Newsletter
THE TIMING LIMIT FOR FILING CERTAIN CHANGES RELEVANT TO TAX DEFERMENT UNDER STATUTE FOR UPGRADING INDUSTRIES
The Ministry of Finance in April 1999 announced an interpretation affecting companies which seek for deferment of income tax imposed on dividends received by their shareholders pursuant to provisions of the Statute for Upgrading Industries (SUI). Articles 16 and 17 of the SUI allow shareholders to defer the inclusion of stock dividends issued by companies from the capitalization of retained earnings and employee bonuses for purchase of machinery and equipment or investment in an important enterprise as specified in Article 8 of the SUI in their taxable income. The interpretation stated that stockholders may still be entitled to tax deferments if the company decides to invest in an important enterprise rather than purchase machinery and equipment as originally planned. In such cases, the original application must have been filed within the time limit stipulated in the Enforcement Rules of the SUI, i.e. within six months following the approval of the increase in capitalization by the competent authority in charge. A supplementary application regarding the investment change must be filed within six months after the due date of the original application. The tax deferment will then be allowed if the investment is completed within the time limit for filing the supplementary application and if the necessary documents have been filed with the relevant tax collection authority in charge.