Revised property tax to start on July 1
Date:2021-04-10 Read
Lawmakers across party lines yesterday agreed to July 1 as the provisional date on which a draft amendment to the Income Tax Act (所得稅法) is to come into effect, with the aim of curbing real-estate speculation. Under the changes, the tax on individuals and businesses would be set at 45 percent on gains from the sale of property within two years of purchase and 35 percent on gains from properties sold within two to five years of purchase. Currently, the 45 percent rate applies only to gains on property sales within the first year of purchase, while the 35 percent rate applies only on sales made within one to two years of purchase. Those rates only apply to individuals. Businesses pay an across-the-board rate of 20 percent on such gains under corporate income tax rules. By imposing the same tax rate on individuals and businesses, the bill aims to prevent individuals from setting up companies to trade property and pay only 20 percent on their gains. For people and companies buying property from outside Taiwan, the 45 percent tax would apply to gains on property sales within two years of purchase, up from one year, after which the rate would remain at a flat 35 percent, according to the bill. The tax on individuals for gains on properties sold five to 10 years after purchase would be 20 percent, and 15 percent thereafter. For companies, the rate would return to 20 percent after five years. The revisions also widen the scope of properties to which the tax applies. While the tax previously only applied to transactions of existing residential properties not considered to be for “self-use,” under the amended version it would apply to the sale of presale homes, above-ground use of land rights and special shareholdings. The measures would apply retroactively to transactions dating back to 2016. Reference: Tapei Times CNA
FSC bans short selling to curb losses
Date:2020-03-19 Read
Due to the impact of the coronavirus which causes fluctuations in the securities market, Financial Supervisory Commission (FSC) announces the following measures to take effect to protect investor’s rights and avoid stock prices slump resulting from short-selling transactions 1. For Investors selling short or borrowing securities (from the TWSE lending system, securities dealers, or securities financial institutions) to sell listed stocks and Taiwan Depository Receipts, If the closing price falls by more than 3.5% on the following day, investors are prohibited to sell securities at a price lower than the closing price of the previous trading day. However, if the closing price of the next trading day still falls by more than 3.5%, the short-sales-bans are still in effect. Nevertheless, securities dealers and futures dealers are not restricted to sell/ borrow securities due to the need for hedging. 2. Investors are prohibited to engage in day-trading when the price is lower than the previous trading day and short-selling day. If the reversing transaction hasn’t completed after the sale of the current securities and its selling price is lower than the previous trading day, it is not allowed to change the type of transaction as margin sale or short sale. The FSC did not say how long the short-selling ban would last. They will assess and respond to COVID-19 pandemic situation in due course. Reference: Financial Supervisory Commission (FSC)
Basic Introduction to Tax on Cross-Border Electronic Services
Date:2019-05-31 Read
The Ministry of Finance (hereafter MOF) promulgated a new regulation on the income tax of the cross-border electronic services by a foreign profit-seeking enterprise. According to the annual income tax principle, the income tax regime became effective from the taxable year 2017. The basic introduction is described below: 1. Recognition of revenue sources from the R.O.C. 1. 1. The product produced or manufactured outside of the R.O.C., e.g., stand-alone software, e-book, etc. 1.1.(1) If only through changing the way of presentation of the product, the enterprise transmits and saves the product into a computer or mobile device via the Internet or other electronic means to offer electronic services to buyers within the R.O.C., the sales amounts collected therefrom are not regarded as income from sources in the R.O.C. 1.1.(2) If the product provided with the assistance and involvement of a person or profit-seeking enterprise of the R.O.C., the sales amounts collected therefrom shall be recognized as income from sources in the R.O.C. 1.2. The real-time, interactive, handy and continuing electronic services: Such as online games, streaming series, streaming music, streaming video, online advertisements, etc. offered to domestic buyers within the R.O.C., its sales amounts shall be deemed as income from sources of the R.O.C. 1.3. Electronic services delivered by physical locations: Such as accommodation services, automobile renting services offered via the Internet or other electronic means and if the locations of the service delivering are within the R.O.C., its sales amounts collected regarded as income from sources in the R.O.C.. 1.4. Foreign platform operator If one of the transaction parties of the internet-based platform is a person, profit-seeking enterprise, or entity within the R.O.C., its sales amounts collected from the seller and buyer shall be recognized as income from sources in the R.O.C. 2. Calculation of the taxable income 2.1. Deductible costs and expenses 2.1.(1) Verification: The accounting books and documents are provided, the taxable income amount shall be the verified gross revenue from sources in the R.O.C. after the deduction of related costs and expenses. 2.2.(2) If the accounting books and documents are not available, the taxable income amount shall be calculated as the gross revenue from sources of the R.O.C. multiplied by the net profit ratio of the profit standard of the same trade concerned applicable to the foreign profit-seeking enterprise. Provided that the business type of the foreign profit-seeking enterprise is recognized as the type "offering platform electronic services," the applicable net profit ratio is 30%. 2.2.(3) The net profit ratio of 30% is applied for foreign profit-seeking enterprises not meeting the 2.1.(1) and 2.1.(2) above. 2.1.(4) If the actual net profit ratio verified by the taxation authority is higher than the above ratio, the actual net profit ratio shall be applied. 2.2. The domestic profit contribution ratio shall be determined according to the following: If the whole transaction flow or the electronic service provided is within the territory of the R.O.C. the deemed domestic profit contribution ratio shall be 100%; otherwise, it should be determined as blow. 2.2.(1) Verification: A foreign profit-seeking enterprise should provide documents supporting a clear division of the onshore and offshore transaction flows as well as the ratio of the contribution attributed to the services performed within the territory R.O.C.. The domestic profit contribution ratio shall be determined based on the supporting documents provided. 2.2.(2) The domestic profit contribution ratio set to be 50% when it can’t meet 2.2.(1) above. 2.2.(3) The actual domestic profit contribution ratio shall be applied if such ratio verified by the taxation authority is higher than 50%. 3. Ways of reporting and paying taxes 3.1. For income within the withholding tax scope, the tax withholder shall withhold the tax from the payment source in accordance with the withholding ratio of the "payable amount". However, if a foreign profit-seeking enterprise has applied with the taxation authority in accordance with the above criteria, its payable tax of the income from sources in the R.O.C. shall be calculated and withheld based on the given net profit ratio and domestic profit contribution ratio. 3.2. For income not within the withholding tax scope, the foreign profit-seeking enterprise shall file the income tax return by itself or through a tax agent within the period for the taxable year. 3.3.(1) Where a foreign profit-seeking enterprise is a platform operator, the sales amounts it collects shall be subject to the income tax. 3.3.(2) If a part of the sales amounts it collects will be transferred to a foreign non-platform service provider, e.g. foreign online game software supplier, the platform service fees collected shall be subject to the income tax and tax withholding requirements. It shall settle all the taxes withheld in the previous month for the national treasury within the first ten days of each month, and shall report the calculation information of the withheld and paid taxes regarding the transferred sales amounts to the taxation authority. Reference: Taxation Administration, MOF, R.O.C.
Business Tax on Cross-Border Electronic Services
Date:2019-01-02 Read
An offshore electronic services business entity shall apply for taxation registration in accordance with the Value-Added and Non-Value-Added Business Tax Act (hereinafter referred to as the VAT Act), which came into force on May 1st, 2017. In the event that an offshore electronic services business entity having no fixed place of business within the territory of the R.O.C. sells services to domestic individual purchasers, the Ministry of Finance (MOF) stipulates that such offshore electronic services business entity shall apply for taxation registration and file/pay VAT by itself or appoint a tax-filing agent to complete these matters if its annual sales amounts derived therefrom exceeds NT $480,000. Reference: Ministry of Finance(MOF)
The gist of the 2018 tax reform passed by Legislative Yuan
Date:2018-01-18 Read
The tax amendment draft was passed on January 18, 2018, including the increase of the standard deductions, the increase of the Special Deductions of Personal Income from Salaries/Wages and for the physically or mentally challenged person as well as for the preschool children. 1. Personal Income Tax: 1.1 The standard deduction of personal income tax is increased to NTD $120,000 from NTD $90,000 (Such deduction is doubling for spouses). Special Deductions for the physically or mentally challenged person and Salaries/Wages are both increased to NTD $208,000 from NTD $128,000. 1.2. Reducing the highest tax bracket of personal income from 45% to 40%. 1.3. As for the dividend income, the taxpayer can either choose (1) the tax rate of 26 % levied on the dividend separately or (2) have the dividend counted as part of total personal income with a tax exemption of dividend at 8.5% which is subject to a maximum of NTD $80,000. 1.4 Eliminating the Imputation Tax credit owing to the Integrated Income Tax System. 1.5 For those who are workplace freshman whose yearly income is less than NTD $408,000 (monthly salary of NTD $30,000), dual-earner families whose annual income is less than NTD $816,000, dual-earner families with 4 members(raising two children under 5 years old) whose annual salary is less than NTD$ 1,232,000, may be exempted from income tax, and therefore reducing the tax burden on them. 2. Profit-seeking enterprise income tax: 2.1 Abolition of business income tax for wholly owned businesses and partnerships, whose earnings will be treated as individual income. 2.2 The corporate income tax rate is increased from 17% to 20%, but if the Taxable Income is equal to or less than NTD $500,000, the tax rate can be adjusted to 18% for 2018 and 19% for 2019, respectively and returned back to 20% in 2020. 2.3 The tax rate on corporate retained earnings is reduced from 10% to 5%. 2.4 Eliminating the Imputation Credit Account (ICA)/imputation system. 3. The dividend tax rate for FINI/FIDI: 3.1 The withholding tax rate is increased to 21% from 20%. 3.2 Eliminating the tax credit owing to the corporate retained earnings. Reference: Taxation Administration, Ministry of Finance, R.O.C