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Taxation
1. Draft Amendment to Income Basic Tax Act.
On 10 December 2020, the Executive Yuan passed draft amendment to the Income Basic Tax Act, which will be further examined by the Legislative Yuan. We summarize below:
(1) Personal income derived from transactions of non-listed or non-OTC-listed stock shall be included in the amount taxable of basic income of an individual, provided that the income may be excluded from the basic income if the stock issuer is a domestic innovative startup that has been identified by the central authority in charge of relevant enterprises as high-risk innovative startups and incorporated for less than five (5) years when the transactions are made.
(2) The amendment shall come into effect on 1 January 2021.
Reported by: Stacy Lo / Jack Tang
2. Highest Standard for Interest Rate under Loan and General Standard for Employee Salaries of Profit-seeking Enterprises in 2021
On 10 December 2020, the Ministry of Finance (MOF) announced a ruling to interpret the highest standard for interest rate under loan and the general standard for employee salaries of profit-seeking enterprises in 2021 as follows.
(1) The highest standard for interest rate under loan:
(a) The interest rate under the loan from financial institutions shall be actually recognized based on the agreed interest rate.
(b) The interest rate under the loan from non-financial institutions may not exceed 1.3% per month, and the excess part shall not be recognized.
(2) The general standard for employee salaries:
(a) The salaries (including year-end bonus) for employees of corporate organization and cooperative shall be actually recognized.
(b) The salaries (including year-end bonus) for proprietary, executive partner and employee of sole proprietorship and partnership shall be actually recognized.
Reported by: Stacy Lo / Melissa Tsai
Insurance
3. The Executive Yuan Passed the Draft Amendment to Insurance Act
On 3 December 2020, the Executive Yuan passed the draft amendment to the Insurance Act (the Amendment), and the Amendment will be forwarded to the Legislative Yuan for review. We summarize the key points below:
(1) To authorize the competent authority to promulgate the regulations for "transfer or withdrawal" of branch units by insurance enterprises;
(2) To authorize the competent authority to promulgate the guidelines for restrictions on concurrent posts, prohibition on conflicts of interest and other matters to be followed by the responsible person of an insurance enterprise. In addition, to add the punishment for the violations of the aforementioned regulations;
(3) To add the net worth ratio of an insurance enterprise as a supervisory indicator;
(4) To amend the calculation basis of an insurance enterprise's investment limit in shares from the ratio of "the paid-in capital" to the ratio of "the number of the outstanding issued shares", and the calculation basis of an insurance enterprise's investment limit on corporate bonds is amended from the "paid-in capital" to the "owner's right";
(5) To authorize the competent authority to promulgate the regulations for real estate investment by insurance enterprises;
(6) To add that the investment by the insurance enterprise's funds in projects, public utilities and social welfare enterprises may be subject to a post recordation, and to delete the limit for the number of directors or supervisors appointed by the insurance enterprise to serves as director or supervisor of the invested enterprises under which the insurance enterprise shall not assign the personnel of the insurance enterprise to concurrently serve as manager of the invested enterprises.
Reported by: David Tsai / Lily Huang
Business Mergers And Acquisitions Act
4. Ruling on Article 14 of Business Mergers And Acquisitions Act
On 23 November 2020, the Financial Supervisory Commission (FSC) issued a ruling. We summarize below:
(1) Article 14 Paragraph 1 of Business Mergers and Acquisitions Act provides that a temporary administrator of a company can be appointed by a shareholder's meeting to perform the duty of the chairman and the board on their behalf under the Company Act when the chairman of the company is unlikely to fulfill his/her duty. This provision is only applicable during the course of merges and acquisitions of the company but not in any situation after the same.
(2) Where a parent company is merged into its wholly owned subsidiary company under which the subsidiary company is the surviving company and the parent company is the dissolved company, a shareholders’ meeting of the surviving company (i.e. the subsidiary company) shall be held to re-elect directors and supervisors because the previous appointment of the existing directors and supervisor would lose its authority upon merger. Given that there will be no board meeting to call this shareholder's meeting, shareholder(s) who has (have) continuously held 3% or more of the total number of outstanding shares for a period of one (1) year or a longer period may, after obtaining an approval from the competent authority, call a shareholders’ meeting on his/their own in accordance with Paragraph 4, Article 173 of the Company Act.
Reported by: Mike Lu / Amy Su
Intellectual Property
5. Positive Patent Examination Pilot Program for Startup Companies
To encourage newly founded companies, the Taiwan Intellectual Property Office (TIPO) has provided "Positive Patent Examination Pilot Program for Startup Companies" (the pilot program) and will begin implementation on 5 January 2021. We summarize below.
(1) The pilot program shall be requested by startups. Eligible startups are those that, under Taiwan’s Company Act or its foreign counterparts, have been established for less than five years from the date of patent filing (where a priority claim is made, the priority date shall apply). An eligible startup shall also be the applicant of the invention patent application at the time both when the patent application is filed and also when the pilot program is requested.
(2) The eligible invention patent applications are those that the TIPO has notified to begin substantive examination and not issued a first office action thereto.
(3) The application for the pilot program shall be made electronically.
(4) For eligible cases, the TIPO will, within one month of receiving the application for the pilot program, supply interview materials including the search report and reasons for patent rejection. The TIPO will then arrange a time for interview to provide comments on amendments. After conclusion of the interview, the applicant shall submit a response or amendments within one month. If the applicant fails to do so, review of the application shall revert to the regular examination procedure. In principle, the TIPO will notify the results of the examination (the decision of allowance or an office action) within one month of receiving the amendment.
(5) The pilot program is limited to a total of 30 test applications. The TIPO will then evaluate the success of the pilot program to determine whether the program shall continue to implement or possible changes are needed.
Reported by: Jolene Wang / Linda Cheng
Banking
6. Amendment to Regulations Governing Real Estate Mortgage Loan by Financial Institutions
On 7 December 2020, the Central Bank announced the amendment to the Regulations Governing High-Priced Housing Loans Extended by Financial Institutions and amended its name to Regulations Governing Real Estate Mortgage Loan by Financial Institutions (Regulations). The amendment took effect on 8 December 2020. We summarize below:
(1) Adding restrictions to housing loan extended by a financial institution to a company or a natural person with two or more housing loans:
(a) Mortgage loan to an abovementioned borrower for purchasing any house with the title deed containing the wording of “residential” is now subject to restrictions applicable to high-priced housing loans.
(b) If a company has one or more housing loans already, in addition to the above restrictions, the loan amount shall not exceed 50% of the house’s appraised value (land included) or its purchase price, whichever is lower.
(2) Adding restrictions to land loan extended by a financial institution:
(a) The borrower shall submit a specific construction plan for the purchased land.
(b) The loan amount extended shall not exceed 65% of the land's appraised value or its purchase price, whichever is lower. 10% of the loan amount shall be drawn down only after the borrower starts construction. No further loan shall be extended in other names.
(3) Adding restrictions to loan extended by a financial institution to a construction company with mortgage on unsold new housing. The loan amount shall not exceed 50% of the house’s appraised value.
(4) The Regulations do not apply to loan to finance reconstruction in accordance with the Urban Renewal Act, the Statute for Expediting Reconstruction of Urban Unsafe and Old Buildings or other relevant government policies.
Reported by: Stacy Lo / Ted Lee
7. Amendment to Regulations Governing Issuance of NTD Bank Debentures by Foreign Bank Branches
On 14 December 2020, the FSC announced the amendment to Regulations Governing Issuance of NTD Bank Debentures by Foreign Bank Branches (Regulation). We summarize below:
(1) To include the Agricultural Bank of Taiwan and the Post Offices engaging in remittances and savings business as the permissible purchasers under the Regulation.
(2) To amend the definition of “net worth” under Paragraph 1, Article 7 of the Regulation so as to have a consistent standard among the regulations based on the net worth of foreign bank branches.
Reported by: Stacy Lo / Nora Wu
SITE Fund
8. Amendment to "Directions of Beneficiaries’ Meeting of Securities Investment Trust Funds"
On 25 November 2020, the FSC announced the formal amendments to the "Directions of Beneficiaries’ Meeting of Securities Investment Trust Funds". Please refer to Lexgroup Newsletter (Issue No.351) for the summary of the draft amendments, which is the same with the formal amendments.
Reported by: Jeffery Liu / Doris Huang
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2020-12-22
