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The Legislative Yuan had passed the income tax reforms this week. As the Ministry of Finance described these reforms are focusing on building a fairness taxation environment, optimizing the taxation procedures and boosting the incentives for investors. The following are several major aspects of this new reforms:
The Standard Deduction for individual income tax has raised to NT$120,000 from NT$ 90,000. Additional benefits and deduction for mid-low income and family with children.
The highest individual income tax rate (net income over NT 10 million dollars) reducing the rate to 40%. (45% before the reform).
A. Dividends for individual domestic resident can choose either way to declare:
1. The dividends would be collected through individual income tax, 8.5% of the dividends would be granted as a deduction. (maximum NT$ 80,000/unit deduction; only apply to dividends under NT$ 940,000/year).
2. The dividends would separate from the individual income tax, tax rate at 28% of the total dividends.
B. Business Income Tax rate
1. Raising the tax rate of business income to 20%.
2. Reducing the tax rate of undistributed profit from 10% to 5%.
3. 21% of dividends withhold of foreign investors.
C. No business income tax for Sole Proprietorship, Partnership. Only tax on their individual income tax.
The Ministry of Justice passed several draft articles to the organization acts, adopting the system of “Grand Chamber” to the final trial. The goal is to ensure the consistency of legal opinions. Additionally, case law without the full text of the judgment will no longer be adopted; case law with the full text of the judgment will be recognized as authorities.
It has been long discussed that the Supreme Court and Supreme Administrative Court, due to their heavy loading of cases, contradictions happened between each other and among different Divisions. It brought inconsistency and unpredictable risks to the legal opinions and the parties involved. Thus, the Ministry of Justice is planning to adopt the system of “Grand Chamber” among Divisions of Civil Law, Criminal Law, and Administrative Law, to coordinate the legal opinion and to decide on cases with opinion contradictions. But it is not meant to create another trail for cases.
Cases go to the Grand Chamber would be divided into two types: Cases with contradictions and Cases with general principles. The former would be cases that contradictions between the Supreme Court and Divisions. The case would be decided by the Grand Chamber after the Meeting of Division, the Chamber will be the final decision of this contradiction. The latter would be the case with general principles of which should be decided by the Grand Chamber for the purpose of consistency. The Grade Chamber would only decide on the legal opinion but will not apply to the facts. It is the court who gives the final judgment of the case.
The Ministry of Finance announced standards for business to adopt mobile payment and released several taxation incentives. The goal is to have 90% coverage of mobile payment in business and stores before 2025. The following are the brief introduction to the standards and tax incentives:
The Legislative Yuan has passed several amendments to “Pharmaceutical Affairs Act” which mainly focuses on the patent linkage system in order to keep pace with the global pharmaceutical management.
These new amendments introduce a patent linkage system which is similar to the “Orange Book” (Hatch-Waxman) of the USA. When new drugs introduced to the market, by the disclosure of patent information, the generic drugs would stay of license approval for a period of 12 months, providing generic drug-makers an opportunity to resolve patent disputes before new generic drugs are launched on the market. The first application filer who successfully challenges the validity of a pharmaceutical patent enjoys 12 months of market exclusivity. This is to encourage the domestic generic drug-makers to challenge the patent of generic drug-makers.
Other amendments are the data exclusivity, providing the patent drug for new indication a 3-year data exclusivity and another 5-year if clinical trial data provided.
The Legislative Yuan has passed the “Bill of Financial Technology Innovation and Experiment Act”. The applicant could exercise FinTech experiments like product testing and new business pattern within a period of 1 to 3 years with the approval from the FSC.
According to article 4 of the Bill, any natural person, wholly owned or joint ventures and legal persons could apply for FinTech experiment, including one who wishes to engage in financial business through innovative business patterns. The authority would decide whether the application is to be approved within 60 days.
In addition, the applicant would be granted 1 year period for the experiment, and maximum 3-year extension if necessary. If the contents of the experiment involved certain aspects related to authorities other than FSC, the FSC could approve the application jointly with the authorities related according to article 25. During the experimental period, the applicant shall exempt from all (or partial) regulations and regulatory responsibilities.
The Ministry of Finance described that for the purpose of providing a fair environment of dividends taxation, capital neutrality and to discourage tax evasion, the Ministry has announced several amendments to the “Standards of Withholding Rates for Various Incomes”. Tax payable for net dividends or profit distributed shall be withheld at a rate of 21% of the amount distributed or payable by the foreign shareholders.
The gap of dividends withholding between the taxpayer who is not residing or enterprise not having any fixed place of business within the territory of the ROC (legal entity and shareholders total rate at 33.6%) and the taxpayer who is residing in ROC (total rate at 49.68% ) was luring the domestic shareholders to conduct tax-evasion by transfer of status.
Thus, the Ministry adjusted the dividends withholding rate of foreign shareholders to 21%. And made amendments to the article 23-1 of “Statute for Industrial Innovation”, to establish a “pass-through” taxation regime.
The Legislative Yuan just passed the “Act for the Recruitment and Employment of Foreign Professional Talent” (“Talent Act” as followed) by the end of October. Since the Talent Act has not yet take into effect, we give you a quick insight of this new law and its features for foreign talents who wish to work in Taiwan or even wish to apply for permanent residency in Taiwan.