1. Implementation Date of Act on the Use and Taxation on the Inward Remittance of Overseas Funds
On 6 August 2019, the Executive Yuan issued a ruling providing that the implementation date of the Act on the Use and Taxation on Inward Remittance of Overseas Funds was 15 August 2019.
Reported by: Stacy Lo / Hsiyen Hsu
2. Announcement of Regulations Governing Inward Remitted Overseas Fund Investing in Financial Products
On 15 August 2019, the Financial Supervisory Commission (FSC) announced the Regulations Governing Inward Remitted Overseas Fund Investing in Financial Products. 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 can 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 (for individuals only).
(2) 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.
(3) 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.
(4) Investment in local securities, and securities-related futures and options on the Taiwan Futures Exchange shall comply with the following requirements, including but not limited to:
(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.
(5) 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 / Paul Hsu
3. Rulings for Specific Protection Ratio under Regulations Governing Inward Remitted Overseas Fund Investing in Financial Products
On 15 August 2019, the FSC announced the ruling to define the specific protection ratio for "traditional life insurance without survival insurance payment and complying with specific protection ratio" under Sub-paragraph 3, Paragraph 1, Article 5 of the Regulations for Financial Investment Use and Management on Inward Remittance of Overseas Funds as the ratio of death benefit to policy value reserve, which shall meet certain ratio during the whole insurance period and be differentiated by age.
Reported by: Stacy Lo / Eliza Lee
4. Draft Regulations Governing Inward Remittance Overseas Fund Investing in industries
On 15 August 2019, the Ministry of Economic Affairs announced the Regulations Governing Inward Remittance of Overseas Fund for Investment in Industries, which provides tax incentive for inward remittance of overseas fund for eligible investment. We summarize below:
(1) Industries and methods of direct investment
Individuals and profit-seeking enterprises (collectively "investors") may invest their overseas funds in agricultural, industrial, and service businesses through their original business, newly-established business or others' business. Investors of newly-established business or others' business are required to hold shares or capitals of such business for four (4) years or more.
(2) Requirement of Indirect Investment
Investors shall invest in domestic venture capital or private equity fund for four (4) years or more and the investment amount of which in important policy-driven industries shall reach certain ratio within specific time provided. The shares in or capitals of said venture capital or private equity fund shall not be pledged or placed as a collateral. In addition, uninvested funds and investment in overseas businesses are subject to certain restrictions.
(3) The Scope of indirect investment in important policy-focused industries
Important policy-driven industries include the so-called "5+2 Industries" (i.e. AI machinery, internet of things, green energy, biomedicine, national defense, circular economy, high-value agriculture), important manufacturing, important service industry, electric power supply, natural gas business, long-term care services and cultural and creative Industry.
Reported by: Mike Lu / Cindy Chien
5. Regulations Governing the Use and Taxation on the Inward Remitted Overseas Fund
On 15 August, the Ministry of Finance announced the Regulations Governing the Use and Taxation on the Inward Remitted Overseas Fund. We summarize the key points below:
(1) The "controlling power or significant influence" mentioned in the Subparagraph 4, Paragraph 1, Article 3 of the Act on the Use and Taxation on the Inward Remittance of Overseas Funds (Act) refer to any of the following:
(a) A profit-seeking enterprise directly or indirectly holds 20% or more of the shares or capital of an offshore invested enterprise.
(b) A profit-seeking enterprise shall adopt the offshore invested enterprise into its consolidated financial statement or recognize the investment profits and losses of such offshore invested enterprise by equity method under the enterprise accounting standards announced by the Accounting Research Development Foundation, the international financial reporting standards, international accounting standards accepted by the FSC, and the Regulations Governing the Preparation of Financial Reports by Securities Issuers
(2) To provide the application process and documents required for an individual and a profit-seeking enterprise which chose to pay tax in accordance with the Act.
(3) To provide the joint review process of the tax collection authority and the bank accepting the application by such individual and profit-seeking enterprise.
(4) The bank shall report the management and use of the dedicated foreign exchange account, trust account, and securities discretionary investment account to the tax collection authority for recordation by the end of January each year.
(5) Other tax benefits under other laws or regulations shall not apply if the person or profit-seeking enterprise chose to pay tax in accordance with the Act.
Reported by: Stacy Lo / Will Chen
6. Adjustment to the minimum wage
On 14 August 2019, the Minimum Wage Review Committee resolved that the minimum wage will be adjusted to NT$23,800 per month and NT$158 per hour since January 1, 2020, which will be submitted to the Executive Yuan for approval.
Reported by: David Tsai / Paul Hsu
7. Draft amendment to Trust Law
The Ministry of Justice announced the draft amendment to the Trust Law on 15 August 2019, which we summarize below:
(1) Add the type of property for the establishment of a charity trust.
(2) Require that a trustee shall propose a plan on property use and submit it to the relevant competent authority for prior approval where the property for establishing a charitable trust contains non-cash property over a certain amount, or a charitable trust accepts donation in the form of non-cash property over a certain amount.
(3) Add provisions in relation to documents which shall be provided by a trustee when applying for the establishment of a charitable trust and matters to be included in the trust act.
(4) Add a provision for the minimum ratio of the annual expense for public welfare accounting for the total annual expense.
(5) Add a provision in relation to the obligations of the trustee and how it can manage and use the trust property.
(6) Add principles for awards or donations made by charitable trusts.
(7) Require the financial statements be signed by a CPA where the property of a charitable trust meet certain threshold.
(8) Set up an information disclosure system for charitable trusts.
(9) Specify trust supervisor's obligations to avoid conflicts of interests, duties and negative qualifications.
(10) Require charitable trusts that meet a certain size to set up a consulting committee and specify the function of such committee, obligations of the members to avoid conflicts of interest and the ratio of professionals.
(11) Amend the ownership of the trust property after the termination of a trust relation to be limited to the charitable legal person, charitable trust or government.
Reported by: Kangshen Liu / Caitlyn Kao
8. Draft Amendment to Trust Enterprise Act
On 5 August 2019, the FSC announced a draft amendment to the Trust Enterprise Act, which is mainly to raise the cap and class interval of the fine imposed with reference to the fine amount adjustment under the amended Banking Act, so as to increase competent authority's discretionary power, and to provide that a fine may be exempted if the violation is minor. Moreover, given the principle of clarity and definiteness of penalties, the draft amendment provides the penalty for offering mutual trust funds without approval, failure to establish or comply with the internal control and audit system, and violation of the Regulations Governing the Scope of Business, Restrictions on Transfer of Beneficiary Rights, Risk Disclosure, Marketing, and Conclusion of Contract by Trust Enterprises.
Reported by: Stacy Lo / Cindy Chien
9. Draft amendments to Regulations Governing Insurance Brokers and Regulations Governing Insurance Agents
On 14 August 2019, the FSC announced the draft amendments to the Regulations Governing Insurance Brokers and Regulations Governing Insurance Agents for public consultation. We summarize the key points below:
(1) The draft amendments simplify the signing procedures of insurance brokers and insurance agents appointed by the insurance broker companies, insurance agent companies and banks.
(2) Due to financial consumers who purchase insurance products by way of loans, deposit cancellations or insurance policy loans will be exposed to higher financial risks, the draft amendments require the banks to establish a mechanism for the consistency of financial information of transactions with such consumers, and the personnel other than sales department shall be assigned to make phone interviews.
(3) The current requirement that the application for operation of the reinsurance brokerage business being subject to the advance application for the establishment of an insurance broker company is amended to that the reinsurance brokerage business may be applied independently or the insurance brokerage business and reinsurance brokerage business may be applied for concurrent operation.
(4) The insurance broker companies shall not arrange the reinsurance through other reinsurance broker companies, and shall keep the complete reinsurance contract documents and deliver them to the original insurer. The current contents of the self-regulation of the insurance broker company operating reinsurance broker business are also incorporated into the draft amendments.
Reported by: David Tsai / Aaron Lai
Pharmaceutical Affairs Act
10. Amendments to Pharmaceutical Affairs Act
On 6 August 2019, the Executive Yuan announced the amendments to Pharmaceutical Affairs Act, establishing the Patent Linkage System, including newly added Chapter 4-1, Articles 48-3 to 48-22, and Articles 92-1, 100 and 100-1, which were promulgated on 31 January 2018, will take effective as of 20 August 2019 (Please refer to Item 8 of Issue No. 288 of the Lexgroup Newsletter for details).
Reported by: Jolene Wang / Linda Cheng