萬國法律事務所

Taiwan's Ministry of Finance (MoF) issued an administrative interpretation regarding article 39 of the Business Merger and Acquisition Act ("BMAA") stating that tax preferences are applied to companies paying the acquired or divided company with shares having voting rights to shareholders of the acquired / divided company at a value of no less than 65% of the total consideration for the division or acquisition.

Reading article 39 of the BMAA alone, the text of the provision may be interpreted as allowing the tax preference to apply only when paying consideration with shares having voting rights to the acquired and the divided "company".

The MoF therefore issue this interpretation to clarify that tax preference is applied when consideration is paid to shareholders. Said tax preference includes exemption from the stamp tax, deed tax, and securities exchange tax when transferring securities, and the land value increment tax and business tax in different circumstances.

However, with respect to exemption of the land value increment tax, if the value of the shares transferred to the acquired or divided company is less than 65% of the consideration within three years after completing the land transfer registration, the acquired or the divided company must make a later payment of the land value increment tax. The acquiring company and the surviving company must make the later payment, also in the event of any shortage.

Additionally, in the absence of a price determination of "all consideration" under Article 39 of the BMAA, the interpretation further states that if the company is divided, acquired, or merged, "all consideration" shall be determined in accordance with the relevant accounting principles in force and the value of shares having voting rights will be calculated using the above said accounting principles.