Newsletter
FURTHER REDUCTION OF PENALTIES FOR UNAPPROVED PRC INVESTMENTS AND ENCOURAGEMENT OF INBOUND INVESTMENTS
According to the Act Governing Relations Between Peoples of the Taiwan Area and the Mainland Area, any investment made by an ROC citizen or company in mainland China without the prior approval of the Investment Commission ("IC") carries an administrative fine of NT$50,000 to NT$25,000,000.
Given the wide latitude in sanctioning ROC investors who failed to secure government approval, the Ministry of Economic Affairs ("MOEA") promulgated the Guidelines for the Imposition of Administrative Penalties for Unapproved PRC Investments (the "Guidelines") in 2004. The MOEA amended the Guidelines three times due to its more liberal PRC investment policies before 2008. The fourth amendment was promulgated on 2 February 2009 (the "4th Amendment") and two clauses were amended:
Article 3
Article 3 set forth a cumulative penalty scheme for unapproved PRC investments, which was significantly relaxed in the 4th Amendment: the threshold that triggers each tier of administrative fine was raised, and the percentage for calculating the penalty amount was decreased. The amended penalty scheme in Article 3 is summarized as follows:
|
Tier |
PRC Investment Amount/Value
of Cooperation |
Penalty for Each Tier
|
|
1 |
For any amount below NT$100,000,000 |
NT$50,000 |
|
2 |
For the amount between NT$100,000,001 and NT$500,000,000 |
0.1% of PRC Investment Amount/Value of Cooperation |
|
3 |
For the amount between NT$500,000,001 and NT$1,500,000,000 |
0.5% of PRC Investment Amount/Value of Cooperation |
|
4 |
For the amount exceeding NT$1,500,000,001 |
1% of PRC Investment Amount/Value of Cooperation |
Article 11
Article 11 was added to the Guidelines during the third amendment to create a leniency program for those who voluntarily report their unapproved PRC investments made on or before 10 March 2008.
In the 4th Amendment, a more favorable treatment is added to this
Article to encourage inbound investments in