Taiwan Approves Corporate Bond Transaction Tax Exemption

by Mary Swire, Tax-News.com, Hong Kong

13 January 2010

To revitalize Taiwan’s bond market, help companies raise funds and stimulate the development of its capital market, the Council for Economic Planning and Development has confirmed that an exemption from securities transactions tax has been agreed for corporate bonds.

Under the provisions of the country’s Securities Transaction Tax Act, when an investor sells corporate bonds or other securities a transaction tax of 0.1% of the value must be paid on each transaction.

When Taiwanese enterprises encountered a peak of corporate bond payments in 2002, they had trouble raising funds and the Ministry of Finance (MOF) lowered their cost of funding by exempting corporate bond transactions from the securities transaction tax for a certain period of time.

The difficulties in capital markets since 2008 have reproduced the fear that it would become difficult for Taiwanese companies to issue corporate bonds, and thus corporate finances and operations would be affected. Since the securities transaction tax on corporate bonds does not account for a large proportion of the country’s tax revenues, it was therefore decided to stop collection of the tax.

Following the passing of the policy through parliament, the MOF has therefore formulated measures for a seven-year halt to the collection of the securities transaction tax on corporate bonds, from January 1, 2010, through to the end of 2016.

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