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Taiwan Cuts Transaction Tax For Risk-Hedging Warrants

by Mary Swire,, Hong Kong

12 November 2012

Following a meeting with the Financial Supervisory Commission (FSC), Taiwan’s Ministry of Finance (MOF) has agreed that the securities transaction tax on risk-hedging warrants will be reduced from 0.3% to 0.1%.

The FSC has calculated that, despite the reduced tax rate, the MOF’s tax take will rise due to a substantial increase in warrant volumes. In fact, it has been suggested that warrant trading volumes will increase sufficiently for the government to collect an extra TWD500m (USD17.2m) in securities transaction tax, and that significant income tax revenue could also be generated on the additional earnings from the increased jobs and profits in broking firms.

It has been decided that the tax cut will be in effect for a period of three years, when it will be subject to review. A decision to renew the lower rate would then depend on the volume of business it had created.

The risk to the MOF is that, if warrant trading volume remains the same and the tax cut does not bring forward increased trading volume, the government will lose TWD890m of tax revenues annually over the next three years.

While it has not yet been decided when the reduction in the securities transactions tax on warrants will be introduced, and while a similar cut in the futures transaction tax has also been proposed to increase trading volumes, the MOF has recently taken the opportunity to confirm that the new capital gains tax on share trading, which is, instead, expected to decrease stock exchange volumes, will become effective, as planned, on January 1, 2013.

A comprehensive report in our Intelligence Report series giving a country-by-country analysis of offshore investment funds, stock exchanges and trusts, with an analysis of the US QI regime, is available in the Lowtax Library at and a description of the report can be seen at
TAGS: Finance | tax | investment | business | capital markets | equity investment | tobin tax | Taiwan | ministry of finance | stock exchanges | tax rates

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