Statute for Industrial Innovation
1. Amendment to Article 12-1, Article 12-2, Article 19-1, Article 23-1 and Article 23-3 of Statute for Industrial Innovation
The amendment to the Statute for Industrial Innovation was announced by the President on 24 July 2019. We summarize the key points below:
(1) To encourage technology cooperation between individuals and companies, Article 12-1 provides that for individuals receiving new shares as a result of assigning or licensing intellectual property rights of their own research and development (“R&D”) who hold such shares and provide services for the same company for 2 years or more, the lower of “acquisition price” or “actual transfer price” will be the basis for calculation of income tax.
(2) To encourage R&D, Article 12-2 provides that for individual creators cooperating with a domestic academic or research institution who receive new shares as a result of assigning or licensing intellectual property rights of their own research and development (“R&D”) and who hold such shares and provide services for the same company for 2 years or more, the lower of “acquisition price” or “actual transfer price” will be the basis for calculation of income tax.
(3) For employee incentive shares issued either by controlling company and subsidiary, the lower of “acquisition price” or “actual transfer price” will be the basis for calculation of income tax.
(4) To promote investment activities, Article 23-3 provides that enterprises investing in buildings, software/hardware facility or technology for business operation by using its undistributed surplus earnings may be entitled to an exemption from the profit-seeking enterprise income tax (i.e. 5%).
Reported by: Mike Lu/Bella Chiu
Cross Straight Relations with Mainland
2. Amendment to Act for Relations between People of Taiwan Area and Mainland Area
On 24 July 2019, the President announced the amendment to the Act for Relations between People of Taiwan Area and Mainland Area, and the effective date which will be further determined by the Executive Yuan. We summarize the key points below:
(1) The minimum restriction period to prohibit retired public servant or who leave the same position from entering into Mainland China is amended to three (3) years, which may be increased but shall not be decreased.
(2) The government agencies in question served by the same people may request them to file a report to the same government agencies before entrance into Mainland and after returning to Taiwan.
(3) To provide restrictions on people with certain status from participating in politic activities in Mainland China.
(4) A violator may be subject to a fine ranging from NT$1,000,000 to NT$10,000,000.
Reported by: Mike Lu/Will Chen
3. Act for Use and Taxation on Inward Remittance of Overseas Funds
The Act for Use and Taxation on Inward Remittance of Overseas Funds (Act) was announced by the President on 24 July 2019. We summarize the key points below:
(1) Individuals and profit-seeking enterprises which choose to calculate, declare and pay taxable income in accordance with the Act may be exempt from the taxation imposed based on the Basic Income Tax Act, the Act Governing Relations between the People of the Taiwan Area and the Mainland Area, and the Income Tax Act, and no change will be permitted once it has been selected; the remitted fund shall not be used for the acquisition of real estate and the beneficiary certificates issued or offered in accordance with the Real Estate Securitization Act, and shall comply with the provisions of the Money Laundering Prevention Act, the Counter-Terrorism Financing Act and other applicable laws and regulations.
(2) In the event that the individual remits the overseas funds within one year from the date of the implementation of the Act, or that the profit-seeking business is allocated and remits back investment income from its offshore invested companies with controlling power or significant influence within one year from the date of implementation of the Act, the tax rate of 8% will be applicable when the funds are remitted back to the special account. For those who make the remittance within one year from the date next to the one year anniversary of implementation of the Act, the tax rate of 10% will be applicable.
(3) Where the funds remitted by individuals and profit-seeking enterprises are used in direct substantive investments, an investment plan shall first be submitted to the Ministry of Economic Affairs for approval of the invested industry before the funds may be withdrawn from the special account. After the investment is completed and the completion certificate is obtained, an application for a refund of 50% of the tax amount may be submitted to the tax authorities.
(4) Individuals and profit-seeking enterprises engaging in substantive investments through domestic venture capital investment or private equity funds, an investment application shall first be submitted to and be approved by the Ministry of Economic Affairs to invest in important policy-focused industries before the funds may be withdrawn from the special account. After the investment period is expired and the completion certificate is obtained, an application for a refund of 50% of the tax amount may be submitted to the tax authorities.
Reported by: Stacy Lo/Eliza Lee
4. Draft Regulations Governing Inward Remitted Overseas Fund Investing in Financial Products
The Financial Supervisory Commission ("FSC") announced the draft Regulations Governing Inward Remitted Overseas Fund Investing in Financial Products on 26 July 2019. We summarize the key points below:
(1) The overseas fund remitted by individuals or profit-seeking enterprises in accordance with the Use and Taxation on Inward Remittance of Overseas Funds may be deposited into a dedicated trust account or discretionary securities investment account for investment in financial products. The scope of the financial products includes domestic local securities, securities-related futures and options traded on the Taiwan Futures Exchange, or local insurance products (individuals only). Where the fund is invested in local securities, and securities-related futures and options on the Taiwan Futures Exchange, it shall be managed by an individually managed trust account or discretionary securities investment account. Where an individual invests in local insurance products, they shall be managed by trust.
(2) The amount investing in financial products shall be limited to 25% of the funds deposited into the dedicated foreign currency deposit account after deducting the relevant tax payable. The amount investing in local insurance products by an individual shall be limited to 3% of the amount aforementioned after deducting the relevant tax payable.
(3) Investment in local securities, and securities-related futures and options on the Taiwan Futures Exchange shall comply with the following:
(a) Certain diversification ratio.
(b) Margin trading, securities lending or borrowing, and leveraged or reversed ETFs and ETNs are prohibited.
(c) The funds shall not be pledged or placed as collateral.
(4) One-third of the funds investing in financial products may be retrieved respectively five (5) years and six (6) years after the fund is deposited into the dedicated foreign currency deposit account. All of the fund may be retrieved seven years after the said deposit.
Reported by: Stacy Lo/Hsiyen Hsu
5. Placement Agent of Offshore Fund through Trust Enterprises
On 18 July 2019, the FSC issued a ruling to a private placement agent engaged by the offshore fund institution for private placement of offshore funds in Taiwan to delegate trust enterprises to assist private placement via monetary trust arrangement, provided that the placement shall bear the ultimate responsibilities for the qualifications of the offerees.
Reported by: Jeffrey Liu/ Eliza Lee
Regulations for Verification of Investment by Overseas Chinese and Foreign Nationals
6. Amendment to Regulations for Verification of Investment by Overseas Chinese and Foreign Nationals
On 29 July 2019, the Ministry of Economic Affairs announced the amendments to the Regulations for Verification of Investment by Overseas Chinese and Foreign Nationals. We summarized key points below:
(1) Investors investing in the invested enterprises by installments may file for the verification once within two (2) months after the completion of the investment. (Article 2)
(2) Relaxation on requirement that foreign currencies remitted into Taiwan must be exchanged into New Taiwan Dollars (“NTD”). (Article 3)
(3) No application for verification is required for investment as a result of gift, inheritance, or capital injection by surplus or reserve. (Article 12)
(4) The competent authorities may request investors to provide additional documents such as certified capital report by certified public accountant as they deem necessary. (Article 13)
Reported by: Mike Lu/ Angela Lin
7. The Executive Yuan passed Draft of Act for the Employment Promotion for the Senior or Mid-Aged Persons and the Elders
On 25 July 2019, the Executive Yuan passed the draft Employment Promotion for the Senior or Mid-Aged Persons and the Elders. We summarize the key points below:
(1) The Act applies to the ROC national or foreigners permitted to reside and their spouse who reaches the age of 45 or above.
(2) The central competent authority shall provide the employment plan to the senior or mid-aged persons and the elders; the local competent authority shall promote employment according to the plan mentioned above.
(3) The employer shall not discriminate persons for the reason of age. The Act also provides the definition of discrimination, burden of proof, procedure of appeal, liability for damage compensation, and penalty.
(4) The employer may adopt on-the-job training, job accommodation or provide employment aids and cooperation of the same work, the competent authority may provide subsidies or incentives.
(5) The competent authority shall assist the senior or mid-aged persons and the elders to obtain employment or start a business, and the competent authority may provide relevant allowance, subsidies or incentives.
(6) The employer may hire workers who is aged 65 or above on fixed term contracts, and the employer may provide retirement preparation or relevant assistance of reemployment from 1 year before the person reaching the age of force retirement retires.
Reported by: David Tsai/ Paul Hsu
8. Interpretive ruling of Regulations on Permission and Administration of Employment of Foreign Workers.
On 17 July 2019, the Ministry of Labor announced a ruling in relation to Paragraph 3, Article7 of the Regulations on Permission and Administration of Employment of Foreign Workers that if an employer hires a foreign employee engaging in the work and the relevant documents were produced in specific countries, the employer shall submit the documents to overseas missions of R.O.C. for legalization, unless under specific conditions below:
(1) If the foreigner is hired by a global company and seconded to the branch or subsidiary in Taiwan, the certificate for working experience issued by the headquarter/parent company or branch/subsidiary do not need to be legalized.
(2) If the foreigner is engaging in the specific work of academic research, and he/she has the degree of foreign university or college adopted by the central competent authority, the degree and certificate for working experience do not need to be verified.
(3) If foreign student, overseas Chinese student or other Chinese student graduating from public or registered private college/university is hired to engage in specialized or technical work, there is no need to do the legalization for the document submitted.
Reported by: David Tsai/Paul Hsu
9. Amendment to Enforcement Rules of the Labor Pension Act
On 29 July 2019, the Ministry of Labor announced the amendment to the Enforcement Rules of the Labor Pension Act. We summarize the key points below:
(1) Where, among other, the foreign spouse and foreigners obtaining a permanent resident permit who do not apply to the Labor Standards Act voluntarily submit the pension, a photocopy of their resident permit in R.O.C shall be attached.
(2) The method of calculating pension for the heir or the designated applicant shall be as same as which of the labor.
Reported by: David Tsai/ Aaron Lai