The Legislative Yuan adopted the Statute for Repatriation of Offshore Funds for Management, Utilization and Taxation to provide tax incentives to the repatriation of offshore funds (Taiwan)

Fang-Wei Lin

The Legislative Yuan adopted the Statute for Repatriation of Offshore Funds for Management, Utilization and Taxation (hereinafter, the “Statute”) during the 3rd Meeting of the 1st Special Session of the 7th Session of the 9th Term on July 3, 2019 with the Statute highlighted below:

Firstly, Article 3, Paragraph 1, Subparagraphs 3 and 4 and Article 4 of the Statute provide that both individuals who repatriate offshore funds in countries or areas outside of Taiwan, Penghu, Kinmen and Matzu (including the mainland China area), and profit-seeking enterprises which repatriate investment gains from offshore reinvested enterprises they control or exert significant influence over may opt for the tax incentives provided under the Statute.

Secondly, the specific tax incentive, which is stipulated under Article 5 of the Statute, shall be that for funds repatriated in the first year after the effective date of this Statute, the tax rate shall be 8%, and 10% for funds repatriated in the second year.  Under Article 7, if substantive investment is completed within the required period and a certificate issued by the Ministry of Economic Affairs (hereinafter, the “MOEA”) for the completion is obtained, application may also be filed with tax agencies for a 50% tax refund.

Thirdly, according to Articles 7 and 8 of the Statute, repatriated funds may, with the approval of the MOEA, engage in substantive investment through directly investing in industries or through investing in venture capital funds or private equity funds which invest key policy industries.  In addition, Article 6 stipulates that up to 5% of the repatriated funds may be freely utilized, provided that they shall not be used to purchase real estate or beneficiary certificates issued or delivered pursuant to the Statute for Real Estate Securitization, and that the ceiling of financial investment is 25%.  Moreover, the repatriated funds shall be deposited in dedicated foreign exchange savings accounts before they may be withdrawn for all kinds of investment based on their purposes pursuant to applicable requirements, and individuals or profit-seeking enterprises shall report the status of their investment to the MOEA each year during their substantive investment periods.