1.Allowing ETF Feeder Fund
On 25 January 2019, the Financial Supervisory Commission (FSC) issued a ruling to allow a securities investment trust enterprise (SITE) managing the ETF may also apply for approval to launch a feeder fund (ETF Feeder Fund) which only feeds to the ETF managed by the SITE (Master Fund).
In addition, the FSC also rules that under the manager of managers structure, the passive management funds that can be concurrently managed by fund managers include ETF Feeder Funds.
Reported by: Jeffrey Liu / Jack Tai
2.Amendment to Directions Concerning the Establishment of Foreign Branches by Domestic Banks
On 12 February 2019, the FSC announced the amendment to the Directions Concerning the Establishment of Foreign Branches by Domestic Banks (Directions). The key points are as follows:
To facilitate the review for application filed by a domestic bank which excels in global management capabilities and intend to set up a branch at a country (region) without branch establishment by local banks, the review period of the application may be shorten to 25 business days.
Where a domestic bank applies to establish a foreign branch, copies of the application documents shall be made to the Central Bank of the Republic of China.
The Directions also provide that the application shall include the analysis of the information of population of the foreign country, area of land and the local GDP, the analysis of the trade development between two countries due to the establishment of the foreign branch, and the plan of the enhancement of the capabilities of the global operation and management of the head office and the specific future development strategy of the foreign branch.
Reported by: Stacy Lo / Hsiyen Hsu
3.Scope of Financial Account for Performance by Financial Institutions of Due Diligence Review and Report
On 31 January 2019, the Ministry of Finance (MOF) issued a ruling that in conducting the due diligence report under Article 5 of the "Regulations for Financial Institutions Implementing Joint Report and Due Diligence" (Regulations), a financial institution shall conduct due diligence and reporting on all types of financial accounts (including deposit accounts, custodian accounts, rights, interests or credits held in the investment entities, insurance contracts and annuity insurance contracts with cash value) under Article 16 of the Regulation.
Reported by: Stacy Lo / Eliza Lee
4.Principles for Taxation on Inward Remittance From Offshore
On 31 January 2019, the MOF issued a ruling in respect of principles for taxation on inward remittance from offshore. We summarize the key points below:
(1) In respect of inward remittance of individuals from offshore, Hong Kong and Macao.
(a)For income alternative income tax shall be imposed on offshore income not included in the taxable income and income sourced from Hong Kong or Macao, and tax paid under the tax law of the jurisdiction where the income is sourced can be credited against the tax payable.
(b)The individual may identify the nature of inward remittance and provide the relevant supportive documents for determination to the tax collection authority.
(2) In respect of inward remittance of individuals from Mainland China.
Income derived from Mainland China shall be included in taxable income and subject to income tax.
Reported by: Stacy Lo / Will Chen
5.<MOEA ruling in relation to Company Act
On 22 January 2019, the Ministry of Economic Affairs (MOEA) issued a ruling that if a public company is authorized by its Articles of Incorporation to distribute dividends and bonuses in cash by a supermajority resolution of the board meeting under Paragraph 5, Article 240 of the Company Act, the board only needs to report its resolution to the shareholders' meeting and it is not required to be subject to the resolution of the shareholders' meeting.
Reported by: Mike Lu / Angela Lin
6.Ruling in Respect of Profit Distribution or loss reaching-up proposals
On 22 January 2019, the MOEA announced a ruling in respect of Article 228-1 of the Company Act. We summarize the key points below:
(1)A company may distribute its earnings of the preceding quarter or preceding half fiscal year as long as it is specified its Articles of Incorporation that the surplus earning distribution or loss setting-off proposal can be proceeded with for each quarter or each half fiscal year.
If a company decides not to distribute its earnings or not to make up its losses, a resolution shall still need be made by the board of directors.
(3)Employees’ remuneration cannot be distributed on a quarterly or semi-annul basis. If a company distributes its earnings on a quarterly or semi-annul basis, it shall reserve an estimated amount for the employees’ remuneration.
Reported by: Mike Lu / Albert Chia