Corporate Tax 2010 - BMR Advisors

Lee and Li, Attorneys-at-Law
Taiwan
Taiwan
transactions and transactions of other securities approved by the
government for issuance to the public is 0.1% of the transaction
price. Moreover, Article 20-1 of the Statute for Upgrading
Industries provides that the sale of corporate bonds and financial
debentures is exempt from STT. But because this Statute is valid
till 31 December 2009, the sale of quasi government bonds and
corporate bonds on or after 1 January 2010 would be subject to STT
at 0.1% of the price, unless the law provides otherwise then. On 21
May 2009, the Executive Yuan proposed the bill of Article 2-1 of
the Securities Transactions Tax Act to prolong the STT exemption
for the sale of corporate bonds and financial debentures.
Futures trading tax is levied on both the buyer and the seller of a
futures transaction.
Gains realised from the sale of a piece of land are exempt from
income tax, but are subject to land value increment tax, which is
calculated based on the increment in value during the period from
the date of purchase to the date of subsequent sale.
Registration fee in an amount equivalent to 0.1% of the sum of (i)
the declared land value (usually, 80% x the government-published
land value of the land), and (ii) the government-assessed value of
the building, is payable, usually by the purchaser, upon registering
the transfer of the titles to the land and building.
Deed tax on a building is payable by the purchaser at 6% of the
building’s government-assessed value, which is usually lower than
the cost of constructing the building as well as the actual purchase
price, and depreciates every year after its construction.
3.3 Would there be any withholding tax on interest paid by a
local company to a non-resident
Yes. In general, when paying interest to a non-Taiwan tax resident
licensor, the Taiwan tax resident company should withhold income
tax at 20%, or a lower rate or 0% if such is provided under a tax
treaty or other regulations.
3.4 Would relief for interest so paid be restricted by reference
to “thin capitalisation” rules
There are no thin capitalisation rules under Taiwan law at present.
The tax authorities are conducting a research on such rules and are
expected to complete a report and propose debt to equity ratios for
various industries by the end of 2009.
While there are no thin-capitalisation rules, interest on loans that
are not for business operations cannot be treated as tax-deductible
expense. Moreover, if the interest rate on a loan extended by a nonfinancial
institution exceeds the highest rate set by the Ministry of
Finance each year (15.6% per annum or 1.3% per month for 2009),
the amount of interest exceeding such rate cannot be treated as taxdeductible
expense.
3.5 If so, is there a “safe harbour” by reference to which tax
relief is assured
Not applicable.
2.6 Are there any other indirect taxes of which we should be
aware
Commodity tax is levied on certain selected commodities
(including rubber tires, cement, beverages, flat-glass, oil and gas,
electrical appliances, vehicles), whether imported into or made in
Taiwan. Commodity tax is payable by the importer or local
manufacturer.
Taiwan adopts the Customs Cooperation Council Nomenclature
(CCCN) for levying customs duty. A consignee, or the holder of the
bill of lading, of the imported goods is responsible for paying the
customs duty on the good imported into Taiwan. The customs duty
payable is calculated based on the transaction price of the imported
goods, which denotes the price actually paid or payable for the
goods when sold for export to the importing country. The customs
may adjust the transaction price declared if it deems it unreasonably
low.
3 Cross-border Payments
3.1 Is any withholding tax imposed on dividends paid by a
locally resident company to a non-resident
Yes. In general, when distributing dividends to a non-Taiwan tax
resident shareholder, the Taiwan tax resident company should
withhold income tax at 20%, or a lower rate if such provided under
a tax treaty.
3.2 Would there be any withholding tax on royalties paid by a
local company to a non-resident
Yes. In general, when paying royalties to a non-Taiwan tax resident
licensor, the Taiwan tax resident company should withhold income
tax at 20%, or a lower rate if such is provided under a tax treaty.
3.6 Would any such “thin capitalisation” rules extend to debt
advanced by a third party but guaranteed by a parent
company
Not applicable.
3.7 Are there any restrictions on tax relief for interest
payments by a local company to a non-resident in addition
to any thin capitalisation rules mentioned in questions
3.4-3.6 above
In general, interest expenses that are attributable to ordinary or
auxiliary operations are deductible regardless of whether the
interest is paid to a Taiwan tax resident or non-Taiwan tax resident,
provided that it complies with other regulations. For example, the
rate at which such interest is charged does not exceed the maximum
interest rate (15.6% per annum or 1.3% per month for 2009), and
the required supporting documents are available.
3.8 Does Taiwan have transfer pricing rules
Yes. Taiwan has transfer pricing rules, which were promulgated on
1 January 2005 and are in line with the Guidelines of the
Organisation of Economic Cooperation and Development in
general.
4 Tax on Business Operations: General
4.1 What is the headline rate of tax on corporate profits
The highest corporate income tax rate is 25%, and will be reduced
to 20%, effective 1 January 2010.
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