Lexgroup Newsletter (Issue No. 329)

Date: Oct 2019

Business Case Adjudication Act

1. Draft of Business Case Adjudication Act

On 10 July 2019, the Judicial Yuan proposed the draft of Business Case Adjudication Act, which is under the review of the Legislative Yuan.  We summarize the key points below:

(1) Establishment of business court: The level of business court is the same as the high court adopting two-level courts and trials system, which is constituted by well-trained judges.  The business court has the exclusive jurisdiction of business case.

(2) Mandatory legal representation by Attorney(s): Parties and related parties shall engage attorneys to represent them to conduct the acts of litigation procedure, the remuneration to the attorneys is a part of the procedure fees.  If the attorney fail to attend the hearing, that party will be deemed absent.

(3) Electronic legal documents submission system: The legal documents shall be submitted through the electronic legal documents submission system.  Legal documents which are not submitted through the system will be deemed not submitted.

(4) Remote hearing: When the court thinks appropriate, the hearing may be held through the device with sound and video transfer function.

(5) Preliminary mediation proceeding: Mediation shall be proceeded before the trial, the mediation shall be held by the judge or people with the relevant expertise appointed by the court as the mediators.  The parties, legal representatives of the parties and the attorneys shall attend the mediation hearing.

(6) Inquiry systems among parties: To prepare the claim or evidence, parties may list necessary matters and inquiries for the explanation by the other party.  When a party refuses to the inquiry raised by the other party without justifiable reasons, the court may hold the other party’s allegation as truth.

(7) Expert witness: Parties may engage expert witnesses to provide professional opinion, and may also raise inquiries against the professional opinion provided by the other party.  The court may request the expert witness to state his/ her opinion during the hearing.

(8) Order of keeping confidentiality: Where the documents, objects to be inspected, or data required for expert testimony submitted during the procedure involve the business secret, the holder may apply for an order of keeping confidentiality with the court.  People who violate the order will be sentenced to the imprisonment for not more than 3 years.

Reported by: David Tsai / Paul Hsu

Labor Incident Act

2. Regulations for Establishment of Labor Mediators by District Courts

On 12 September 2019, the Judicial Yuan promulgated the "Regulations for Establishment of Labor Mediators by District Courts" (Regulations).  We summarize the key points below:

(1) The labor mediators shall be selected by each court under which the number of mediators shall be decided by each court according to its need.  The mediators shall be divided into the labor team and employer team.

(2) The Judicial Yuan shall in the due course request the Ministry of Labor, Ministry of Economic Affairs (MOEA), city/country governments or other central competent authorities, nationwide unions, industrial and commercial groups to recommend labor mediators and provide the name list to the court according to the court's request. 

(3) The selected labor mediators shall attend the professional seminar held by the Judicial Yuan or each district court for at least 12 hours before the engagement by the court.  The above shall not apply if the mediator is retained before or has been retained by other court.

(4) The term of the labor mediator is 3 years, which may be shorten according to the actual need of the court.

(5) The Regulation will be effective from 1 January 2019.

Reported by: David Tsai / Naiju Kuan

SITE/SICE

3. Reasonableness for Payment of Channel Remuneration

On 23 September 2019, the Securities Investment Trust and Consulting Association forwarded and announced the principles of reasonableness for the payment of channel remuneration according to instructions of the Financial Supervisory Commission.  We summarize as follows:  

(1) The payment of remuneration must take into account of items such as the company's operating costs, reasonable profits and the overall contribution of sales agents.  It is not permitted to pay any one-time sales incentive as remuneration in any disguised form;

(2) The payment of channel remuneration be in line with the income of management fee.  For example, the management fee which has not been collected shall not be prepaid to the sales agent(s) as a kind of sharing of management fees; and

(3) The determination of the rate of management fee shall be reasonably allocated to the fund's duration and the collection mechanism of such fee must take the interest of investors into consideration.  It is not permitted to concentrate the collection of the management fee within a short period for the purpose of paying channel remuneration.

Reported by: Jeffrey Liu / Caitlyn Kao

Insurance

4. Draft Amendment to Regulations Governing Business Solicitation, Policy Underwriting and Claim Adjusting of Insurance Enterprises

On 24 September 2019, the Financial Supervisory Commission (FSC) announced an amendment to the Regulations Governing Business Solicitation, Policy Underwriting and Claim Adjusting of Insurance Enterprises for public consultation.  We summarize the key points below:

(1) The amendment adds a provision that the insurance solicitor shall understand the source of funds of the premium paid by the applicant when soliciting, and the solicitation report shall include the information of whether the applicant had asked for a loan or a policy loan within 3 months before the participation in the insurance. 

(2) The amendment provides that the insurance solicitor and the insurance brokers with the business relationship shall not induce the applicant to pay the premium by a loan or a policy loan, and the insurance enterprise or its solicitors shall not pay or receive the remuneration for promoting the applicant to apply for a loan to pay the premium.

(3) The amendment provides that when the insurance enterprise sells all kinds of insurance products with cash surrender value (excluding the small amount whole life insurance and the injury insurance with policy term no more than 3 years) to customers over 70 years old, the sales process shall be recorded by sound recording, video recording or electronic equipment to preserve the trajectory of the relevant operation, which shall be reviewed by the appropriate unit or supervisor to confirm the appropriateness of the customer's handling of such product transactions.

(4) The amendment provides that, for the customers whose source of funds of the premium is from loans or insurance policies and purchase insurance products with non-forfeiture value (excluding the small amount whole life insurance and the injury insurance with policy term no more than 3 years) or purchase the mortgage life insurance products with survival insurance premiums, the insurance enterprise shall designate a non-sales channel personnel to confirm through the phone call of whether the solicitor has a full understanding of the customer and the appropriateness of the insurance products, and clearly inform the customer of related risks that he/she will face and the maximum possible loss due to the financial leverage operation method.

Reported by: David Tsai / Aaron Lai

Taxation

5. Amendment to Article 15-1 of Principle of Recognizing Income Sourced from the Republic of China in accordance with Article 8 of Income Tax Act

On 26 September 2019, the Ministry of Finance (MOF) announced the amendment to Article 15-1 of the Principle of Recognizing Income Sourced from the Republic of China in accordance with Article 8 of Income Tax Act.  We summarize the key points below:

Foreign enterprises without fixed business place and business agent in the Republic of China receiving service remuneration and operating income under subparagraphs 3 and 9 of Article 8 of Income Tax Act respectively, may, before acquisition of such income, provide the tax collection authority relevant documents to apply for assessment of applicable net profit ratio and domestic profit contribution ratio.  Such enterprises shall according to the assessment result calculate and report tax return, or the tax withholder shall withhold the tax based on applicable withholding rate accordingly. 

Reported by: Stacy Lo / Bella Chiu

6. Directions for Foreign Profit-seeking Enterprises Applying for Assessment of Net Profit Ratio and Domestic Profit Contribution Ratio for Calculation of Applicable Income Sourced from the Republic of China

On 26 September 2019, the MOF announced the Directions for Foreign Profit-seeking Enterprises Applying for Assessment of Net Profit Ratio and Domestic Profit Contribution Ratio for Calculation of Applicable Income Sourced from the Republic of China.  We summarize the key points below:

(1) Before receiving service remuneration and operating profit under Subparagraphs 3 and 9, Article 8 of Income Tax Act respectively, foreign profit-seeking enterprises may apply to the tax collection authority for assessment of applicable net profit ratio (ANPR) and domestic profit contribution ratio (DPCR) for calculation of taxable income.

(2) Foreign profit-seeking enterprises may file the above application personally or appoint a resident or profit-seeking enterprise with fixed business place in the Republic of China as an application agent to file such application.

(3) The income tax collection process after approval of the assessment is as follows:

(a) The taxable income will be (net income × ANPR × DPCR).

(b) For income under Article 88 of the Income Tax Act, the tax withholder shall withhold tax calculated based on the assessed income and prescribed tax rates.

(c) For other income, the foreign profit-seeking enterprises shall file the tax return personally or appoint an agent to do so.

Reported by: Stacy Lo / Alex Li

Intellectual Property

7. Amendment to Patent Examination Guidelines

On 24 September 2019, the MOEA announced an amendment to Patent Examination Guidelines, Part I, Procedural Examination and Patent Right Management, Chapters 13, 17, 20, 21 and 22.  The amendment is made to modify the corresponding requirements to comply with the amendment to the Patent Act promulgated on 1 May 2019 by the President, including those in respect of the filing for divisional invention/utility model patent applications after written decision of allowance is served, extension of the protective term of design patent, the examination for post-grant amendments and the period for making such amendments, and the time limits for submitting supplementary reasons or evidence in invalidation procedures.  The above-mentioned Patent Act and corresponding amendments to the Patent Examination Guidelines will take effect as of 1 November 2019.

Reported by: Jolene Wang / Linda Cheng

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