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Insurance
1. FSC Amendment of "Regulations Governing Investment in Investment-linked Insurance"
The Financial Supervisory Commission ("FSC") has amended Article 19 of the "Regulations Governing Investment in Investment-linked Insurance." One of the qualifications for insurers to sell investment-linked insurance with discretionary investment services was amended from the comprehensive rating given by competent authorities and their designated agencies in the most recent year according to rates of complaints initiated by the insured for the cases, claims and the number of handling days to the comprehensive rating given by competent authorities and their designated agencies in the most recent year according to the rates for the complaint initiated by the insured for the non-claim/claim cases and the number of handling days.
Reported by: David Tsai / Angela Chang
Agreements between Taiwan Area and Mainland Area
2. Act for Monitoring Agreements between Taiwan Area and Mainland Area
The Executive Yuan passed the draft "Act for Monitoring Agreements between Taiwan Area and Mainland Area" on April 3, 2014. It aims to enhance participation by the Legislative Yuan and general public in the negotiation process, to strengthen communication and coordination in advance, and to improve transparency in the review of agreements between the Taiwan area and Mainland area. However, the definition of "agreement," the manner of reviewing agreements and the interaction between the executive authorities and Legislative Yuan remain controversial. Therefore, efforts to seek public consensus are necessary.
Reported by: Kang-Shen Liu / Mark Chen
Tax Treaty
3. Tax Treaty between Taiwan Area and Mainland Area
A National Taxation Bureau of the Central Area (“NTBCA”), Ministry of Finance press release of April 5, 2014 states that the information exchange clauses in the tax treaty between Taiwan area and Mainland area ("Treaty") refer to those in international tax treaty templates and other tax treaties executed by Taiwan. The information exchanged thereunder does not trigger or facilitate criminal proceedings and is provided on a case-by-case basis. Both parties are obligated to keep the information exchanged in confidence and cannot utilize it for any purposes other than taxation. In addition, the Treaty does not apply retrospectively. Thus, the Treaty does not affect the interests of Taiwanese.
In addition, some Taiwanese businessmen have concerns that the Treaty increases the possibility of them facing tax investigations. The NTBCA stressed that the Mainland area has executed tax treaties or conventions with many jurisdictions, like Hong Kong SAR, Singapore and the British Virgin Islands. Taiwanese businessmen who have investments or transactions in such jurisdictions have been exposed to possible tax investigations since the Mainland area can retrieve relevant information from relevant tax authorities even without the Treaty.
Reported by: Kang-Shen Liu
Investment
4. Commissioners of the Investment Commission, Ministry of Economic Affairs
A press release issued by the Investment Commission ("IC"), Ministry of Economic Affairs, on April 11, 2014 states that Article 2 of the Rules Governing the Organization of the IC has been revised. The Deputy Director-General of the National Security Bureau will be one of the IC's Commissioners tasked with ensuring national security for onshore and/or offshore investments and enhancing investment review and management.
Reported by: Kang-Shen Liu
Tax
5. Rules Governing Withholding Tax of Interest Income of Overseas Chinese and Foreign Nationals Investing in Foreign Currency-Denominated Bonds without Designated Agents
On April 2, 2014, the Ministry of Finance issued the "Rules Governing Withholding Tax of Interest Income of Overseas Chinese and Foreign Nationals Investing in Foreign Currency-Denominated Bonds without Designated Agents" ("Rules"). The Rules were enacted in accordance with Paragraph 2 of Article 4-1 of Regulations Governing Investment in Securities by Overseas Chinese and Foreign Nationals. According to the Rules, if there is no need for overseas Chinese and foreign nationals ("Non-residents") to retain a domestic agent for tax returns pursuant to the Rules, interest income incurred from the purchase of foreign currency-denominated corporate bonds or financial bonds without nature of stock equity issued by the domestic company ("Bond ") via a domestic account opened by the foreign custody entity for the custody, transfer and settlement in the domestic centralized securities depository enterprises shall apply to the withholding tax below:
(1) If the Non-resident holds a Bond in full interest accrual period or purchases a Bond between two interest dates and holds the Bond until the interest date, a withholding tax of 15% shall be levied on the total interest incomes of the Non-resident.
(2) If the Non-resident sells a Bond to a domestic bond dealer before the interest date, and the domestic bond dealer is the agent of the Non-resident for the tax return, the domestic bond dealer shall withhold 10% of the interest income as the withholding tax and make the shortage of the tax payable by the Non-resident due to the difference of the withholding rate between 10% and 15% on behalf of the Non-resident.
(3) If the Non-resident trades with other investors for the Bond between two interest dates, the buyer shall withhold 15% of the interest income incurred from the latest interest date to the sale date as the withholding tax.
(4) The Non-resident may under certain circumstance apply for a tax refund with the competent authority within 5 years from the date when the tax payment is made.
Reported by: David Tsai / Robin Huang
SICE/SITE
6. Permission for SITEs and SICEs to be appointed by an Offshore Asset Management Institution to Provide Administrative Services
On March 27, 2014, the FSC issued a ruling (Ref. No.: Jin-Guan-Zheng-Tou-Zi-1030008846) to permit Securities Investment Trust Enterprises ("SITE") and Securities Investment Consulting Enterprises ("SICE") to act as local service agents for offshore asset management institutions, subject to the FSC's prior approval and on a case-by-case basis, to provide administrative services and facilitate relevant matters, including:
(1) Liaison with an offshore banking unit ("OBU") or offshore securities unit ("OSU"), visits to the same with offshore institutions and assistance in product introduction and training;
(2) Assisting in delivery or receipt of correspondence, including product inquiries, communication, telephone conversations, teleconferences, correspondence and relevant administrative matters; and
(3) Providing translation services, including delivery, translation and in-time communication of product and trading information.
Reported by: Jeffrey Liu / Judy Tai
SITE Fund
7. Relief of Securities Investment Trust Funds' investment
On March 31, 2014, the FSC issued two rulings (Ref. No.: Jin-Guan-Zheng-Tou-Zi-10300046551, 1030004655) respectively to relieve certain investments of SITE Funds. We summarize the separate key points below:
(1) Where the foreign securities invested by a SITE Fund are convertible bonds, they shall not be subject to credit rating requirements set out by the FSC;
(2) Balanced funds and plain bond funds may invest in high yield bonds, provided that the investment complies comply with specific restrictions (such as restrictions on the total investment amount.)
Reported by: Jeffrey Liu / Angela Lin
Finance
8. Investment scope of OBU trust businesses
On April 10, 2014, the FSC issued a press release to explain that the FSC will allow OBU's trust businesses to invest in offshore funds and foreign currency types of securities investment trust funds with multiple currency types, including New Taiwan Dollars, which are issued by domestic securities investment trust enterprises, which involve New Taiwan Dollars denominated products. However, investment of such funds in the domestic securities market shall not exceed 30% of the net asset value of the fund, provided that the international bond denominated in foreign currency (including Formosa Bonds) is not be included in the calculation.
Reported by: Stacy Lo / Mark Chen
9. OSU to strictly execute KYC and suitability analysis of products
The FSC issued a ruling (Ref. No.: Jin-Guan-Yin-Wai-Zi-10350001180) on March 28, 2014, explaining the procedures that OBUs must comply with. We summarize the key points below:
(1) OBUs shall establish internal operation procedures for internal control and risk control for local banks. Such procedures shall be implemented after approval by the board of directors. For branches of foreign banks such procedures shall be approved by the head office or the regional center.
(2) When offering offshore financial products, OBUs shall comply with Know Your Customer (“KYC”) procedures, implement suitability analysis of products and not solicit local clients to set up offshore entities to convert their status and open accounts with OBUs, so as to invest in offshore financial products not allowed to be purchased onshore.
(3) When offering financial products not reviewed by competent authorities, OBUs shall provide the following wordings in the product prospectus and sales documents: such products were not reviewed, can only be promoted or sold to offshore clients and the Financial Consumer Protection Act does not apply to OBU clients.
Reported by: Stacy Lo / Angela Lin
10. Banks prevented from running promotion campaigns offering gifts or prizes to solicit deposits
The FSC issued a ruling (Ref. No.: Jin-Guan-Yin-Fa-Zi-10310001330) on April 9, 2014, stating that banks shall comply with the Banking Act, and shall not hold promotion campaigns offering gifts or prizes to solicit deposits. If for the purpose of maintaining client relationships, promoting other business or strengthening corporate image other than soliciting deposits, a promotion campaign related to deposit business is held, the price of a single gift should not exceed NT$500.
Reported by: Stacy Lo / Angela Lin
Public Reporting Companies
11. Independent supervisors of OTC-listed companies may serve as independent directors of public reporting companies
The FSC issued a ruling (Ref. No.: Jin-Guan-Zheng-Fa-Zi-1030005881) on April 1, 2014, stating that according to Subparagraph 2, Paragraph 1, Article3 of the Regulations Governing Appointment of Independent Directors and Compliance Matters for Public Companies, persons who were a supervisor of a public reporting company 2 years before election of independent directors are disqualified from serving as independent directors of that public reporting company. The only exception is when the said person was an independent supervisor of OTC-listed companies according to Article 8 of the Standards for Determining Unsuitability for GreTai Securities Market Rules (“GTSM”) Listing under Article 10, Paragraph 1 of the GreTai Securities Market Rules Governing the Review of Securities for Trading on the GTSM (August 8, 2011 version).
Reported by: Kang-Shen Liu / Angela Lin
12. Ruling on Independent Directors
With respect to an FSC ruling (Ref. No.: Jin-Guan-Zheng-Fa-Zi-1020053112, "2013 Ruling"), the FSC further explained in its new ruling (Ref. No.: Jin-Guan-Zheng-Fa-Zi-10300058811) on April 1, 2014 that the 2013 Ruling applies upon the expiration term of the incumbent directors and supervisors if the company they serve with is a newly incorporated TWSE/GTSM listed company due to stock conversion in accordance with Article 31 of the Enterprise Merger and Acquisition Act.
Reported by: Kang-Shen Liu / Jenny Chang
Company Act
13. Directors Candidates Nomination System
On March 26, 2014, the Ministry of Economics Affairs issued a ruling (Ref. No.:Jing-Shang-Zi-10302406060) to explain the directors candidates nomination system. The ruling opines that the review authority of a nominated director candidate exclusively belongs to the board of directors (or other authorized conveners of shareholders' meetings). Unless there is any circumstance set out in Paragraph 5, Article 192-1 of the Company Act for which the director candidate shall be excluded on the candidate list, the board of directors shall include all qualified nominated candidates in the roster of the director candidates.
Reported by: Jeffrey Liu / Judy Tai
Companies
14. Ruling issued by the Ministry of Economic Affairs
The Ministry of Economic Affairs issued a ruling on April 2, 2014 stating that the language used in shareholder meetings shall not be limited to Mandarin and that such meetings can be held in foreign or vernacular languages. However, minutes of shareholder meetings shall be made in Chinese to make future checking and reviewing easier.
Reported by: David Tsai
Food and Drugs Administration
15. New Announcement on the Labeling of Food Utensils, Containers and Packaging to Replace Four Previous Announcements
To be consistent with the new Act Governing Food Safety and Sanitation (previously the “Act Governing Food Sanitation”), the Ministry of Health and Welfare announced on March 31, 2014 that it will issue a new Announcement on the labeling of food utensils, containers and packaging, which will become effective on June 19, 2014. This will replace four previously issued Announcements. The four Announcements are: (1) Announcement on the Labeling of Disposable Paper Tableware and Disposable Chopsticks (dated December 19, 2006), (2) Announcement on Extra Labeling Items for Plastic Food Utensils, Containers and Packaging Designated by the Central Competent Authority To Be Conspicuously Labeled in Chinese and Common Symbols (dated July 21, 2011), (3) Announcement on Plastic Food Utensils, Containers and Packaging Items that Shall be Labeled in Accordance with Article 18 of the Act Governing Food Sanitation and Its Implementation Date (dated July 21, 2011), and (4) Announcement that Reusable Plastic Plates, Bowls and Dishes Shall be Labeled in Accordance with Article 18 of the Act Governing Food Sanitation and Its Implementation Date (dated June 10, 2013).
Reported by: Jolene Wang / Crick Liang
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2014-04-23
