Taiwan adjusts withholding tax regime
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Taiwan adjusts withholding tax regime

Changes to Taiwan’s tax law mean that gains from structured notes are no longer regarded as interest income and so should be liable for withholding tax.

However, this announcement contradicts steps taken by the country’s Ministry of Finance.

Announced at the end of 2009, amendments to the country’s Income Tax Act mean that, theoretically, gains from structured notes traded via offshore banking units should be subject to withholding tax, whereas in the past, such gains were tax exempt.

However, the Ministry of Finance has just issued a directive that temporarily suspends the withholding obligation on gains for structured notes traded via offshore banks for six months.

The six month suspension will allow banks to re-programme their computer systems.

The Ministry indicated that if the directive is ratified within the 6-month period and has a retroactive effect from January 1 2010, withholding tax shall not apply from January 1 2010.

However, if the amended law is not ratified by June 30, withholding tax on gains from structured notes will be imposed from January 1 2010.

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