19 Jan 2018 Taiwan weekly legal update: Income Tax reform
Income Tax reform
The Legislative Yuan had passed the income tax reforms this week. As the Ministry of Finance described these reforms are focusing on building a fairness taxation environment, optimizing the taxation procedures and boosting the incentives for investors. The following are several major aspects of this new reforms:
I. Tax cut for salary income
The Standard Deduction for individual income tax has raised to NT$120,000 from NT$ 90,000. Additional benefits and deduction for mid-low income and family with children.
II. Incentives for expatriate
The highest individual income tax rate (net income over NT 10 million dollars) reducing the rate to 40%. (45% before the reform)
III. Incentives for investors
A. Dividends for individual domestic resident can choose either way to declare:
1. The dividends would be collected through individual income tax, 8.5% of the dividends would be granted as a deduction. (maximum NT$ 80,000/unit deduction; only apply to dividends under NT$ 940,000/year)
2. The dividends would separate from the individual income tax, tax rate at 28% of the total dividends.
B. Business Income Tax rate
1. Raising the tax rate of business income to 20%.
2. Reducing the tax rate of undistributed profit from 10% to 5%.
3. 21% of dividends withhold of foreign investors.
C. No business income tax for Sole Proprietorship, Partnership. Only tax on their individual income tax.
Taxation incentives for mobile payment
The Ministry of Finance announced standards for business to adopt mobile payment and released several taxation incentives. The goal is to have 90% coverage of mobile payment in business and stores before 2025. The following are the brief introduction to the standards and tax incentives.
1. Qualification: brick and mortar business (small company), which allow customers to pay through mobile devices, and agree to provide information to mobile payment provider and taxation bureau for auditing.
2. Taxation incentives: qualified applicants may enjoy business income tax rate at 1% and not required to issue invoices until the end of 2020.
3. Application opened: 12 January 2018 ~ 31 December 2020.
The Ministry of Justice is planning to adopt “Grand Chamber” in the judicial system
The Ministry of Justice passed several draft articles to the organization acts, adopting the system of “Grand Chamber” to the final trial. The goal is to ensure the consistency of legal opinions. Additionally, case law without the full text of the judgment will no longer be adopted; case law with the full text of the judgment will be recognized as authorities.
It has been long discussed that the Supreme Court and Supreme Administrative Court, due to their heavy loading of cases, contradictions happened between each other and among different Divisions. It brought inconsistency and unpredictable risks to the legal opinions and the parties involved. Thus, the Ministry of Justice is planning to adopt the system of “Grand Chamber” among Divisions of Civil Law, Criminal Law, and Administrative Law, to coordinate the legal opinion and to decide on cases with opinion contradictions. But it is not meant to create another trail for cases.
Cases go to the Grand Chamber would be divided into two types: Cases with contradictions and Cases with general principles. The former would be cases that contradictions between the Supreme Court and Divisions. The case would be decided by the Grand Chamber after the Meeting of Division, the Chamber will be the final decision of this contradiction. The latter would be the case with general principles of which should be decided by the Grand Chamber for the purpose of consistency. The Grade Chamber would only decide on the legal opinion but will not apply to the facts. It is the court who gives the final judgment of the case.
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