Ministry of Finance Explains What Basic Income Tax for Foreign Investors is.
The Ministry of Finance (MOF) issued a notice on Aug. 17, 2006 stating that overseas foreign institutional investors that have a fixed place of business and/or a business agent in Taiwan and that trade in domestic securities in accordance with the Regulations Governing Investment in Securities by Overseas Chinese and Foreign Nationals (but not trading done on a proprietary basis), do not need to pay the basic income tax on earnings resulting from that trading. The MOF issued this notice in order to eliminate foreign investor’s concerns about the regulations governing the payment of the basic income tax in Taiwan.
The MOF notice also stated that, in accordance with Article 3, paragraph 1, item 5 of the Income Basic Tax Act, overseas foreign institutional investors having no fixed place of business or business agent in Taiwan do not need to pay the basic income tax on earnings derived from trading in domestic securities.
In order to comply with the new notice, foreign investors must submit certification by a qualified CPA at the location of the overseas headquarters institution, plus certification by a CPA commissioned by the business unit or agent within the Republic of China.
The MOF stressed that the notice provides consistency with the tax rules for domestic investors dealing in securities. Accordingly, the profit or loss on investment by a securities investment trust fund that is raised and managed by a domestic securities investment trust firm is shared by the investors in that fund in accordance with their ratio of investment, and not by the fund manager. Moreover, income earned from trading in securities by the brokerage department of a domestic securities firm on commission does not belong to the securities firm, but belongs to the consignor. Income from securities trading does not need to be included in the minimum tax liability of fund managers or securities firms.
It is expected that the notice will have the effect of encouraging more foreign investment in Taiwan and to energizing the island’s capital market.
Search
English