Capital Gains from Offshore Securities Transaction Are Subject to the Profit-seeking Enterprise Income Tax


National Taxation Bureau of Taipei (hereinafter referred to as the NTBT), Ministry of Finance (hereinafter referred to as MOF) expressed that Article 4-1 of Income Tax Act is not applicable to capital gains from securities transaction whose securities are issued by foreign governments or companies (hereinafter referred to as offshore securities).  Hence, capital gains from offshore securities transaction are taxable and shall be filed while filing profit-seeking enterprise income tax return.
The NTBT stated that there was an enterprise (hereinafter referred to as Company A) found false statement and got fined and paid extra tax because it failed to file capital gain from offshore securities transaction.  Actually, Company A sold European Growth Fund B (hereinafter referred to as Fund B) which was marketed by financial institutions on behalf of foreign mutual fund company and earned capital gain around NT$22 million in 2017.  Owing to misunderstanding of Article 4-1 of Income Tax Act, Company A failed to file the said capital gain.  Based on prospectus of Fund B, it is marketed by its Taiwanese agent, security firm C, and is registered in Luxembourg.  Accordingly, Fund B is deemed as offshore mutual fund, kind of offshore securities.  In accordance with Decree No.821506281 issued by the MOF on January 12th, 1994, Article 4-1 of Income Tax Act is not applicable to capital gains from offshore securities transaction.  Therefore, capital gain from transaction of Fund B in 2017 for Company A is subject to profit-seeking enterprise income tax.
The NTBT emphasized that capital gains from offshore securities, including securities and futures, transaction are under scope of profit-seeking enterprise income tax and the said capital gains shall be filed in accordance with Paragraph 2 of Article 3 of Income Tax Act.  Plus, Article 4-1 of Income Tax Act is not applicable to the said capital gains.  To avoid extra tax payment and penalty, profit-seeking enterprises with capital gains from offshore securities transaction shall file the said capital gains.
(Contact: Ms. Chen, Revenue Assessor of First Legal Affairs Division; (02) 2311-3711 Ext. 1814)

Reference URL:https://www.mof.gov.tw/Eng/Detail/Index?nodeid=319&pid=86336