LEGAL UPDATES - TAK Associes and Ecovis International

ARC numbers to e changed to a Taiwanese-ID format

2019.11

The National Development Council announced at the beginning of November that the number format on Alien Resident Certificates (ARC) would be changed by October 2020. The current format of ARC cards, namely two letters and eight digits, has indeed historically been troublesome for foreign nationals, notably as regards the access to online services. The European Chamber of Commerce Taiwan (ECCT) welcomed this announcement as it released its 2020 position paper, a document grouping suggestions and recommendations of policy change in Taiwan. Roughly a million ARC and APRC card-holders should thus receive new numbers matching the Taiwanese ID format of one letter and nine digits starting in October 2020.

New Amendments to the Patent Act

2019.11

The Patent Act of Taiwan was amended for the fourteenth time on May 1st 2019. The latest amendment became effective on November 1st, 2019, introducing some of the following changes

1. Divisional patent applications:
Both invention and utility model patents are now allowed to apply for divisional patents. The time limit to apply has also been extended from 30 days to 3 months after the date on which an approval decision for the original patent application or re-examination is served.

2. Increase the efficiency of invalidation proceedings:
A requester of invalidation action shall as of now provide invalidation reasons or evidence within 3 months after the date of filing. The reason or evidence shall not be examined if the requester does not respect this deadline.

3. Post-grant amendment to utility model patents:
Prior to this amendment, any post-grant amendment to utility model patents could be done through formality examination. Now, the patentee is allowed to apply for post-grant amendment to the utility model patent under invalidation proceedingswhether under the process for technical evaluation report application, or under a litigation. In addition, amendment review will be based on substantive examination rather than formality examination for greater effectiveness during disputes.

4. Extension for the protection term of design patent
Design patent terms have been extended from 12 to 15 years following demands of the industry to align with the regulations applied by the Hague Agreement member-states.

"Fake origin labels" Draft Bill Passes review

2019.11

As draft amendment to the Foreign Trade Act passed the legislature’s Economics Committee review on November 18th. The amendment aims to increases fines for the use of fake certificates of origin on imported and exported goods, especially for high-tech products transported to unrestricted regions. Currently, such fines range from NT$30,000 to NT$300,000, and will be changed, should the draft pass, to a bracket between NT$60,000 and NT$3 million. In addition, the bill introduces a « whistle-blower clause » to encourage people to denounce offenders. The draft amendment was introduced following several cases or fraudulent labelling from importers. The government had indeed identified several companies re-tagging Chinese products with false labels of origin to avoid anti-dumping tariffs, or to ship them to the United States in the context the trade dispute.

New Income Tax Act: Deduction of Necessary Expenses

2019.11

The Taiwanese Ministry of Finance published on November 8th the “Regulations Governing Scope and Identification of Allowable Deductions of Necessary Expenses from Individual Salary and Wage”. These regulations aim to clarify the amendments made to Articles 14 and 126 of Income Tax Act (“the Act”) last July.

Article 14 indeed provides that the amount of income from salaries and wages shall be all salaries and wages earned for performing duties or doing works after deducting the “special deduction of income from salaries/wages”. The amount of this special deduction is now fixed to 20,000 NTD this fiscal year.

The new Regulations also specify that, if the total amount of the “necessary expenses” directly related to the work or services rendered and paid by the income taxpayer is higher than 20,000 NTD (“special deduction”), the taxpayer may choose to deduct these necessary expenses from salaries and wages alternatively, and the amount of income shall be the balance after deducting these “necessary expenses”. 

Finally, the necessary expenses provided in the new Article 14 are stated to be: vocational clothing expenses; upgrading training expenses and vocational tool expenses. According to the Regulations, the amount of deduction of each necessary expense shall not exceed 3% of the income from salaries/wages.

New Labor Law Starts From 2020

2019.10.31

 
 
 

To enhance the protection of the labors and to facilitate the proceedings of labor disputes in Taiwan, the legislature has passed the Labor Incident Act on November 9th 2018. This new law will come into force from January 1st 2020. The courts of all levels shall establish Labor Professional Courts to deal with labor disputes cases under this new act.

According to this new act, upon any labor disputes submitted to a court, a mediation shall be arranged by the court before any litigation proceeding. The composition of this labor mediation committees will be one labor court judge and two committee members, who should be professionals with knowledge and experience in labor affairs. If the two parties agree, the mediation committees may determine the terms and conditions to resolve the mediation, and these terms and conditions shall be deemed as an establishment of mediation. Or, the mediation committees may present an appropriate proposal and inform the two parties. If no dissent is raised within 10 days after the receipt of the notice, this proposal shall be deemed as an establishment of mediation. If the labor dispute is settled through the mediation, the established mediation will carry the same legal weight as a final and binding judgment. If no settlement is achieved through the mediation, the litigation proceeding will go on.

This new labor law also aims at expediting the proceedings. The mediations procedure shall be completed in 3 months. The labor court shall in general conclude the oral argument within 1 session, and the first instance trial should be concluded within 6 months. Besides, other measures to enhance the rights of the labor have been included into this new act. Such as: if the labor initiates an action for the confirmation of the employment relationship, wages payment, pensions, or severance fees, 2/3 of the court fee may be temporarily waived. If the ongoing litigation has caused great hardships to the labor’s livelihood, the labor may motion for a temporary status quo injunction to receive a certain payment of his wages, workers' compensation, pension or severance pay ex ante.

 
 
 

Access to Corporate information Under New Company Act

2019.10.31

 
 
 

For the purpose of increasing corporate transparency and anti-money laundering, in the amendment to the Company Act of Taiwan made on August 1st 2018, a new article 22-1 has been added, which regulates that the companies shall report annually the information of its key managers and shareholders to the online Information Platform. Such information includes the names, nationalities, birthdays, or the dates of its incorporation registration, identification numbers, numbers of shareholding or capital contribution of the company’s directors, supervisors, managerial officers, and shareholders holding more than 10 percent of the total shares of the company.

The authorities are now considering that whether the court, prosecutors’ office or other administrative authority may have access to such information for cases irrelevant to anti-money laundering. Generally, if necessary, the prosecutors’ office or court may ask for any document or information which is held in a government agency's custody or in a public officer's possession, as authorized by the Code of Civil Procedure and Code of Criminal Procedure of Taiwan. However, the controversy arose among the authorities during a meeting on August 5th 2019, for the issue of the application of the implement rules of this article 22-1 of the Company Act, which is Regulations Governing Reporting and Management of Information on Article 22-1 (“Regulations”). Since the above information is highly private and confidential, this Regulations provide that the Information Platform shall keep the information held by it confidential unless otherwise provided by this Regulations or other laws. And the administrative authority, prosecutors’ office or court may inquire or obtain such information if it is necessary to use or access such information, to handle, investigate or hear any litigant proceeding related to money laundering activities.

The Anti Money Laundering Office of Taiwan considers that, to increase the corporate transparency and based on the rules in the civil and criminal procedure code, even for cases irrelevant to anti-money laundering, the court and prosecutors’ office shall have access to such information. However, the regulation committee of Ministry of Economic Affairs of Taiwan and other commercial associations hold that it shall be limited to anti-money laundering cases, based on the protection of personal information concern and the original purpose of the establishment of this Information Platform. Therefore, it seems that further discussion is required in regard to this issue.

 
 
 

New Study On Data Protection

2019.10.31

 
 
 

On October 1st, The Court of Justice of the European Union (CJEU) ruled on the validity of consent to cookies via pre-checked boxes. The Court analyzed the case in light of the General Data Protection Regulation (GDPR), finding that only a positive and active behavior would qualify as indicating the website user’s wish regarding his or her data. Hence, pre-checked boxes requiring users to deselect the box are illegal. Studies conducted at the University of Michigan had indeed demonstrated that the acceptance rate for website cookies plummets from 83% when the box is pre-checked, to merely 0.16% when it is not. Common user apathy and disinterest for terms and conditions were thus obviously relied on to collect data against user's will, especially since, in 86% of the most popular websites visited in the EU, opting-out of the use of cookies was not even an option. 

 
 
 

New EU standards on customer authentication

2019.09.23

 
 
 

Starting September 14th 2019, Regulation 2018/289 regarding online customer authentication will be entering into force in the European Union. This Regulation establishes the requirements for payment service providers to protect the confidentiality and integrity of personalized security credentials. 

The main requirement is the implementation of monitoring mechanisms to detect unauthorized or fraudulent payments, taking into account a list of risk-based factors, among which the amount of each transaction, the list of stolen authentication elements or signs of malware infections during the procedure. 

Exemptions however apply for low-value contactless payments at points of sale, as well as for electronic payment transactions initiated at unattended terminals where operational reasons make the regulations difficult to implement.

 
 
 

Towards an important strengthening

2019.09.23

 
 
 

On May 30th 2018, the European Parliament and European Council modified the EU Directive 2015/849 through an ordonnance implementing the new anti-money-laundering directive (Directive (UE) 2018/843). The most important change is the replacement of Article 18(2), which constitutes an obligation to declare complex transactions to relevant FIU (TRACFIN in France). 

The Article is as follows:
'Member States shall require obliged entities to examine, as far as reasonably possible, the background and purpose of all transactions that fulfills at least one of the following conditions: they are complex transactions; they are unusually large transactions; they are conducted in an unusual pattern; they do not have an apparent economic or lawful purpose. In particular, obliged entities shall increase the degree and nature of monitoring of the business relationship, in order to determine whether those transactions or activities appear suspicious'

 
 
 

Amendments to the Food Administration Act and the Agricultural Products Market Transaction Act

2019.09.23

As the spread of fake news and misinformation in social media greatly impacts public tranquility, Taiwanese legislators amended both the Food Administration Act and the Agricultural Products Market Transaction Act on June 21st 2019. New articles effective since July 17th prohibit any person to deliberately disseminate rumors or false information affecting either the market food price, the competent authorities’ implementation of programs on food production and marketing, or public rice procurement. Any damage is subjected to a fine ranging from NTD 60,000 to NTD 300,000. Since August 15th, the Agricultural Products Market Transaction Act also applies this fine. 'False information' may include any information, news, data, advertisements, reports, poll, events or other forms, whether spread in verbal, writing, or video, via the press, the internet or other media

More protections on contracts, wages and accidents in the Labor Standards Act

2019.09.23

Article 9 of the Labor Standards Act now compels dispatch agencies to replace fixed-term contracts between workers and agencies with non-fixed-term contract. Non-compliant agencies are exposed to fines ranging from NTD 20,000 to NTD 1 million in case of violation. Dispatched workers may furthermore require their dispatch agencies to pay wages 'if the dispatch agency is fined by the authority for owing the dispatched worker wages or was ordered to pay by a deadline but has failed to comply'. Should the client company be asked to pay for wages, it may either ask the agency for reimbursement or deduct these expenses from the agency's fees. Regarding occupational accidents, both the dispatch agency and the client company shall be jointly and severally liable for compensation bore by employers. To prevent dispatched worker transfers by client companies, a new article stipulates that “a client company shall not interview the dispatched worker or undertake any other conduct of appointing a specific dispatched worker before the dispatch agency and the dispatched worker sign a labor contract”. Dispatched worker has 90 days to execute a contract with the client company. The client company shall negotiate about contract within 10 days after receiving such notice.

Possible abrogation to be submitted to the Legislative Yuan for voting

2019.09.23

Last August, the Taiwan government approved abolishing the stamp tax (up to 4% on the transaction amount). The Stamp Tax Act, passed in 1934, currenly applies to the following transactions: receipts for certain monetary payments, contracts to perform a specific job, task contracts for the sale of movable properties, as well as contracts for the sale, transfer and subdivision of real estate. In practice, the tak also applies to contracts such as Shares Purchase Agreements (statiscally more frequent than mergers). Yet, although local businesses support the move to repeal the Act, a strong opposition has emerged from local governments in Taiwan, for whom the tax is a substantial source of income. The outcome of the vote at the Parliament is therefore unclear at this stage, and will be discussed this year 2019 as a top priority matter for the government.

Increase in Penalty for Drunk Driving

2019.08

On March 26, 2019, part of the amendments to the Road Traffic Management and Penalty Act in Taiwan was passed by the legislature, and is effective as from July 1, 2019.

 

Fines for DUI for car drivers vary from 30,000 to 120,000 NTD while penalty for motorcycle drivers remains the same , ranging from 15,000 to 90,000 NTD. For the 2nd DUI, the maximum penalty is applicable (90,000 or 120,000 NTD), to which 90,000 NTD is added for each additional DUI.

Suspension of license goes from 1 to 2 years and can be prolonged up to 4 years in specific cases.

Skipping checkpoints or rejecting the BAC (Blood Alcohol Concentration) test goes from 90,000 up to 180,000 NTD. The same amount is applicable for any other individual offense.

Drunk driving limitation: from 0,15 mg/l (through breath) - from 0,03% (in blood)

Passengers aged 18 and + will be fined as well from 600 to 3,000 NTD. Slow-vehicles are fined 600 to 1,200 NTD (drivers refusing BAC will be fined 2,400 NTD).

Breakthrough in Cryptocurrency Governance in Taiwan

2019.08

The Financial Supervisory Commission (FSC) published an interpretation on July 3rd defining cryptocurrency and including it under the current legal framework in the Securities and Exchange Act.

 

Virtual currencies that contain a nature of securities shall belong to “Securities”. It shall mean the application of cryptography, distributed ledger technology or other similar technology that represents the value stored, exchanged and transferred in a digital way and is in circulation on the market. It shall also contain a nature of investment as follows:

- Investors contribute to the capital;

- Investment is based on a common business and plan;

- Investors expect to earn profits;

- Profits are decided by the efforts of both the issuer and a third party.

 

This is the first time that Taiwanese government takes official action. It is a milestone in the development and governance of cryptocurrencies. However, the government's next steps and attitude in the long run remain uncertain.

Mergers and Acquisitions in Taiwan: Conflicts of Interest

2019.08

What is cash-out merger ?

After a merger, the surviving or the new company (acquiring company) may issue new shares to the shareholders of the dissolved company (target) as compensation. The acquiring company may choose to pay cash.

 

Policies in Taiwan

In order to facilitate the procedure for mergers and acquisitions, the Business Mergers and Acquisitions Act of Taiwan (the M&A Act) now provides that the shareholders or directors with personal interest may exercise their voting right for the merger resolution. On the other hand, to balance the right of the minority shareholders, the shareholders of the target company may request the acquiring company to buy back the shares at the fair price (appraisal right). In case no agreement is reached within 60 days since the resolution, to ensure the fair price, the dispute shall be submitted to and settled by the court upon application.

 

Constitutional Interpretation NO. 770

 

However, the Interpretation NO. 770 further indicated that information on personal interests shall be available to other shareholders within a reasonable period prior to the Board or General meeting; and measures shall be taken if there is not enough information.

 

Regulations of the Duty of Disclosure

 

For public companies, according to the article 31 of the Regulations Governing the Acquisition and Disposal of Assets by Public Companies published by the Financial Supervisory Commission, in the event of any merger, demerger, acquisition, or transfer of shares of a public listed company, the company shall publicly announce and report the relevant information on the Financial Supervisory Commission’s designated website within 2 days after the resolution of board meeting.

The Taiwan Stock Exchange has amended its guideline for the Self-Regulatory Rules on Disclosure of Merger and Acquisition Information on April 24, 2019. The directors shall disclose their names, material information, the reason for exercising voting right or not exercising voting rights and the reason for approval or dissent.

In the course of mergers and acquisitions, it will be better for the shareholders to know whether the price is fair or underestimated. However, it may thus affect a company's strategy on mergers and acquisitions. In response to the Interpretation NO.770, the decision on whether there will be more duties of disclosure remains at the discretion of the legislative policy and is now discussed by the Taiwanese authorities.

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