Criminal Code

 

1.       Criminal Code

 

On 3 December 2019, the Legislative Yuan passed its third reading to amend the currency of criminal fine to the New Taiwan Dollars provided in certain articles of the Criminal Code.

 

Reported by: David Tsai / Paul Hsu

 

2.       Amendment to Article 8-1 of Enforcement Law of Criminal Code

 

On 6 December 2019, the Legislative Yuan passed its third reading of the amendment to Article 8-1 of the Enforcement Law of the Criminal Code, which provides that if the statutory of limitation of prosecution or execution was in progress but not completed before the amendment to the Criminal Code on 6 December 2019, the provisions in favor of the offender shall apply to the calculation of the statutory of limitation.

 

Reported by: David Tsai / Paul Hsu

 

Detention Act

 

3.       Detention Act

 

On 10 December 2019, the Legislation Yuan passed the amendment to the Detention Act.  We summarize below:

 

(1)     To provide the requirements, process and time limitation on usage of precautionary appliances, confinement appliances and confinement rooms.

 

(2)     To raise the reward of labor service provided by the defendant.

 

(3)     To stipulate that the detention house can only check defendants' letters for the purpose of searching prohibited items.

 

(4)     To stipulate that the detention house cannot read the correspondence between lawyer(s) and the defendant(s).

 

(5)     To provide remedial procedure including petition, complaints and initiation of lawsuit.

 

Reported by: David Tsai / Alex Li

 

Foreign Trade

 

4.       Foreign Trade Act

 

On 3 December 2019, the Legislative Yuan passed its three readings of the amendments to the Foreign Trade Act.  We summarize below.

 

(1)    Exporters/importers shall not apply for or use relevant trade permissions and certificates by false or untrue measures.

 

(2)    Awards are granted for report of untrue place of origin labeled by exporters/importers. 

 

(3)    The criminal fine against the enterprises who illegally export strategic high-tech commodities to restricted regions is raised.

 

(4)    The administrative fine against the irregularities, such as illegal exports, labels of untrue places of origin, and improper activities to disturb trade order, is raised.

 

Reported by: Kangshen Liu / Will Chen

 

Intellectual Property

 

5.       Amendment to Patent Examination Guidelines

 

The Ministry of Economic Affairs announced amendments to Patent Examination Guideline, including Part II, Substantive Examination for Invention Patents, Chapters 7, 9 and 10, Part IV, Formality Examination for Utility Model Patents, Chapter 2, and Part V, Examination of Patent Invalidation, Chapters 1 and 2, effective as of 1 November 2019; and Part II, Substantive Examination for Invention patents, Chapter 13, Pharmaceutical-Related Inventions, effective as of 1 January 2020.

 

Reported by: Jolene Wang / Linda Cheng

 

Taxation

 

6.       Regulations Governing Assessment of Profit-Seeking Enterprise Income Tax on Non-Arm's-Length Transfer Pricing

 

On 10 December 2019, the Ministry of Finance issued a ruling to supplement the Regulations Governing Assessment of Profit-Seeking Enterprise Income Tax on Non-Arm's-Length Transfer pricing (Regulation).  We summarize below:

 

(1)   According to Paragraph 3, Article 21-1 of the Regulation, the profit-seeking enterprise (Enterprise) in the Republic of China (ROC) being a constituent entity of Multinational Enterprise Group (MNE Group) may be exempted from submitting the "Master File" if the following conditions are satisfied:

 

(a)     The annual net operating revenue and non-operating income of the Enterprise in aggregate is less than NT $ 3 billion, or the total amount of annual cross border controlled transactions is less than NT $ 1.5 billion.

 

(b)    The "total amount of annual cross border controlled transactions" above refers to the total amount of controlled transactions between the constituent entity of the Enterprise in the ROC and its other constituent entities outside of the ROC.

 

(2)   According to Paragraph 6, Article 22-1 of the Regulation, the enterprise in the ROC being a constituent entity of MNE Group may be exempted from submitting "Country-by-Country Report " if the following conditions are satisfied:

 

(a)     It is the ultimate parent entity of the MNE Group, and the MNE Group’s total consolidated revenue during the last fiscal year is less than NT $ 27 billion.

 

(b)    The ultimate parent entity of the MNE Group is outside of the ROC and complies with certain conditions.

 

(3)   This ruling applies to the filing of annual profit-seeking enterprise income tax for 2017 and thereafter.

 

Reported by: Stacy Lo / Bella Chiu

 

Banking

 

7.       Amendment to Regulations Governing Public Announcement by the Financial Supervisory Commission of Material Sanctions for Violations of Financial Legislation

 

On 2 December, 2019, the Financial Supervisory Commission (FSC) announced the amendment to the “Regulations Governing Public Announcement by the Financial Supervisory Commission of Material Sanctions for Violations of Financial Legislation”.    The amendment supplements certain sanctions for which a public announcement shall be made by the FSC, including:

 

(1)    To set aside a certain amount of reserve, cancellation of a branch or department within a prescribed period, suspension of selling insurance products, to restrict from launching new insurance products or the amount of new insurance contracts, to restrict the investment or use of funds, or to order or prohibit disposal or transfer of specific assets, and other major disposition; and

 

(2)    For a single violation, administrative fines of NT$1 million or above, or administrative fines of less than NT$1 million but three times of the minimum amount or above.

 

Reported by: Stacy Lo / Lily Huang

 

Electronic Payment

 

8.       Act Governing Electronic Payment Institutions

 

On 5 December 2019, the FSC issued a ruling providing that securities investment trust funds (SIT Funds) issued by securities investment trust enterprises, where the receipts and payments of the SIT Funds are made in New Taiwan Dollars, such SITE Fund shall constitute financial products or services approved by the competent authority to be processed by the agent for receipts and payments under Subparagraph 2, Paragraph 1, Article 4 of the Act Governing Electronic Payment Institutions.

 

Reported by: Stacy Lo / Cindy Chien

 

SITE/SICE

 

9.       Amendment to Standard Directions for  Internal Management System of Securities Investment Consulting Enterprises Operating Securities Investment Consulting Business

 

On 29 November 2019, the Securities Investment Trust & Consulting Association (SITCA) announced the amendments to Standard Directions for the Internal Management System of Securities Investment Consulting Enterprises Operating Securities Investment Consulting Business to cope with the most updated rulings or amendments.  Sections involving amendments include application for consulting foreign securities; personnel allocation, qualifications and registration; anti-money laundering and countering the financing of terrorism; other legal compliance matters (mainly concerning the non-application of certain amendments of Company Act to securities investment consulting enterprises); organization security; personnel security and operation maintenance; and application of emerging technology.

 

Reported by: Jeffrey Liu / Doris Huang

 

10.     Amendment to Guidelines for Channel Remuneration Payments and Sales Activities for Members and Their Sales Agents Issued by the SITCA

 

On 9 December 2019, the SITCA announced an amendment to Article 5 of Guidelines for Channel Remuneration Payments and Sales Activities for Members and Their Sales Agents, adding reasonableness for payment of channel remuneration.  We summarize below:

 

(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 shall 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 / Melissa Tsai

 

11.     Amendment to Securities Investment Trust and Consulting Association Guidelines for Advertisements and Business Activities Performed by Members and Their Sales Agents and Template of Simplified Prospectus

 

On 11 December 2019, the SITCA announced the amendment to the Securities Investment Trust and Consulting Association Guidelines for Advertisements and Business Activities Performed by Members and Their Sales Agents, which requires that where the securities investment trust enterprise, master agent, or the sales agent discloses the information of average credit rating, they shall disclose relevant details such as the calculation method, assets included in the calculation, and the method to determine credit rating of the underlying investment as well.  Furthermore, the template of simplified prospectus of bond fund requires that the relevant percentage be disclosed according to the ratings of underlying investments. 

 

Reported by: Jeffrey Liu / Mindy Liao

 

Insurance

 

12.     ETF is a Security Approved by Competent Authority for Insurance Enterprise to Purchase

 

On 10 December 2019, the FSC issued a ruling announcing that ETFs are other securities approved by the competent authority for the insurance enterprise to purchase.  In addition, where the ETFs invested by the insurance enterprises are valuated in New Taiwan Dollars and are tracking, simulating, or replicating in the performance of foreign underlying index, and their constituent securities are bonds (bond ETFs), the credit rating of the bonds actually held shall not be lower than BBB- or equivalent to BBB-.  However, the insurance enterprises having already invested in non-compliant bond ETFs before the issuance of this ruling is exempted from the said limitation, but it is not allowed to increase investment in such non-compliant bond ETFs.

 

Reported by: David Tsai / Aaron Lai

 

13.     Amendment to Regulations Governing Capital Adequacy of Insurance Enterprises

 

On 4 December 2019, the FSC announced the amendment to the "Regulations Governing Capital Adequacy of Insurance Enterprises".  We summarize below:

 

(1)   The amendment amends the criteria for the classification of the capital adequacy ratio of the insurance enterprises.

 

(2)   The insurance enterprises shall report to the competent authority the net value ratio audited by the CPA within 3 months after the close of each fiscal year and within 2 months after the end of each semi-annual fiscal year.

 

(3)   An insurance enterprise shall disclose the net value ratio for each fiscal year and every semi-annual fiscal year, and starting from the first half year of 2019

 

(4)   The amendment will take effect on 1 April 2020.

 

Reported by: David Tsai / Aaron Lai