To link to this article, copy this persistent link:
http://www.loc.gov/lawweb/servlet/lloc_news?disp3_l205403121_text

(Apr 30, 2012) On April 26, 2012, the Executive Yuan (Cabinet) of the Republic of China on Taiwan approved a previously effective capital gains tax, to be reinstated as of 2013, as part of a set of proposed amendments to the Income Tax Act. The matter will next be considered by the legislature. (Meg Chang, ROC Cabinet Approves Securities Gain Tax Bill (Apr. 27, 2012).)

Highlights of the draft proposal are:

  • a tax of 15% to 20% on annual capital gains over NT$4 million (about US$135,135) for individual investors, with the rate to be determined after economic and market circumstances are taken into account. The tax will not be levied on futures trade gains;
  • 50% of annual capital gains transaction taxes claimable as a post-tax assessment deduction, with the past three years of losses allowed to offset gains;
  • an increase in the institutional investors' tax rate, from between 10% and 12% to a maximum of 15%, and a major decrease in the exemption threshold from NT$2 million to NT$500,000 (overseas investors that have no offices or direct business operations in Taiwan will be exempt);
  • taxation of 50% of gains for securities held by individual or corporate investors for three or more years; and
  • retention of the existing securities transaction tax of 0.3%. (Id.; Chinmei Sung, Taiwan Cabinet Approves Capital Gains Tax Plan from 2013, BLOOMBERG (Apr. 25, 2012).)

According to Premier Sean C. Chen, "[b]ringing back the tax moves Taiwan closer to the principle of ability based taxation while cushioning the stock market from potentially adverse effects" and "is the first step in overhauling the country's taxation system, and one that shapes the future development of the local securities market." (Chang, supra.)


Securities and futures firms expressed dissatisfaction with the proposed changes and vowed to take their case to the legislature to prevent the adoption of the amendments. In the view of the head of the Taiwan Securities Association, the proposal "fails to ease concerns over potential fund outflows and shrinking trading volumes linked to the imposition of the capital gains tax." Nor, he contends, would the NT$4 million exemption amount cause investors to keep their funds in the country, especially given the fact that Singapore and Hong Kong do not impose a capital gains tax on securities investments. (Crystal Hsu & Amy Su, Securities Houses Slam Revised Capital Gains Tax Plan, TAIPEI TIMES (Apr. 27, 2012), at 12.)


The Association wants the securities transaction levy to be lowered or eliminated if capital gains are taxed. Its own draft amendment would merge the capital gains tax into a 10% minimum income tax, applicable to institutional stock investments in both listed and unlisted companies, with an exemption threshold set at NT$2 million; halve that proposed tax rate for securities held two years and longer; and exempt individual investors, domestic or foreign, from any capital gains tax until institutional investors constitute more than 50% (versus the current 30%) of daily turnover. The Association called upon lawmakers to reject the Cabinet proposal and to either maintain the current system or, if the legislature goes ahead with the law's reform, to consult the Association's draft. (Id.)

Author: Wendy Zeldin More by this author
Topic: Taxation More on this topic
Jurisdiction: Taiwan More about this jurisdiction

Search Legal News
Find legal news by topic, country, keyword, date, or author.

Global Legal Monitor RSS
Get the Global Legal Monitor delivered to your inbox. Sign up for RSS service.

The Global Legal Monitor is an online publication from the Law Library of Congress covering legal news and developments worldwide. It is updated frequently and draws on information from the Global Legal Information Network, official national legal publications, and reliable press sources. You can find previous news by searching the GLM.

Last updated: 04/30/2012