All material subject to strictly enforced copyright laws. © 2022 ITR is part of the Euromoney Institutional Investor PLC group.

Taiwan reintroduces capital gains tax after 24 years

taiwan-flag.jpg

Taiwan yesterday amended its Income Tax Act so that capital gains on securities investments will once again be taxable from January 1 2013.

Corporate shareholders will still be subject to the alternative minimum tax (AMT) on capital gains from the sale of shares, but the rate levied will increase from 10% to 12%. The annual deduction, or tax-free threshold, will be reduced from TWD2 million ($65,000) to TWD500,000.

The taxable portion of the capital gain will be reduced by half if the investor holds onto the shares for more than three years.

“Capital losses can be carried forward for five years to offset future capital gains. To encourage long-term holding, only 50% of the capital gain will be taxed where shares have been held for more than three years,” said a Baker & McKenzie alert.

There should be no direct impact on foreign shareholders because they are exempted from the AMT.

“Only foreign companies with a fixed place of business or a business agent in Taiwan are subject to AMT,” said Baker & McKenzie.

However, the increased AMT rate will impact foreign investors who use Taiwan holding companies as part of their structuring. Advisers are therefore recommending that companies thinking about disposing of their Taiwan investments should bring that process forward so as to complete the disposal before the January 1 2013 implementation date.

Finance Minister Chang Sheng-Ford hopes that the tax will raise between TWD6 billion and TWD11 billion each year.

The decision to reintroduce capital gains tax has not been met well by opposition parties. They have criticised the government’s statement that this reform is part of a process to make the tax system fairer.

“I condemn lawmakers for approving the amendments,” said Hsu Chung-Hsin, legislator for the Taiwan Solidarity Union party. “They have defied their professionalism.”

A similar attempt to tax share trading 20 years ago was abandoned after causing the stock market to plunge by more than 35% in a month.

More from across our site

This week European Commission officials consider legal loopholes to secure minimum corporate taxation, while Cisco and Microsoft shareholders call for tax transparency.
The fast-food company’s tax settlement with French authorities strengthens the need for businesses to review their TP arrangements and documentation.
The full ALP model will be adopted through a new TP regime, which is set to boost the country’s investments and tax certainty.
Tax professionals have called on the UK government to reconsider its online sales tax as it would affect the economy at the worst time.
Tax professionals have called on companies to act urgently to meet e-invoicing compliance targets as the EU plans to ramp up digitisation.
In the wake of India’s ambitious 25-year plan for economic growth, ITR has partnered with leading tax commentators to discuss what the future will look like for India and for the rest of the world.
But experts cast doubt on HMRC's data and believe COVID-19 would have increased the revenue shortfall.
EY’s plan to separate its auditing and consulting businesses might lessen scrutiny from global regulators, but the brand identity could suffer, say sources.
Multinationals are asking world leaders to put a scale on carbon pricing to tackle climate change at the 48th G7 summit in Germany, from June 26 to 28.
The state secretary told the French press that the country continues to oppose pillar two’s global minimum tax rate following an Ecofin meeting last week.
We use cookies to provide a personalized site experience.
By continuing to use & browse the site you agree to our Privacy Policy.
I agree