may commission other institutions or entities to handle the approval of human trial plans for new medicines.

Reported by: Kang-Shen Liu / Chenchi Wang

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