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Jan 2010 |
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Tsar & Tsai Lex News is aimed at providing the readers and clients (1) important recent changes in the laws and regulations in Taiwan, (2) practical views and interpretations on the laws, (3) important legal news and case developments, and (4) information on recent activities of Tsar & Tsai Law Firm. If you have any comments or questions, please feel free to contact us (Tel: 886-2-2781-4111; e-mail: Law@TsarTsai.com.tw ).
Editors:
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Recent Firm Activities |
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Withholding Tax will be Lowered for Certain
Types of Income –
The MOF issued amendment to "The Standards of Withholding Rates for Various Incomes"
to reduce the withholding tax rates of the
following income from January 1, 2010: (1)
withholding on salaries received by individuals
not residing in Taiwan, profit seeking
enterprises that do not have a permanent
business location in Taiwan, Chinese mainlanders
who do not reside in Taiwan for more than 183
days in one year and a legal entity from
mainland China that does not have a permanent
business location in Taiwan: (i) dividends and
earnings: individual withholding tax rate was
previously "30% if the investment is not
approved; 20% if approved"; the profit-seeking
enterprise withholding tax rate was previously
"25% if the investment is not approved; 20% if
approved"; both the individual and
profit-seeking enterprise rates are reduced to
20%, whether approved or not; (ii) salary and
pension: the withholding rates are reduced from
20% to 18%; and (iii) interest income:
previously "except for securitization product
interest the withholding rate of which is 6%,
the rate for the other interest income is 20%",
now "15% interest income withholding rate is
imposed on short-term notes, securitization
products, government bonds, corporate bonds,
financial bonds and repo trades, 20% for the
other instruments"; and (2) withholding rate on
interest income received by individuals residing
in Taiwan, profit seeking enterprises having a
permanent business location in the Taiwan,
Chinese mainlanders who reside in Taiwan for
more than 183 days in one year and the legal
entities from mainland China that have a
permanent business location in Taiwan is reduced
to 10% from "20% for interests from short-term
notes, 6% for interest from securitization
products and 10% for other interest incomes". (
No Securities Transaction Tax on Company’s
Retrieving Shares with Other Companies’ Shares
– The MOF issued a
ruling on October 22, 2009, stipulating that in
the event a company reduces its capital by
transferring other company’s shares to its
shareholders instead of paying cash to buy back
its own shares, and then writes off such shares,
such share transfer is not subject to the
securities transaction tax. (
MOF Issued Ruling to Impose Income Tax on Investment-Linked
Insurance Products
– The MOF issued a ruling on
November 6, 2009, stipulating that for incomes
accrued from investment account of
investment-linked insurance products issued on
or after January 1, 2010, the insurer shall, in
the year when such incomes are accrued,
calculate the amount of each category of incomes
for each policyholder after deduction of
necessary costs and expenses, and the same shall
be consolidated into the gross income of the
policyholder in the current year and taxed in
accordance with the Income Tax Act and the
Alternative Minimum Tax Act, meaning the gains
are deemed realized when the investment account
receives dividends from the investment or when
the investment is disposed of or redeemed,
regardless of whether the policyholder actually
withdraws the money from the account. The new
tax ruling will have no retroactive effect and
will only apply to new policies purchased after
January 1, 2010. Existing insurance
contracts will not be affected. (
FSC Approval is No Longer Required for Transfer
of Treasury Shares to Employees by Listed
Companies – The
FSC issued an order on December 4, 2009,
stipulating that from January 5, 2010, pursuant
to Subparagraph 1, Paragraph 1, Article 28-2 of
the Securities Exchange Act, where a listed
company buys back its treasury shares and have
transferred such shares to the employees per
relevant regulations of Taiwan Stock Exchange
and Taiwan Depository & Clearing Corporation,
the listed company is not subject to Article 150
of the Securities Exchange Act under which
listed securities trading shall be done in the
centralized market. The company may proceed with
the transfer after forwarding the relevant
information to TDCC without first obtaining
approval from the FSC, provided however the
relevant information shall be disclosed at the
Market Observation Post System of the Taiwan
Stock Exchange. (Jolin Huang)
Overseas Chinese and Foreigners Holding Unlisted
Shares as a Result of Capital Reduction May
Transfer Shares within One Year of Capital
Reduction without the Investment Commission’s
Approval – The FSC
issued an order on November 4, 2009, stipulating
that if an investor who invests in listed or OTC
listed stock pursuant to Article 4-1 of the
Regulations Governing Investment in Securities
by Overseas Chinese and Foreigners, and later
the shares held become unlisted as a result of
capital reduction of such invested company, the
investor may transfer said shares within one
year of the date of capital reduction without
obtaining approval from the Investment
Commission. However, during said period,
the investor shall designate a bank, approved by
the FSC to offer custodial services, to act as
its custodian institution and to handle related
matters, such as custodianship of funds and
certificates related to securities investments,
confirmation of trades, transaction settlement,
and reporting of relevant information pursuant
to Article 17 of the Regulations Governing
Investment in Securities by Overseas Chinese and
Foreign National. (
VAT Refund May be Directly Applied by the
Importer with the Local Customs Office
– On November 18, 2009, the MOF amended the
“Directions for Collection of Business Tax by
the Customs”. Under the amendment, if tax-paid
imported goods are returned for re-export and
will not be re-imported, the importer may
directly apply to the Customs Office at the
place where the goods are originally imported
for refund of the business tax and no need to
apply for the tax authority’s prior approval
anymore. (
Accelerated Patent Examination Available for
More Applications -
Under the current Accelerated
Examination Program (AEP) in Taiwan, a request
for accelerated examination of an invention
patent application is acceptable only when a
corresponding foreign application has been
allowed for patent upon substantive examination.
Through IPO’s amendment of said AEP, effective
from January 1, 2010, the following
two additional conditions can also be used to
apply for a request for accelerated examination:
(1) An examination report and search report (if
any) have been issued to a corresponding foreign
application filed in the US, in Japan or before
the European Patent Office; or (2) The grant of
patent is necessary for the commercial
implementation of the invention, e.g. a relevant
patent license is under negotiation, or a
relevant product advertisement has been
published. (
IPO
Amended the Official Fees for Patent Matters
- Under the
current Taiwan patent practice, the basic
official fee for requesting substantive
examination (the basic examination fee) for an
invention patent application is fixed at
NT$8,000 irrespective of the number of the
claims. For an invention patent
application filed on or after January 1, 2010,
although the basic examination fee for primary
examination proceeding is reduced to NT$7,000,
an excess claim fee of NT$800 per claim will be
required for the claims in excess of the basic
10 claims. Moreover, effective from
January 1, 2010, the entire official fee for
substantive examination either in the primary or
in the re-examination proceeding is refundable
provided that a request for withdrawal of the
application is filed before the first
examination report is issued. The amount
of part of the patent annuities is also reduced
from January 1, 2010. Depending on the
type of patent and year of annuity, the reduced
amount ranges from NT$1,000 to NT$13,000. (
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Tsar & Tsai successfully assisted TPO Displays Corp. in its decrease of capital and negotiated for a merger with Innolux Display Corp. (Yvonne Liu / Jackie Lin) Tsar &
Tsai successfully assisted American Industrial
Partners Capital Fund IV, L.P. in its
acquisition of the systems integration business
and related assets of Celerity, Inc. in Taiwan.
(Janice Lin/ James Cheng/ On
January 19, 2010, On January 14, 2010, James Cheng will participate in the conference on Purchase Price Allocations for Business Combinations Under ROC GAAP and IFRS Perspectives held by Wau Yuan Property Appraisal Co., Ltd. and Chun Yi Appraisal & Consulting Co., Ltd. in Taipei. On
December 26, 2009, |
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Taipei
District Court held that Yuanta Funds shall not
be liable for investor’s loss
－ Tsar & Tsai
represented Yuanta Funds to defend in a
litigation against Yuanta Funds filed by an
investor who invested in an offshore fund
through private placement and suffered loss.
Yuanta Funds was commissioned by an offshore
fund manager to sell such offshore fund.
The Plaintiff claimed that Yuanta Funds failed
to perform its duties and shall be liable to the
Plaintiff pursuant to the Consumer Protection
Act and Articles 7 and 8 of the Securities
Investment Trust and Consulting Act. The
Plaintiff also claimed that Yuanta Funds
committed tortious acts. To defend Yuanta Funds,
Tsar & Tsai argued that Yuanta Funds did not
fail to perform its duties; the Consumer
Protection Act is not applicable to financial
services, an offshore fund sold by private
placement is not a securities investment trust
fund so that Articles 7 and 8 of the Securities
Investment Trust and Consulting Act shall not
apply, and that Yuanta Funds is a legal entity
so that it is incapable of committing tortious
acts. In October, 2009, Taipei District
Court rendered a decision to dismiss the
Plaintiff’s complaint on the grounds that the
Consumer Protection Act is not applicable to
financial services, an offshore fund by private
placement is not a securities investment trust
fund, and Yuanta Funds is a legal entity so that
it is incapable of committing tortious acts. (SK
Chen &
Taiwan High Court granted decision in favor
of an Israeli computer company’s royalty claim
－ On behalf of
Jungo, Ltd., an Israeli computer company
(Licensor), Tsar & Tsai filed a lawsuit against
Jess-Link (Licensee) claiming for payment of
royalties. The governing law for the
license agreement between the parties is Israeli
law. During the litigation process, Tsar &
Tsai presented two Israeli lawyers’ opinions to
support that the provisions set forth in the
attachment to the license agreement require that
the licensee shall pay the pre-committed
royalties to the licensor regardless of whether
the licensee has sold any licensed software to a
third party. The first instance and the
second instance of the courts did not adopt the
two Israeli lawyers’ opinions and rendered an
unfavorable decision against Jungo, Ltd.
In the appeal to the Supreme Court filed by Tsar
& Tsai on behalf of Jungo, Ltd., the Supreme
Court vacated the lower court’s decision and
remanded the case to the Taiwan High Court for a
new trial on the ground that the lower court’s
failure to provide reasoning for not adopting
the two Israeli lawyers’ opinions was in
violation of the law. In October 2009,
Taiwan High Court held that the provisions set
forth in the attachment to the license agreement
require that the licensee shall pay the
pre-committed royalties to the licensor
regardless of whether the licensee has sold any
licensed software to a third party. As a
result, the Taiwan High Court reversed the lower
court’s decision and rendered a decision in
favor of Jungo, Ltd.
The
Intellectual Property Court rendered a
decision in favor of Triumph in patent
infringement litigation
－ Tsar & Tsai
successfully defended Triumph International Ltd.
(Taiwan) (“Triumph”) in a patent infringement
litigation filed by the patentee Li-mei Yu.
Based on Tsar & Tsai’s defense arguments, the
Intellectual Property Court in October 2009,
held that the patentee’s patent lacks inventive
step because the technical features in the
patentee’s patent have been disclosed in the
prior art references. The IP Court dismissed
the Plaintiff’s action accordingly. (Edgar Chen
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COMMENTARY -- Commentary on Digital Terretrial Television Policy By June Su |
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The Ministry of Transportation and Communications (“MOTC”) recently submitted the proposed digital terrestrial television (“DTTV”) licensing policy and plan (“Plan”) to the Executive Yuan for review and approval. Once the Executive Yuan approves the Plan, the National Communications Commission (“NCC”) will conduct DTTV licensing accordingly within 200 days. It is expected that DTTV licensing can be completed by mid-year 2010. According to the Plan proposed by the MOTC, NCC will issue five DTTV licenses and two mobile television licenses. All seven licenses are for high-definition television (“HDTV”). Each license shall be entitled to 6MHz of bandwidth, which can be utilized for three HDTV channels or ten mobile television channels using MPEG-4 technology. Of the five DTTV licenses, the Plan proposes that one license will be reserved for religious or charitable organization as public interest station and another will be reserved for new entrant. However, if the number of bidders for the license is less than the number of licenses to be released, the actual number of licenses to be released will be one less than the number of bidders. In other words, not every bidder will obtain a DTTV license. The Plan contemplates releasing the license by qualification review first and than multiple rounds of bidding process. The ceiling of the bid will be a certain percentage of the minimum capital for a DTTV operator. In preparation for the licensing of DTTV, the NCC has passed draft amendments to the Radio Television Broadcast Act (“Act”) on November 11, 2009. The major proposed amendments relating to the licensing of DTTV includes that the NCC shall issue DTTV license using review, auction, bidding or other appropriate processes after considering various factors. The proposed amendments to the Act also set forth the particulars that shall be specified in the applicant’s business plan. After the applicant passes the review or successfully wins the bid, an establishment permit shall be issued by the NCC to the applicant after payment of performance bond. Upon the applicant completes incorporation (or amendment incorporation), the performance bond shall be returned to the applicant. The details relating to the applicant’s qualification, the procedure for submitting the bid, required capital, form of application and business plans, the establishment of the business, method of payment and return of the performance bond, etc. were to be separately promulgated by the NCC. The proposed amendments to the Act also require the applicant to apply for a radio station establishment permit in accordance with the Telecommunications Act within six months of winning the bid. The applicant shall then apply for the radio station license after completion of building of the radio station. Thereafter, the applicant shall apply for the DTTV license within six months of obtaining the radio station license. For a new entrant, the building of the radio station and transmission facility will be the major capital expenditure for entering into DTTV business. The digital transmission facility and platform currently used by the five incumbent terrestrial television operators were built together by these five operators and subsidized by the Government Information Office. The transmission platform and facility are still under the control of the incumbent operators. Despite the trend to move toward horizontal/layered regulation in light of digital convergence, the NCC has not yet requested the incumbent operators to share the transmission platform with new entrants through proposed amendments of relevant laws. The incumbent operators, in consideration of their own business interest, are unlikely to voluntarily share the transmission platform. Hence, judging from the current licensing condition, the cost for building the radio station and transmission platform will be excessively high for DTTV new entrants. Based on the NCC’s proposed amendments to the Act, if the DTTV applicant obtains the license via auction or bidding, the duration of the license will be nine years. If the license is obtained via review or other licensing procedure, the license duration will only be six years given that the licensees need not pay for the frequency as the case is in auction or bidding. Upon expiration of the term of the license, the license will be terminated. If the operator wishes to continue operating DTTV business, the operator shall apply for a new DTTV license in accordance with the then licensing procedure. The NCC’s proposed amendments to the Act also change the current performance evaluation and review from every two years to every three years. If the operator’s performance fails to meet its own operation plan submitted during licensing application, the NCC may request the operator to cure or rectify if such is possible. If the failure to meet its own operation plan cannot be cured, the NCC may revoke the operator’s license. The MOTC has expressed its position that it will strictly scrutinize the license application and subsequent performance evaluation and review in order to encourage the DTTV operators to improve performance. As such, DTTV operators’ cost of operation will significantly increase because, in addition to the large amount of initial capital expenditure for building radio stations and transmission platform and facilities, the uncertainty of obtaining a new license upon expiration of the original license also add to the operator’s pressure to achieve a profitable operation during the first licensing term. Further, the current Act contains a rigid regulatory scheme as applied to terrestrial television operators. Given that terrestrial television operators have to compete with cable television operators for the limited volume of advertisement available, whether DTTV operators will be able to compete with cable operators in the market also depends on the following policy and regulatory issues not currently addressed by the NCC in the proposed amendments to the Act, to name a few: 1. whether DTTV operators may allocate a portion of its bandwidth to provide value-added telecom services; 2.whether DTTV operators may lease or resale a portion of its bandwidth to other telecom operators; 3. whether DTTV operators may allocate bandwidth for shopping channels; 4. whether DTTV operators may provide pay TV services; 5. whether the current must-carry rule may change for DTTV operators to collect licensing fees from cable operators carrying its premium channels; and 6. whether the ratio of required domestic programming currently imposed on terrestrial television operators may be lowered. In sum,
without changes to the current rigid regulatory
scheme, the MOTC’s proposal to release DTTV
licenses through auction could possibly lead to
new DTTV licensees not being able to compete
with digitalized cable television operators
after payment of bid price and performance bond
and large expenditure on construction of radio
stations and transmission platform, which does
not necessarily benefit the development of pay
TV industry in Taiwan. |
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| The contents of Tsar & Tsai Lex News are not legal opinions and shall not be taken as legal advice on any particular issue or case. If the reader has any suggestions or questions, please do not hesitate to contact us. |
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