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RULES ON CALCULATION OF SECURITIES INVESTMENT IN-COME FOR AMT
The income generated by Taiwan residents from securities investments was exempt from income tax since 1 January 1990. However, with the introduction of the alternative minimum tax (AMT) in year 2006, any income generated by Taiwan residents from securities investments in any company not listed on the Taiwan Stock Exchange or traded Over-the-Counter ("OTC") or the market for emerging companies, as well as private placement of beneficiary certificates of investment trust funds, must be included in cal-culating each individual's basic income for as-sessing his/her AMT liability.
The Ministry of Finance issued on 5 June 2006 the Rules on Calculation of Individual Securities Investment Income for Assessment of Alterna-tive Minimum Tax, which apply to income gen-erated from 1 January 2006 onwards.
The formula for calculating an individual's se-curities investment income is summarized be-low:
Provided that evidentiary documents stating the actual sale price and the original purchase cost of the subject securities are submitted, the balance after deducting the purchase cost and justifiable expense from the actual sale price should be stated as the amount of income generated from the securities investment. The original purchase cost should be calculated in either the specific identifying method or the weighted average method, while justifiable expense refers to securities transaction tax and charges. Securities investment loss verified and recognized by the tax collection authori-ties can be offset against any securities in-vestment income generated within three years following the year in which such loss was incurred.
If a Taiwan resident submits the evidentiary document stating the actual securities sale price but fails to submit any document to prove the original securities purchase cost, his/her securities investment income would be calculated as 20% of the actual securities sale price.
If a Taiwan resident fails to declare securities investment income or fails to submit eviden-tiary document stating the actual securities sale price, his/her securities investment in-come would be calculated based on the com-pany's net asset value on the settlement date of the subject securities investment, and at 75% of the total amount of his/her securities in-vestment income. In the event of income generated from beneficiary certificates, the income should be calculated based on the trust fund'`s net asset value on the transfer date, or at the contractually agreed redemption price, and at 75% of his/her income from beneficiary certificates.