The Executive Yuan on Friday announced that rules designed to prevent Taiwanese businesses from setting up subsidiaries in low-tax countries or territories to avoid their tax obligations in Taiwan are to take effect next year. The move is part of the government’s efforts to follow international trends of reining in corporate tax avoidance, and to honor the principles of fairness in taxation.
The rules regulating controlled foreign companies (CFCs) were launched in June 2016, namely as Article 43-3 of the Income Tax Act (所得稅法) and Article 43-4, which regulate the place of effective management of CFCs, along with Article 12-1 of the Income Basic Tax Act (所得基本稅額條例), launched in May 2017.
When the legislature in July 2019 passed the Management, Utilization and Taxation of Repatriated Offshore Funds Act (境外資金匯回管理運用及課稅條例), it also passed a resolution requiring that the Executive Yuan decide the effective date of CFC rules within one year of the expiration of the tax amnesty legislation on repatriated funds. That law expired in August last year.
Under the legislation, a Taiwanese company that directly or indirectly holds 50 percent or more of shares or capital of a foreign enterprise registered in a low-tax country or jurisdiction, or has a significant influence on such a foreign enterprise, is considered to be a CFC. Therefore, the earnings of the foreign entity are regarded as the Taiwanese parent company’s investment income, which must be included in the parent company’s taxable income. In other words, income generated from a CFC is deemed taxable regardless of whether there is dividend distribution to the Taiwanese parent company.
Not all CFCs are subject to the rules. There are exemptions. For instance, CFCs engaging in business operations in their registered jurisdiction, or those with annual passive income — such as dividends, royalties, rental income or gains from asset sales — of less than 10 percent of their total income or current-year earnings of less than NT$7 million (US$253,403).
The Ministry of Finance also plans to adjust the applicable minimum corporate tax rate, which is set at 12 percent and could be raised to 15 percent, according to regulations. Although its implementation needs reviewing, the effective date of a minimum tax system for Taiwanese enterprises should not be far from the date when the CFC rules come into force. It is also in response to the Organisation for Economic Co-operation and Development’s push for a global minimum tax of 15 percent on multinational corporations, which is to take effect next year.
The organization’s global minimum corporate tax applies to companies with annual revenue greater than 750 million euros (US$856.15 million) in two of four successive financial years. If the tax rate of a country or territory does not reach 15 percent, the government where the parent company is registered can make up the difference. About 160 Taiwanese corporations meet this criterion, the ministry said.
In the global fight against tax avoidance, it is increasingly difficult for corporations and wealthy people to take advantage of tax havens to avoid paying taxes. They should consider how to meet the requirements for exemption from CFC rules, for instance, by doing business in the country in which their foreign entities are registered, or adjusting their investment structure, profit allocation and transaction mode to mitigate the adverse impacts of the new rules.
Given the rapidly changing business environment worldwide, risk management and strategic deployment have become increasingly critical for corporations and wealthy people.
In the event of a war with China, Taiwan has some surprisingly tough defenses that could make it as difficult to tackle as a porcupine: A shoreline dotted with swamps, rocks and concrete barriers; conscription for all adult men; highways and airports that are built to double as hardened combat facilities. This porcupine has a soft underbelly, though, and the war in Iran is exposing it: energy. About 39,000 ships dock at Taiwan’s ports each year, more than the 30,000 that transit the Strait of Hormuz. About one-fifth of their inbound tonnage is coal, oil, refined fuels and liquefied natural gas (LNG),
On Monday, the day before Chinese Nationalist Party (KMT) Chairwoman Cheng Li-wun (鄭麗文) departed on her visit to China, the party released a promotional video titled “Only with peace can we ‘lie flat’” to highlight its desire to have peace across the Taiwan Strait. However, its use of the expression “lie flat” (tang ping, 躺平) drew sarcastic comments, with critics saying it sounded as if the party was “bowing down” to the Chinese Communist Party (CCP). Amid the controversy over the opposition parties blocking proposed defense budgets, Cheng departed for China after receiving an invitation from the CCP, with a meeting with
Chinese Nationalist Party (KMT) Chairwoman Cheng Li-wun (鄭麗文) is leading a delegation to China through Sunday. She is expected to meet with Chinese President Xi Jinping (習近平) in Beijing tomorrow. That date coincides with the anniversary of the signing of the Taiwan Relations Act (TRA), which marked a cornerstone of Taiwan-US relations. Staging their meeting on this date makes it clear that the Chinese Communist Party (CCP) intends to challenge the US and demonstrate its “authority” over Taiwan. Since the US severed official diplomatic relations with Taiwan in 1979, it has relied on the TRA as a legal basis for all
To counter the CCP’s escalating threats, Taiwan must build a national consensus and demonstrate the capability and the will to fight. The Chinese Communist Party (CCP) often leans on a seductive mantra to soften its threats, such as “Chinese do not kill Chinese.” The slogan is designed to frame territorial conquest (annexation) as a domestic family matter. A look at the historical ledger reveals a different truth. For the CCP, being labeled “family” has never been a guarantee of safety; it has been the primary prerequisite for state-sanctioned slaughter. From the forced starvation of 150,000 civilians at the Siege of Changchun
RSS