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Climate Change
1. Enforcement Rules on Climate Change Response Act
On 29 December 2023, the Ministry of Environment (MOE) promulgated Enforcement Rules on Climate Change Response Act. Please refer to "Lexgroup Newsletter (Issue No. 427) 2. Amendment to 'Enforcement Rules on Greenhouse Gas Reduction and Management Act,' Renamed as 'Enforcement Rules on Climate Change Response Act'" for more details in connection with the additions and revisions.
Reported by: Jeffrey Liu / Jason Su
Labor
2. Guidelines and Reference Cases in Drafting Clauses of Collective Agreements
On 5 January 2024, the Ministry of Labor announced the "Guidelines and Reference Cases in Drafting Clauses of Collective Agreements" (Guidelines) which provide 6 major do’s and don’ts for both sides of the labor and management when signing effective collective agreements. The Guidelines also compile clauses from the past collective agreements executed by and between the labor and management whose terms and conditions are better than those under the applicable laws and regulations for both side's reference to stabilize labor/management relationship and improve the welfare of the union members.
Reported by: David Tsai / Hazel Wei
Taxation
3. Application of Article 43-3 of Income Tax Act and Article 12-1 of Income Basic Tax Act on Trust Shares for Trustor or Interest Beneficiary
On 4 January 2024, the Ministry of Finance issued a letter with respect to application of Article 43-3 of Income Tax Act and Article 12-1 of Income Basic Tax Act on trust shares for trustor or interest beneficiary. We summarize below:
(1) Where the interest beneficiary is certain and specific:
a. If an interest beneficiary and its related person directly or indirectly hold 50% of a low-tax burden area affiliated enterprise’s shares in total or have a controlling power, such low-tax burden area affiliated enterprise shall be the controlled foreign company (CFC) of the interest beneficiary. The shareholding ratio in the low-tax burden area affiliated enterprise directly held by the interest beneficiary shall be the trust share direct shareholding ratio calculated by multiplying the trust shareholding ratio upon establishment of the trust by the trustor and the beneficiary ratio of the interest beneficiary; if at the same time it is also an interest beneficiary taking the same low-tax burden area affiliated enterprise’s company share as trust asset, it shall be calculated together by the same method, and the direct shareholding ratio in addition to the interest beneficiary's trust shall be further added; and
b. If such low-tax burden area affiliated enterprise is the CFC of the interest beneficiary, the interest beneficiary shall recognize the investment income or calculate the business income with respect to the CFC's earnings of such year for the income tax in accordance with CFC tax laws, based on the trust share direct shareholding ratio and the trust period of the year.
(2) If the interest beneficiary is not certain, for the uncertain portion, the interest beneficiary shall be the trustor and the shareholding ratio in such low-tax burden area affiliated enterprise directly held by the trust or otherwise shall be calculated according to 1 above, and the investment income or business income shall be recognized or calculated, and the income tax shall be imposed in accordance with the Income Tax Act.
(3) When the trustee of a trust declares the trust income for 2024 and the following years in accordance with Article 92-1 of the Income Tax Act, it shall follow the provisions below:
a. If the shareholding ratio in such low-tax burden area affiliated enterprise directly held by interest beneficiary or trustor by trust or otherwise, adding the interest beneficiary or the trustors' indirect shareholding ratio and its related person and the nominees’ direct and indirect shareholding ratio, reaches 50% in total, the trustee shall calculate the investment income or business income of the CFC's earnings of such year in accordance with the CFC tax law based on the trust shares direct shareholding ratio of the interest beneficiary or the trustor and the trust period of such year;
b. When CFC actually distributes dividends or earnings, it may identify the year where the investment income is recognized or business income tax is calculated for such dividend or earnings in accordance with the CFC shareholders' meeting minute, the notes to the earning distribution statement recognized by the shareholders' meeting, or other sufficient supporting documents; and
c. When the trustee disposes CFC's shares, it shall specify the disposal income and original acquisition cost for the interest beneficiary or the trustee to calculate the disposal or transaction profits and losses.
Reported by: Stacy Lo/ Henry Ku
Securities
4. Amendments to the Applicable Scope of the Candidate Nomination System for the Election of Directors and Supervisors of the Company
On 29 December 2023, the Financial Supervisory Commission ('FSC) issued a ruling stating that from 1 January 2024, in addition to listed and OTC-listed companies, the candidate nomination system is also applicable to the election of directors and supervisors of the emerging companies, and such system shall be stipulated in the Articles of Incorporation.
Reported by: Angela Lin/ Linda Chu
5. Amendments to Regulations Governing Exercise of Duties by Audit Committees of Public Companies and Regulations Governing Procedures for Board Meetings of Public Companies
On 11 January 2024, in response to the amendment to the Securities and Exchange Act (SEA) on 28 June 2023, the FSC announced to amend the following regulations. We summarize below:
(1) Regulations Governing Exercise of Duties by Audit Committees of Public Companies:
a. To stipulate the procedures for the appointment of representatives when a company files a lawsuit against a director and when a director of a company transacts with the company on his/her own account, and to stipulate that if there is a legitimate reason for the audit committee not being able to convene, the independent directors shall still issue a "consent" opinion on the matters for the financial statement related matters.
b. To stipulate details methods and relevant procedures for calling an audit committee meeting.
(2) Regulations Governing Procedures for Board Meetings of Public Companies:
a. To stipulate that when the number of attendee is insufficient, the meeting can only be announced by the chairman to be postponed to other time within the same day.
b. To stipulate the methods for election of deputy of the chairman of the board meeting.
Reported by: Mike Lu / Sean Tsai
6. Amendment to Q&A for Offshore Funds
On 27 December 2023, the FSC announced the amendment to Q&A for Offshore Funds. We summarize below:
(1) Sub-paragraph 2, Article 24 of Regulations Governing Offshore Funds stipulates the qualification of offshore fund management institution that no sanction with relevant record has been made against the company by any competent authority of its home jurisdiction due to any violation of regulation in relation to operation of asset management business for the most recent two (2) years which has not been corrected. The scope of operation of asset management business refers to business such as offering of funds, private placement, launch and marketing, investment consulting, discretionary investment mandatory and matters related to conduct of asset management business (including but not limit to operation of AML/CFT, KYC and KYP).
(2) In line with the administrative commission of the Taiwan Depositary and Clearing Corporation (TDCC) to review onshore and offshore funds other than exchange traded funds (ETFs) since 2024, the TDCC announced the Directions for Review of Onshore and Offshore Funds Offering Application Entrustment.
Reported by: Jeffrey Liu / Amy Su
7. "Amendment to Standards Governing Eligibility of Securities for Margin Purchase and Short Sale"
On 28 December 2023, the FSC announced the amendment to "Standards Governing Eligibility of Securities for Margin Purchase and Short Sale" (Standards) to include that common stocks listed on the Taiwan Innovation Board can be used for margin purchasing and short selling as well.
8. Ruling regarding Regulations Governing the Establishment of Internal Control Systems by Service Enterprises in Securities and Futures Markets
On 4 January 2024, the FSC issued a ruling to reduce thresholds of capital amount and asset size under the management of each applicable service entity mentioned in Article 36-2 and Article 37 of Regulations Governing the Establishment of Internal Control Systems by Service Enterprises in Securities and Futures Markets, which shall designate an chief information officer (CIO). For example, the thresholds of capital amount is adjusted from above NT$10 billion to above NT$4 billion for securities firm, which shall in turn designate a qualified CIO.
Reported by: Jeffrey Liu /Lia Wang
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2024-01-22
