To levy tax on Technical Investment? The Ministry of Finance gave in; 5-year suspended taxation on conditions.

The long lasting dispute on the issue of “Technical Investment” has finally been settled. The council for Economic Planning and Development, the Ministry of Economic Affairs and the Ministry of Finance have reached a consensus and agreed that the “conditioned suspending taxation” is a part of major burgeoning tactical industry, and once held over 20% of the company share, a 5-year suspended taxation is allowed. Nevertheless if the ownership of the shares is transferred during the suspension, the tax should still be levied on in the transferring year.

 

The so called “suspending taxation conditions” and its scope of appliance are listed as per below:

i)       The applicable industries are limited to “major burgeoning tactical industries” and ones that have been acknowledged.

ii)     The individual shareholder whose total share that obtained from technical support instead of from the monetary contribution exceeds 20% of the company share (has substantial influence on the invested company).

iii)   The maximum term for suspending the taxation is 5 years and that the shareholders should calculate the proportion income acquired from transaction in the year followed by the expiration of the terms suspended, declare and pay for the income tax, but as for shareholders who transferred their shares during the suspension shall calculate their proportion income acquired from transaction in the year of transferring, and declare and pay for the tax.

 

To suspend the taxation levied on “technical investment”, one should apply in accordance with the amendment of the “Regulations for expediting industries to grade up” when it has been done, otherwise should applied by means of “Tax levied when become a shareholder” in accordance with the current regulations stipulated by the Ministry of Finance. (2004.05)

CYJ/SH