The Ministry of Finance issued the Tai-Cai-Shui-10704681060 Directive of January 31, 2019 (hereinafter, the “Directive”) to stipulate the three types of overseas funds repatriated by individuals which will be exempt from income taxes as well as the determination principles and the required documentation in order to increase the willingness to repatriate funds for investment purposes.
This Directive first points out that an individual’s income not included in the total taxable income for consolidated income taxes and derived from sources other than the Republic of China, Hong Kong and Macao (hereinafter, an “Overseas Income”) shall be included in the individual’s basis income on which a basic income tax should be levied pursuant to Article 12, Paragraph 1, Subparagraph 1 the Basic Income Tax Statute (hereinafter, the “Statute”). However, if an income tax has been paid pursuant to the local tax law of the income source, such income tax may be deducted within a stipulated limit pursuant to Article 13 of the same Statute.
This Directive further points out that if an overseas fund repatriated by an individual is (1) a fund which is not an overseas income, including a foreign investment principal or capital reduction refund, a loan or an amount to satisfy a debt, the principal of a deposit with a financial institution, the principal of a property transaction and other funds; (2) an Overseas Income on which a basic tax has been levied pursuant to the Statute; or (3) an Overseas Income on which a basic income tax is not levied pursuant to the Statute but has exceeded the collection period under Article 21 of the Tax Collection Law, no supplemental filing and supplemental payment of the basic income tax are required pursuant to the Statute. As for circumstances other than those mentioned above, if an individual fails to file the taxable income during a tax period, supplemental filing may be made pursuant to Article 48-1 of the Tax Collection Law. If a basic tax should be supplemented, overseas tax deductions may apply to avoid double taxation. In addition, there will be no penalty other than an interest on supplemental tax payment.