Lexgroup Newsletter (Issue No. 328)

Date: Oct 2019

Tax

1. Proposal to Abolish Stamp Tax Act

On 12 September 2019, the Executive Yuan passed the proposal to abolish the Stamp Tax Act.  The proposal will be further submitted to the Legislation Yuan for review.

Reported by: Stacy Lo / Jack Tai

2. Taxation for Income Derived by an Individual from Transaction after 1 January 2016 of House and Land Received by Gift

On 11 September, the Taxation Administration, Ministry of Finance (MOF) issued a ruling interpreting that if an individual transfers after 1 January 2016, the house and land received by gift where the house and land were (i) acquired by the individual between the following day of 1 January 2014 and 31 December 2015 by gift, and the individual and the legator have been held for a period of no more than 2 years, or (ii) acquired by the legator before 31 December 2015 and acquired by the individual after 1 January 2016 then of paragraph 1 of Article 4-4 of the Income Tax Act (Act) does not apply.  The income derived from the transaction shall be subject to assessment of income tax of the house in accordance with Category 7 of Paragraph 1 of Article 14 of the Act (i.e., property transaction income), which shall be consolidated into the amount of income for the whole year, reported during the specific time under Article 71 of the Act, and handled pursuant to items 2 to 4 of Tai-Tsai-Shui-Tzu No. 10404620870.

Reported by: Stacy Lo / Cindy Chien

3. MOEA Q&A Re Regulations Governing Inward Remitted Overseas Fund Investing in Business

On 26 August 2019, the Ministry of Economic Affairs (MOEA) issued a Q&A for the FAQ concerning the Regulations Governing Inward Remitted Overseas Fund Investing in Business. We summarize the major contents below:

(1) Expense on direct investment in construction or purchase of buildings does not include the purchase cost of the land.

(2) Resale of buildings constructed or purchased through direct investment is subject to tax.

(3) Direct investment is prohibited from investing in convertible bond issued by another profit-seeking enterprise. 

(4) Indirect investment through domestic venture capital or private equity shall be limited to in important strategic industries in Taiwan and investment in TWSE/GTSM listed company conducting mergers and acquisitions of such companies are not permitted.  

(5) The important strategic industries to be invested indirectly are limited to companies incorporated in Taiwan.

(6) Qualifications of private equity under the indirect investment shall be jointly reviewed and determined by the MOEA, the MOF and the FSC.

(7) Domestic venture capital or private equity qualified for indirect investment shall be a company or limited partnership registered in Taiwan and its initial capital upon incorporation may be less than NTD 200 million.  After the offshore funds of the individual and profit enterprises have been available for use by the domestic venture capital or private equity, its capital must become at least NTD 200 million.

(8) For indirect investment in existing share such fund shall still be subject to tax.

Reported by: Mike Lu / Rady Lee

Fund

4. Amendment to Code of Conduct for Engaged Institution for Private Placement of Offshore Funds and Matters To Be Specified on the Engagement Agreement between the Engaged Institution and the Trust Enterprise with Respect to the Private Placement of Offshore Funds via Monetary Trust

On 21 September 2019, the Securities Investment Trust &Consultation Association of R.O.C. announced an amendment to the "Code of Conduct for Engaged Institution for Private Placement of Offshore Funds" (Code of Conduct) and new rules "Matters To Be Specified on the Engagement Agreement between the Engaged Institution and the Trust Enterprise with Respect to the Private Placement of Offshore Funds via Monetary Trust". We summarize key points below:

(1) It is specified in the Code of Conduct that the engaged institution (i.e. placement agent) may further engage a trust enterprise to conduct the business of private placement of offshore funds via monetary trust arrangement and an engagement agreement will be required.  Furthermore, a trust enterprise shall confirm qualifications of the offerees and preserve supporting documents. 

(2) Matters, such as the rights and obligations of both parties, remuneration, termination and other miscellaneous matters, are required to be included in the engagement agreement

Reported by: Jeffrey Liu / Jack Tai

Banking

5. Amendment to Regulations Governing Internal Operating Systems and Procedures for the Outsourcing of Financial Institution Operation

On 12 September 2019, the Financial Supervisory Commission (FSC) announced an amendment to the Regulations Governing Internal Operating Systems and Procedures for the Outsourcing of Financial Institution Operation, which will be implemented soon. We summarize the key points of the amendment below:

(1) To delete the provisions in respect of implied consent of the clients for outsourcing;

(2) To add provisions that asset management companies directly or indirectly wholly owned by financial institutions can accept the appointment from their parent companies to handle the debt collection of their parent companies;

(3) To add the compliance requirements in respect of outsourcing of cloud services, including:

(a) A financial institution shall ensure the risk control of operation;

(b) A financial institution shall have the ultimate supervisory obligation of the cloud service providers; 

(c) A financial institution shall ensure that themselves, competent authority, the Central Bank or the designated entities may obtain the relevant information of operation implemented by the cloud service providers;

(d) A financial institution may entrust the independent third parties to conduct auditing;

(e) A financial institution shall adopt the effective protection measures for the clients' information that transmitted to and stored with the cloud service providers; 

(f) A financial institution shall reserve the ownership of the information outsourced to cloud service providers for processing; 

(g) In principle, the clients' information and storage location thereof shall be within Taiwan; and

(h) A financial institution shall set out the emergency contingency plan.

(4) Whether the approval or filing for record will be required for outsourcing of cloud service shall depend on the materiality of the outsourcing, and the criteria of determining the materiality and the required documents for the application are provided.

Reported by: Stacy Lo / Alex Li

Intellectual Property

6. Amendment to Patent Examination Guidelines

On 12 September 2019, the MOEA announced an amendment to Patent Examination Guidelines, Part III, Substantive Examination for Design Patents, Chapter 5, Priority Claims, which took effect as of the same date.  The amendment was made to comply with the current practice that only when it is discovered that the date of a previous application or the date of publication of relevant data falls between the claimed priority date and the filing date of a later application, may the competent authority decide whether to recognize the priority claim or not.

Reported by: Jolene Wang / Linda Cheng

Criminal Act

7. Draft Amendment to Criminal Code

On 19 September2019, the Ministry of Justice announced the draft amendment to the Criminal Code.  We summarize the key points below:

(1) Amendment to Article 266:  The cap of the fine for committing gambling in a public place is raised to NT$50,000.  A provision that gambling via telecommunication equipment, electronic communication, internet or other similar means shall be subject to the same penalty is added in paragraph 2. 

(2) Amendment to Article 270-1:  In the case of committing gambling, the gambling equipment, lotteries, properties located at the gambling tables or the place to cash out tokens at the site shall be confiscated, no matter whether it belongs to the offender or not.

Reported by: David Tsai / Naiju Kuan

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