Changes in Law and Regulations
The Judicial Yuan passed the proposed amendment of The Code of Criminal Procedure ─ The amendment provides that those defendants who are not represented by counsel shall be permitted to access the relevant case files to a certain extent. In addition, in order to prevent defendants from evading criminal punishment, the court may order that the defendants be monitored with proper surveillance technology, be confined at the defendant’s residence or certain area, be required to hand over their passports, or be prohibited to dispose of their specific properties; and that the defendants be compelled to appear in court when the judgement is announced. Additionally, when the higher court determines that the petition to vacate the lower court’s ruling on bail setting, custody, confinement, or detention is justifiable, the higher court shall vacate the original ruling and make a new ruling itself, and not remain the case to the lower court.
Ministry of Finance (“MOF”) promulgated the “Principle for Tax Collection Authorities to Terminate and Recover Tax Incentives According to Article 48 of the Tax Collection Act” (effective December 1, 2017) – Paragraph 2 of Article 48 of the Tax Collection Act provides that, in the event a taxpayer is found to have committed material violation of environmental protection, labor, food safety or sanitation laws, the central competent authority of the tax incentive laws shall notice the MOF to terminate the tax incentive and recover the benefits to which the taxpayer was originally entitled for the year(s) in which the violation occurred. For purpose of suppressing violation of law and enhancing corporate social responsibility, the MOF promulgated the “Principle for Tax Collection Authorities to Terminate and Recover Tax Incentives According to Article 48 of the Tax Collection Act” on December 1, 2017. According to the Principles, even if the MOF has not yet received the notice from the central competent atrocity of the tax incentive law, the tax bureau where the head office of the taxpayer is located should take the initiative to inform the competent authorities and add the taxpayer onto the special monitoring list, so that the MOF can promptly handle the subsequent termination and recovery of tax incentives to meet the social expectations.
The Financial Supervisory Commission (“FSC”) amended the Regulations of Governing Securities Firms on December 5, 2017 — For enhancing the compatibility of securities firm internationally, the FSC amended the Regulations of Governing Securities Firms to increase the total external debt limit of securities firm from no more than 4 times of its net worth to 6 times thereof; and amended the regulations that the securities firm may capitalize half of the special reserve when the reserve reaches 50 percent of the amount of paid-in capital to that the securities firm may capitalize the portion of the special reserve that exceeds 25% of the paid-in capital when the special reserve reaches 25 percent of the paid-in capital, so as to allow securities firm to expand the use of the special reserve.
The Amended Articles 33 and 61 of the Cable Radio and Television Act. — Article 33 IV of the newly amended Cable Radio and Television Act provides that the system operator shall provide, free of charge, specific channels for broadcasting the programs of congressional proceeding that the central regulatory agency designates broadcast based on Article 5 of the Organic Law of the Legislative Yuan. In addition, the system operator shall not alter the forms, contents, and channel positions of these programs and shall include the channels as a basic channel. A system operator who violates this provision shall be fined an amount no less than NT$200,000 but no more than NT$4,000,000, and be compelled to make correction on a prescribed deadline. If no correction is made by the deadline, the consecutive fine may be imposed based on the number of violations.
The FSC amended the Regulations Governing Implementation of Internal Control and Auditing System of Insurance Enterprises — For purpose of strengthening the function of the board of directors of insurance enterprise, the FSC promulgated an amendment to the Regulations Governing Implementation of Internal Control and Auditing System of Insurance Enterprises on October 19, 2017. The amended regulations require that, when the board finds that a material loss may be possible, it shall deal with the situation properly and shall cause the relevant report be submitted to the competent authority. The monitoring systems established by insurance enterprise shall include the mechanism for handling material incidents and the compliance with the laws and regulations pertaining to anti-money laundering and counter terrorism financing. After an overseas branch of insurance enterprise is inspected by, or receives inspection report from, the local authority, the internal auditing unit of the insurance enterprise’s headquarter shall timely report to the board of directors and supervisors or to the audit committee thereof depending upon the materiality of the situation. Furthermore, The amended regulations also require that when an overseas branch of insurance enterprise establishes a self-evaluation and monitoring mechanism for the risk of the laws and regulations compliance, it shall engage outside independent local consultants to verify the effectiveness of such self-evaluation and monitoring mechanism for legal compliance over large size, high complexity and high risk businesses. The internal control auditing performed by the accountants engaged by insurance enterprise shall include the auditing of compliance with respect to the implementation of above monitoring mechanism, e.g., anti-money laundering system and its overseas branches.
The FSC promulgated the Regulations Governing the Securities Businesses of Offshore Banking Unit (“RGSBOBU”) on November 27, 2017, effective immediately — Said Regulations require that offshore banking unit (“OBU”) obtain permits for also engaging in the foreign currency securities business prescribed in the Offshore Banking Act, and that the securities involved in such business neither denominate in Taiwan Dollars (“TWD”), nor link to TWD exchange rates or interest rate indicator or to commodities denominated in TWD. Unless an OBU who has been engaging in foreign currency securities business before the promulgation of said Regulations has already obtained permits for also engaging in foreign currency securities business pursuant to the Securities Exchange Act, it must file a supplemental application with the FSC within 6 months of the promulgation of said Regulations. As for those non-complied foreign currency securities transactions made before the promulgation of said Regulations, the Regulations allow them to continue under the original terms until their respective due date.
The glasses used exclusively for the solar photovoltaic modules may be exempt from commodity tax within 5 years from November 24, 2017 on the condition of non-transfer and no change of the purpose of use — The amended Article of 9-1 of the Commodity Tax Act provides that the glasses used exclusively for the solar photovoltaic modules may be exempt from commodity tax within 5 years from the November 24, 2017 on the condition that the importer submits a declaration that the glasses will not be transferred to another party and that the purpose of use will not be changed, together with proof issued by the competent authority as to the purpose of use.
Opinions and Views in Practice / Legal News
The Ministry of Economic Affairs (“MOEA”) indicated that in the event that the effective date of resignation of director or supervisor is subject to a period of time or condition, company may elect succeeding director or supervisor to fill the vacancy before such resignation to be effective — According to a letter issued by the MOEA in 2003, a company is not allowed to elect succeeding director or supervisor until the actual vacancy occurs. The MOEA issued a supplemental interpretation in this regard on October 24, 2017, indicating that while the company may elect succeeding director or supervisor to fill the expected vacancy when a director or supervisor has tendered resignation but such resignation is to become effective on a certain date or upon the occurrence of a certain condition, such election of succeeding director or supervisor is nonetheless subject to a condition subsequent. The company cannot file an application for amended registration with the MOEA to record the changes of director or supervisor until such resignation becomes actually effective.
The FSC amended the private placement regulations under Securities Investment Trust and Consulting Act ( the “SITCA”) — According to Item 2, Paragraph 1 of Article 11 of the SITCA, a securities investment trust enterprise may carry out a private placement of beneficial interest certificates to qualified natural persons, juristic persons or funds. By a letter dated October 19, 2017, the FSC amended the qualifications of the subscribers of the private placement as follows: (1) In the case of natural person subscribers: the minimum requirement of NT$15 million asset that a natural person put in the private placement institution or delegated institution may include the amount of deposits and other investments, and no longer limited to discretionary or fund investments. (2) In the case of trust enterprise subscribers: the original requirement that the value of the trust asset contracted pursuant to the Trust Enterprise Act shall exceed NT$ 50 million was amended to that the settlor of the trust asset must meet the qualification requirements for natural person subscribers, legal juristic person subscribers or fund subscribers set forth in the amended regulations, as the case may be, and (3) the private placement institutions or delegated institutions shall include in their “know your customer” procedure the evaluation method of the subscriber’s knowledge over the financial products and trading experience, and shall submit the same to the board of directors for approval. Said amended regulations became effective on January 2, 2018.
Introduction on the amendment bill to Labor Standard Act issued by Executive Yuan
In the proposed amendment of the Labor Standards Act (“LSA”) introduced in December 2016, the “one mandatory day off and one flexible rest day”, the calculation of overtime working payment, and hours in rest days, interval rest hours during the switch of shift works and annual leaves were all changed in the proposed amendment only one year after the enactment of the LSA by virtue of the various public opinions to the current laws. Having considered the actual need of the society, the Executive Yuan proposed its own amendment bill to the LSA and sent it to the Legislative Yuan for review. The key aspects of the amendments are:
1. Adjustment of the mandatory day off. Under the current law, employees are entitled to two days off for every seven days, to wit: one “mandatory day off” and one “flexible rest day”. On the mandatory day off an employer may request an employee to work only in the event of a natural disaster, accident or emergency. As a result, except for those work in the businesses where the 4-week flexible working hours is applicable, workers in principle should have at least one day off for every 7 days. According to the Executive Yuan’s proposed amendment, however, employer and employee may agree to adjust the mandatory day off to be on any day within a seven day cycle, provided that the qualifying business sectors be designated by the Ministry of Labor and be approved by the relevant competent authority and the labor union (or the Labor-Management Meeting if there is no labor union), meaning that the employee’s date off could end up on the first and the last day of a 14-day period, resulting in the employee to work 12 days consecutively without a day off.
2. Calculation of overtime working hours in rest days. According to the current LSA, if the employee works on the flexible rest day, the employee is entitled to receive overtime pay for 4 hours even though the total actual working hours on that rest day is less than 4 hours. If the total hours worked exceeds 4 hours but is less than 8 hours, the employee is entitled to receive overtime pay for 8 hours. If the total hours worked exceeds 8 hours and is less than 12 hours, the employee is entitled to receive overtime pay for 12 hours. The Executive Yuan’s proposed amendment removes the rounding-up calculation method. Thus the overtime pay will be paid based on the actual working hours in the proposed amendment.
3. Total overtime working hours per month. While the maximum overtime working hours allowed per month remains at 46 hours in the proposed amendment, the proposed amendment allows the employer to adjust the maximum overtime working hours to 54 hours in one month within a three month cycle, provided that the consent of the labor union is obtained (or the Labor-Management Meeting if there is no labor union), and that the total overtime working hours within such month period does not exceed 138 hours (i.e. the original maximum overtime working hours for 3 months, calculated by 46 times 3). In addition, the proposed amendment provides that an employer having more than 30 employees shall notify the local competent authority for reference in the event the employer adjusts the overtime working hours as described above.
4. The rest hours during the rotation of shift The current Act provides that workers on shifts shall be granted a rest period of at least 11 hours continually when the shifts are rotated (please note that this rule has not come into force). While the same rule is adopted by the proposed amendment, the proposed amendment allows the employer to adjust a rest period to at least 8 hours continually after obtaining the consent of the labor union (or the Labor-Management Meeting if there is no labor union). The proposed amendment provides that the employer hiring more than 30 employees shall notify the local competent authority in the event that the employer adjusts the rest period as described above.
5. Deferral of annual paid leave Under the current LSA, wages must be paid in lieu of annual paid leaves which are unused during the year or due to termination of employment. The proposed amendment allows the employee’s unused annual leaves be deferred to the following year upon agreement by the employee and employer, provided, however, that the employer shall pay the employee for any unused and deferred annual leaves if such deferred leaves are still not used at the end of the following year.
The Executive Yuan indicated that the proposed amendment protects the labor’s rights and enables the employer to have a more flexibility in management at the same time. On the other hand, the labor groups argue that such proposed amendment is controversial since it heavily damages the labor’s fundamental rights.