The ROC Ministry of Finance submitted a proposal to the Executive Yuan April 12 calling for the imposition of a Taiwan capital gains tax on securities and futures transactions.
The proposed tax will make Taiwan’s tax system more equitable and help balance the budget, Finance Minister Christina Y. Liu said in a news conference afterwards.
According to the proposal, individual investors who make more than NT$3 million (US$10,135) from trading stocks, futures, options and private funds will have to pay 20 percent of their profits to the government. Those who make less than the stipulated amount will remain exempt.
Incurred fees and the 3-percent transactions tax currently imposed on securities will be deductible, the MOF noted.
It added investment losses can also be used to offset gains in the following three years. If investors hold on to the same stock for five years or more, they will only have to pay 20 percent of half of the gains.
As to domestic institutional investors, they will be required to pay a 12-percent tax whenever they make a profit in excess of NT$500,000, according to the MOF proposal. Current regulations, by contrast, call for a 10-percent tax rate only when profits are more than NT$2 million.
Institutional investors will also be able to deduct trading fees and losses, the MOF said.
Compared with institutional investors, individual investors have been asked to bear a larger burden of the proposed capital gains tax, according to sources familiar with the matter. The recent downtrend in the Taiwan stock index is a reflection of the unhappiness of individual investors, they added.
The proposed draft reflects the majority view of the tax reform task force, according to Liu, who presided over several task force meetings, most recently on April 5 and April 9.
Also taken into consideration were the views of more than 50 experts, including professors of finance and accounting, industrial representatives and heads of civic groups concerned with taxation reform.
Though divided on certain topics, the majority of the task force agreed that foreign institutional investors would be exempt from the proposed tax. They recommended that the policy take effect starting 2013, with the first payments on the new tax coming due in May 2014.
According to the MOF, the draft has to be approved by the Cabinet and then passed by the Legislature before it can take effect. (HZW)
Write to Aaron Hsu at pj1210meister@mail.gio.gov.tw