Tsar & Tsai Lex News is aimed at providing the readers and clients
- important recent changes in the laws and regulations in Taiwan,
- practical views and interpretations on the laws,
- important legal news and case developments, and
- 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: Edgar Chen / George Shih
Management and Taxation of Repatriated Offshore Funds Act Officially Implemented
The Management and Taxation of Repatriated Offshore Funds Act (the “Act”), which had been passed by the Legislative Yuan and promulgated by the President, as well as the various related regulations issued respectively by the Ministry of Economic Affairs, the Financial Supervisory Commission and the Ministry of Finance, came into force on August 15, 2019.
The Act provides that the offshore funds repatriated by individuals or the offshore income repatriated by profit-making businesses may enjoy the below-mentioned tax incentives. For the funds repatriated between August 15, 2019 and August 14, 2020, the tax rate shall be 8 percent; and for the funds repatriated between August 15, 2020 and August 14, 2021, the tax rate shall be 10 percent. Further, for encouraging the repatriated funds be used for direct investments or investments in important strategic industries via domestic venture capital or private equity funds, 50% of the tax paid accordingly may be refunded by making an application after the investment is completed,.
The Act also requires that the repatriated funds be deposited in a foreign currency deposit account. Up to 5% of such deposited fund may be used freely. If a portion of the deposited fund is to be used for financial investments, up to 25% of the amount of which shall be re-deposited to a trust account or a discretionary securities account, and be withdrawn for financial investment subject to an annual withdrawl limit. (Dennis C.)
The Legislative Yuan passed an amendment to the Income Tax Act, adding the Celebrity’s Clause and the special deduction for long-term care. The amendment became effective retroactively as of January 1, 2019.
An amendment to Article 14 of the Income Tax Act, famously known as the “Celebrity’s Clause”, was passed by The Legislative Yuan and promulgated by the president. According to the amended article, future wage earners may elect to use the “itemized deduction” method when the necessary expenditure of earning salaries is higher than the amount of standard deduction. The provable itemized deduction must meet the following conditions: (1) the deduction shall be limited to three categories of expenditure, namely, the occupational outfits, the professional education or training and the occupational tools, all of which shall be directly related to the tax payer’s occupation or profession, (2) the allowable deduction for each of the three categories shall not exceed 3% of each tax payer’s annual wage income.
If a wage earner has elected to deduct expenditure using the itemized deduction method based on Article 14, the special deduction for employment income prescribed in Article 17, Paragraph 1, Subparagraph 2, Item 3-2 shall not be applicable when calculating the tax payable under Article 15 and the net consolidated income under Article 17.
In addition, the long-term care expense was added to the allowable deduction in the amended Article 17 of the Income Tax Act. An annual limit of NT$120,000 deduction for long term care expense is allowed for each qualified disabled person. (Yijia Chao)
The Legislative Yuan Passed the Amendment to the National Security Act
The Legislative Yuan passed an amendment to the National Security Act. The highlights of the amendment include: (1) declaring that the national security covers the necessary scope of the Internet; and (2) depriving the current or retired military, public and teaching personnel and the personnel of state-owned enterprises who have been finally convicted of the crime of detecting, collecting, delivering or transmitting confidential documents, pictures, information or articles of official business, or developing an organization for the administration, military, political party, or any other official organization of a foreign country or the Mainland Area, of the right to receive retirement pensions and recovering the previously received pensions from the aforesaid persons.
(Roam Huang / Trainee Lawyer)
The Code of Criminal Procedure Amended To Prevent Fleeing of Criminal Defendants during Investigation, Trial and Enforcement
In order to prevent a criminal defendant from absconding prosecution, trail or enforcement, implement the nation’s penal power, and improve the mechanism of preventing absconding of criminal defendants, the Legislative Yuan passed an amendment to the Code of Criminal Procedure on July 17, 2019. The highlights of the amendment include: (1) when a criminal defendant is not or no longer detained during the investigation or trial stage, the prosecutor or the court may order the criminal defendant to comply with alternative measures such as monitoring by technical devices, restriction of area of activity, submission of passports or other travel documents, or prohibition from disposing specific property; (2) the court may order a criminal defendant to attend the court on the judgment date to prevent absconding; (3) if a criminal defendant does not comply with the aforementioned order, the prosecutor or the court may arrest such defendant without a warrant, or detain or re-detain such defendant; (4) if necessary, the enforcement prosecutor may enforce a prison sentence before receiving the judgment file from the court; and (5) if there exist sufficient ground to believe that a criminal defendant who has been sentenced for death, life imprisonment or imprisonment of two years or more may abscond, the enforcement prosecutor may arrest such defendant without a warrant. (Roam Huang / Trainee Lawyer)
The Legislative Yuan passed an Amendment to the Securities and Exchange Act—The Legislative Yuan recently passed the amendment to Article 14-5 and Article 36 of the Securities and Exchange Act for implementing corporate governance, clarifying the responsibilities of financial reports makers and enhancing the internal managing procedure of financial reports. The amendment requires that the financial reports to be submitted to the auditing committee and the board of directors of a publicly traded company and the financial reports to be submitted to the board of directors of a publicly traded company within 45 days of the end of the first, second, and third quarters of each fiscal year be signed or sealed by the chairperson, the operating officer, and the chief accounting officer of the company. (Linda Huang)
The Amendment to the Part of Family of the Civil Code was Passed—The Legislative Yuan recently passed the amendment to the Part of Family of the Civil Code, adding “the appointed assistant, the voluntary custodien, and the other interested parties” as the qualified applicants of a declaration of guardianship. The amendment also establishes an adult voluntary custody system by inserting related provisions in Articles 1113-2 to 1113-10 of the Civil Code. (Linda Huang)
The Financial Supervisory Commission (“FSC”) promulgated the “Guidelines for Banks to Apply for Trial Businesses” (“GBATB”)
The FSC promulgated the GBATB on June 19, 2019 (Ref. No.: Jin-Guan-Yin-Kong–Zhi No. 10802700400) to encourage banks to apply for trial businesses on items not restricted by laws or regulations. The FSC may order banks to abide by relevant restrictions based on the nature of the trial business. The scope of the trial businesses includes: (1) an expansion of the business item which has been approved, other general business items approved by the competent authority that are listed among the business items specified in laws or regulations, or those not specifically regulated in technical operation regulations such as the Regulations Governing Safety Control Operation in Electronic Banking Services by Financial Institutions; (2) trial business items for which transaction or operation models have not been applied by another bank or have been applied for but not yet officially operated; (3) trial business items that are same as the innovation experiment matters already approved under the Financial Technology Development and Innovative Experimentation Act, provided that they do not violate any prohibition under the applicable laws or regulations; (4) no application for trial business items shall be made for matters prohibited by laws or regulations; and as to those matters, an application shall be made pursuant to Article 25 of the Financial Technology Development and Innovative Experimentation Act. Electronic payment institutions, electronic stored value card issuers, trust enterprises, bills finance companies and credit cooperatives may refer to the provision of GBATB to apply for trial businesses. (Ju-Ya Lu, Esq.)
The FSC promulgated the “Guidelines for Insurance Enterprises to Apply for Operating Trial Business.” (the “Guidelines”)
For allowing the insurance enterprises to develop and provide innovative insurance products and services, encouraging innovation by the insurance industry, enhancing compatibility and customers rights, the FSC promulgated the Guidelines on August 13, 2019. According to the Guidelines, the trial businesses that insurance enterprises may apply for include the following: (1) the business items which insurance enterprises may operate under the current laws and regulations; (2) trial business items for which transaction or operation models have not been applied for by another insurance enterprise or have been applied for but not yet officially operated; (3) trial business items that are same as the innovation experiment matters already approved under the Financial Technology Development and Innovative Experimentation Act; namely, if a financial business item is permitted by FSC to enter innovative experimentation, other insurance enterprises may still apply to operate such item as a trial business provided that it is not prohibited by any applicable laws or regulations; (4) no application for trial business shall be made for items prohibited by laws or regulations; and as to those matter, application shall be made pursuant to Article 25 of the Financial Technology Development and Innovative Experimentation Act, and the trial business item shall be operated only after acquiring permission from the FSC together with other relevant authoritis for exemption from such prohibition of laws or regulations.
The Guidelines is different from the Financial Technology Development and Innovative Experimentation Act in that the latter accepts financial institutes as well as non-financial institutes to apply for trial businesses, contains no requirement that the trial business item not be prohibited under laws, regulations or orders, and provides a long trial period of 1 year, while the former is only applicable to the insurance enterprises, requires that the trial business not be prohibited under other laws or regulations, and provides a trial period of only 6 months. (Yijia Chao)
The FSC amended the “Rules Governing the Administration of Electronic Payment Institutions” (the “Rules”)
For meeting the business needs of electronic payment institutions, enhancing the completeness of services and convenience of using electronic payment, the FSC promulgated the amend Rules on July 2, 2019 (Ref. No.: Jin-Guan-Yin-Piao–Zhi No. 10802720010). The highlights of the amendment include: (1) allowing messaging service between users of electronic payment institutions; (2) permitting electronic payment institutions to issue electronic payment account stored value cards; (3) amending the items to be recorded in payment instruction and relaxing the regulation on inapplicability of payment instructions and reconfirmation; (4) allowing electronic payment institutions to offer agency service of receiving payments of substantive transactions; (5) introducing the function of electronic advance payment. (Ju-Ya Lu, Esq.)
The FSC promulgated the amended Article 6, 7 and 8 of the “Regulations Governing Concurrent Serving Restrictions and Matters for Compliance by the Responsible Persons of Electronic Stored Value Card Issuers” (the “Regulations”)
On July 11, 2019, the FSC promulgated the amended Articles 6, 7 and 8 of the Regulations (Ref. No.: Jin-Guan-Yin-Piao–Zhi No. 10802721690). The highlights of the amendment include: (1) the responsible person of an issuer may concurrently hold the post of a contracted institution; (2) where the total paid-in capital of an issuer is NT$ 2 billion or more, its chairperson and general manager shall not be the same person; provided, however, an exception may be granted by the competent authority in the event that the chairperson or the general manager is unable to perform his/her duties by reason of resignation, or that the chairperson or the general manager is replaced or dismissed by the competent authority, or that the chairperson or the general manager cannot perform his/her duties due to a substantial unforeseen circumstance. (Ju-Ya Lu, Esq.)
The Supreme Court held that the employer may, without advance notice, terminate the employment of an employee who commits a material breach of the employment agreement or work rules by disclosing the employer’s trade secrets
The Supreme Court in a recent decision (Case Ref. 107-Tai-Shang-Zhi-No.1388) held that the employer may without advance notice terminate the employment of an employee who commits a material breach of the employment agreement or work rules by disclosing the employer’s trade secrets. The basic facts of the case are as follows: During the defendant’s employment at the plaintiff company (the “Employer”), a civil copyright infringement action was filed against the Employer by a third-party company, of which the defendant’s wife was the legal representative. The defendant (i.e., Employee) obtained certain Employer’s trade secrets relevant to the copyright infringement action and handed the information to his wife for facilitating plaintiff’s prosecution of the action. The court held that such Employee’s conduct violated the Employer’s work rules and the confidentiality agreement signed between him and the Employer, and thus breached the duty of loyalty that he owed to the Employer. As such, the Employee committed “a material breach of employment agreement or work rules” set forth in Subparagraph 4 of Paragraph 1, Article 12 of the Labor Standards Act, and the Employer was therefore entitled to terminate the employment without advance notice pursuant to the law. (Max Lee)
The Ministry of Economic Affairs (“MOEA”) issued a letter interpretation on June 5, 2019 regarding exercising voting right by shareholders of a publicly traded company under Paragraph 3, Article 181 of Company Act.
The MOEA’s interpretation indicates that by virtue of the cumulative voting system set forth in Article 198 of Company Act, the number of votes that each share is entitled to cast shall be the same as the number of directors to be elected, and such votes may be cast for a single candidate or be split among several candidates. There is no express restriction on how many candidates can the votes from one share be allocated. Therefore, the principle of cumulative voiting is not violated if the votes that one share is entitled to cast are allocated to a number of candidates that is more than the number of directors to be elected. (Yijia Chao)
MOEA issued a letter interpretation on June 14, 2019 concerning the special shares issues under Subparagraph 5 of Paragraph 1, Article 157 of the Company Act
The MOEA’s letter indicates that since Subparagraph 5 of Paragraph 1, Article 157 of the Company Act refers to certain number of special shareholders being elected to be directors, the qualified directors so elected must be special shareholders. The letter further indicates that according to Paragraph 1 of Article 27 of the Company Act, the elected director is the juristic person shareholder (special shareholder), and not the natural person representative appointed by such juristice person, who is only an agent of such juristic person to perform its duties; and therefore, the juristic person director may appoint a natural person who is not a special shareholder to serve as its representative to perform the director’s duties. (Yijia Chao)
The FSC issued a letter interpretation on June 21, 2019 indicating that the Exchange Traded Note (ETN) which is authorized to issue by the FSC, traded on the securities markets, and purchased and sold in cash by investors, is the marketable securities referred to in Paragraph 1(6) of Article 146-1 of the Insurance Act, namely, securities which is approved by other competent authority for insurance enterprises to purchase Moreover, the total amount of investment by an insurance enterprise in each ETN may not exceed 10 percent of the total issued units of such securities. (Yijia Chao)
On July, 18, 2019, the FSC issued a letter interpretation (Ref. No.: Jin-Guan-Zheng-Tou–Zhi No. 1080321527), indicating that the financial institutions who are commissioned by an offshore fund to conduct private placement to qualified natural persons, juristic persons, or funds under Paragraphs 6 and 7 of Article 52 of the Regulations Governing Offshore Funds may engage in private placements of offshore funds through money trust by contracting with trust enterprises, provided: (1) that the qualified trust enterprise shall meet the requirements set forth in Article 19 of the Regulations Governing Offshore Funds; (2) the commissioned financial institution and the trust enterprise shall enter into written contract to set forth the rights and obligations of the parties; (3) the commissioned financial institution shall still bear the final responsibility for verifying the qualifications of the subscribers, and shall establish relevant risk monitoring and management measures in its internal control systems.(Linda Huang)
The FSC recently indicated that, for encouraging young people and individual investors to invest in stock market and bringing more life to the odd-lot trading market, the FSC had, in addition to maintaining the current after-market odd-lot trading system (Paragraph 1, Article 3 of Taiwan Stock Exchange Corporation Regulations Governing Odd-lot Trading of Listed Securities), asked the Taiwan Securities Exchange (“TWSE”) to promote intraday odd-lot trading. Such proposition was supported by the Taiwan Securities Association, and the TWSE obliged and targeted the second half of 2020 to launch the market. Securities companies may decide whether or not to participate in the intraday odd-lot trading. The planned intraday odd-lot trading will be conducted between 9:00 am and 1:30 pm. The way of transactions will be matching odd-lots for aggregate auction every ten minutes. The incomplete odd-lot offers will not be reserved for after-hour odd-lot trading.(Linda Huang)
Patent Linkage System Introduced By Pharmaceutical Affairs Act Came Into Effect On August 20, 2019
The Executive Yuan had announced that the Patent Linkage System, introduced into the Pharmaceutical Affairs Act last year, came into effect on August 20, 2019. Patent owners may now record their patents on the Patent Linkage Recordation Website. (Roam Huang / Trainee Lawyer)
The “Patent Linkage” of the Pharmaceutical Affairs Act
The most recently amended Pharmaceutical Affairs Act (“PAA”) was promulgated by the President on January 31, 2018, in which the data exclusivity for new indications and patent linkage system were introduced. The provisions relating to the patent linkage system in the amended PAA have taken effect since August 20, 2019. The main aspects of the newly established patent linkage system are set forth below.
1. New Drug Patent Listing
Starting August 20, 2019, the holder of a new drug permit is responsible for submitting the relevant patent information of the new drug to the Health Authority within 45 days of the receipt of the new drug permit or of the publication of patent grant, whichever comes later. Patents listed in the database should contain claims related to substances, compositions or formulations, or medical uses thereof. For a new drug permit obtained before August 20, 2019, the new drug holder may submit the relevant patent information within 3 months from the effective date of the amended PAA, i.e., by November 20, 2019.
2. Stay of Issuance of Generic Drug Permit and Grant of Market Exclusivity to the Generic Drug
Beginning August 20, 2019, an applicant for a generic drug permit should file a declaration concerning the listed patenta when applying for the drug permit, which should certify: (1) that there is no listed patent information corresponding to the new drug; (2) that the listed patents relating to the new drug have expired; (3) that the generic drug permit will be issued by the authority after the expiration of the listed patents; or (4) that the listed patents corresponding to the new drug should be invalidated or that the generic drug applying for the permit does not infringe the listed patents relating to the netw drug. The applicant of the generic drug permit who makes the declaration must notify the holder of the new drug permit, the patentee and exclusive licensee if the applicant asserts that the listed patents corresponding to the new drug should be invalidated or that the generic drug applying for the permit does not infringe the listed patents relating to the netw drug (i.e., Item (4) of the aforesaid declaration). While the authority may continue to review the application for the generic drug permit in such event, it should suspend the issuance of the permit for the generic drug for a period of 12 months unless that the patentee or exclusive licensee fails to file a patent infringement lawsuit within 45 days of receiving such notification from the applicant of the generic drug permit, that the court finds that the patent at issue is invalid or not infringed, that TIPO decides that the patent at issue should be invalid, the litigants settles, or that the patent at issue has expired. The first applicant for the generic drug permit that declares the invalidity of the listed patent(s) or non-infringement of the listed patent(s) will be granted a 12-month period for marketing exclusivity after receiving the drug permit.
3. The patent linkage provisions governing the drug approval application for generic drugs shall apply mutatis mutandis to biosimilar products
Although the PAA does not prescribe any definition or provision regarding “biosimilar drugs”, the Ministry of Health and Welfare promulgated the “Enforcement Rules for Patent Linkage” on July 1, 2019 to not only provide for the definition of “biosimilar drugs” but also indicate that the patent linkage provisions governing the drug approval application for generic drugs shall apply mutatis mutandis to biosimilar products. In addition, if a letter approving the clinical trial has been issued by the central health authority for a biosimilar drug prior to the effective date of the patent linkage provisions of the PAA, those patent linkage provisions are not applicable to said biosimilar drug.
- Tsar and Tsai is awarded as Tier 1 law firm in Trademark Contentious.
- Tsar and Tsai is selected by Benchmark Litigation Asia – Pacific Awards 2019 as “Firm of the Year – Taiwan.”
- Edgar Chen, Esq. is awarded “Lawyer of the Year – Taiwan.”
- On June 29, 2019, Matt Liu, Esq. was invited to give a speech on “Legal Strategy of Power Politics by Major Countries in the New Century: Take the America’s Legal Battle Against Toshiba of Japan and Huawei of China as an Example” at the Chunghwa Negotiation Management Society.
- Matt Liu, Esq., Eugenia Chuang, Esq. and Yichu Chen, Esq. co-authored an article introducing regulations of merger control in Taiwan. The article is published in the Merger Control 2019, published by Global Legal Insights.
- Jeanne Wang, Esq., Vincent Lin Esq., Marilyn Wu., Esq. and Henry Chang Esq. co-attended “Trade Secret Protection – Legislation, Practice, and Enforcement International Conference,” co-held by Trade Secret Protection Association and School of Law, National Chiao Tung University and sponsored by Tsar Tsai. Among all, Jean Wan, Esq. and Henry Chang Esq. served as speakers in the conference, on the topic of “Challenge and Prospect (Taiwan’s Trade Secret in Practice and Mutual Legal Assistance) ” and “Taiwan’s Current Regulation and Practice in Trade Secret – retrospect and prospect. ”
- Eugenia Chuang, Esq. and her husband Mr. Chang Chen-Hung co-authored “Regulation of Personal Information Protection in New Era: Comparison and Explanation of Europe GDPR and Personal Information Protection Act in Taiwan” has been published.
- On July 24, 2019, Janice Lin, Esq. is to attend the “International Investment Forum” held by the Taiwan Merger & Acquisitions and Privacy Equity Council at Shangri-La’s Far Eastern Plaza Hotel. Janice Lin will be a roundtable panelist of the forum, elaborating the topic of “Investment Trend and Strategic Layout of European Businesses in Taiwan”.
- On July 26, 2019, Josh Fan, Esq. was invited by Taiwan Corporate Governance Associate to serve as a lecturer on the topic of “The Duty of Director, Supervisor and Manager.”
- Josh Fan, Esq. participated in the“There Should Be Exemption for Independent Director’s in Performing Their Duties, An Explicit Condition and Maximum Limitation Should Be Placed in Civil Liabilities,” seminar held by Taiwan Corporate Governance Associate on July 4.
- Tsar and Tsai held a lunch meeting in the firm’s office on July 24, and invvited Vincent Shih, assistant general counsel, Microsoft and general manager of CELA at Microsoft Taiwan to give a speech. Jennifer Lin Esq. gave the opening speech and served as a host.
- On July 10, Hector Chin, Esq. attended the“Battle of Shareholder Meeting and Management Power in Practice”seminar held by Angel Publishing in Taipei.
- On July 25, Roy Su, Esq. attended the“ Fair Trade Commission’s Guideline for Relevant Market Definitions”sesseion held by Fair Trade Commission in Taipei.
- On July 23, Lucy Chuang and Roam Huang attended the“2019 Seminar on IPR Practice,” held by Taiwan Intellectual Property Office in Taipei.
- From August 4 to 10, Li-Chen Wang attended the“2019 Lex Mundi Institute Cross-Boarder Transactions Program” held by Lex Mundi in Monterey, California.
- From August 5 to 11, Scarlett Tang, Esq. attended the“2019 Lex Mundi Institute Programs Cross-Border Dispute Resolution Program”
- On July 31, Yijia Chao attended the“2019 Gender Equality in the Workplace and Sexual Harrasment Prevention,”seminar held by Department of Labor, Taipei City Government.
- On August 6, Linda Huang attended the“Legal Liability and Risk Management of AI－In-Service Training,”courses held by Taipei Bar Association.
- Tsar&Tsai Foundation sponsored Fu Jen Catholic University to hold the Forth Biennial Conference of World Tort Law Society from November 14 to 16, the topic of “Protection of Personality Right in Information Age.”
- Sylvia Hong attended the 2019 Conference of Practical Exchanges on Business IP Management held by the Taiwan Patent Attorneys Association in Taipei on August 23, 2019