萬國法律事務所

The Executive Yuan (the Cabinet) has approved the Securities Capital Gains Tax Proposal as a part of the Income Tax Act amendments on April 27, 2012. The proposal was once blocked by the Procedure Committee of the Legislative Yuan (the Congress) on May 5. However, the bill is now listed on the agenda due to President Ma’s instruction. The proposal will be considered by the Legislative Yuan later.

Main points of the Cabinet’s version are as follows:

1. The new act will levy a 15 to 20 percent tax on individual investors who earn more than NT$4 million annually from stock trades. Overseas investors without offices and direct business operations in Taiwan will be exempt. The tax will be applicable to all residents including foreigners who stay in Taiwan for more than 183 days in a year. For non-residents, the threshold will be NT$2 million.

2. Losses may be allowed to offset gains in the following three years.

3. For institutional investors, the tax threshold is lowered from NT$2 million to NT$500,000 and the rate was raised from 10 percent to 12 percent.

4. To encourage long term investment, the new act enables individual and corporate investors to pay taxes on half of their gains from securities held for three-plus years.

5. The existing 0.3 percent securities transaction tax will remain.

Some investors are concerned that the capital gains tax on the broad range of securities, including stocks, bonds and derivative products, could cause an adverse impact on the securities market. Nevertheless, some believe that since the new tax will be applicable to people with large amount of trading and with an exemption on foreign investors, the impact on the Taiwanese market will be limited.