Taiwan Approves CGT Amendment
27 June 2013
Posted by: Author: Mary Swire
Author: Mary Swire
Despite a row in the Taiwanese parliament, an income tax code amendment to dilute the existing capital gains tax (CGT) on share trading, which has been accused of dampening trading on Taiwan's stock exchange and sharply reducing share prices, has finally been passed.
CGT only began to be implemented at the beginning of this year, as the Government sought to enlarge its tax base and find additional tax revenues. It required all investors to pay a transactions tax of between 0.02 percent and 0.06 percent when selling stock if Taiwan's stock exchange index (TAIEX) stock index rose above 8,500 in 2013 and 2014.
While the index has actually stayed below the 8,500 level since the CGT was approved, the existence of a threshold structure has been blamed for causing investor uncertainty and reducing stock market turnover.
The approved amendments now remove completely the provision that a tax would take effect when the TAIEX surpasses 8,500 points. While the index has never threatened that level this year, it has been said that the existence of the threshold has caused uncertainty in investors' minds, and reduced turnover on the stock market.
Instead, beginning in 2015, there will be a 15 percent tax on the capital gains of large traders, defined as those who sell over TWD1bn (USD33.2m) of shares in a year, based on a government assessment of those gains, with verification by the taxpayer. On the other hand, such traders may choose to be subject to a 0.1 percent tax on their share trades in excess of TWD1bn.
A 15 percent CGT remains in 2013 on those individual investors that sell a certain number of shares they acquired in initial public offerings, unlisted markets or emerging markets, and non-Taiwanese residents in Taiwan for under 183 days per year.