REGISTRATION OF CAPITAL REDUCTION BY A TAXPAYER WITH OUTSANDING TAX LIABILITIES ALLOWED UNDER CERTAIN CIRCUMSTANCES

05/01/2009

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The tax-collection authorities have the discretion to bar a corporate taxpayer with outstanding tax liabilities from registering any reduction of its capital or cancelation of its shares. (Paragraph 1, Article 24 of the Tax Collection Act)

On 16 January 2009, the Ministry of Finance issued a ruling stating that the above provision does not apply to a case where the taxpayer's buy-back of its shares and reduction of its capital is for any of the following purposes, as prescribed under Paragraphs 1 and 4, Article 28-2 of the Securities and Exchange Act:

• Where the buy-back of shares is for its employees' subscription;
• Where the buy-back of shares is for converting corporate bonds or preferred shares with warrants, convertible corporate bonds or preferred shares, or share subscription warrants; or 
• Where the buy-back of shares is to maintain its credibility or shareholders' equity, provided that the shares so bought are cancelled.