Newsletter
Income Tax on Market Price of Stocks Given as Employee Bonus
With respect to the tax treatment of stocks given as employee bonus after the Statute for Upgrading Industries was abolished on December 31, 2009, the Ministry of Finance issued a ruling on November 5, 2009 (Tai-Cai-Shui-Zi-No. 09804109680) which stipulates that starting from January 1, 2010, tax should be withheld by the company according to Article 88 of the Income Tax Act on the date on which stocks are given as employee bonus. If such stocks are given via book-entry, income tax should be withheld on the day designated by the company or its stock agent as the date of book-entry; if not, it should be withheld on the first day of the period designated by the company or its stock agent for collection of stocks.
On March 12, 2010, the Ministry of Finance issued a ruling (Tai-Cai-Shui-Zi-No. 09900025480) to clarify the income tax withholding process. This ruling states that the stocks received by an employee should be included as part of his/her salary and should be calculated based on the market price of the stocks on the delivery date, and income tax should be withheld accordingly. By referring to Article 17 of the Enforcement Rules of Income Basic Tax Act, market price of stocks should be determined as follows: (1) The market price of listed stocks or over-the-counter traded stocks should be the closing price on the delivery date; if no trade price is available on the delivery date, it should be the closing price of the first day on which trade price is available after the delivery date; (2) The market price of stocks listed on the emerging stock market should be the compound average price on the delivery date; if no trade price is available on the delivery date, it should be the compound average price of the first day on which trade price is available after the delivery date; and (3) The market price of stocks not listed, not traded over-the-counter and not listed on the emerging stock market should be the net value per share as stated in the most recent CPA-audited financial statements of the year preceding the delivery date. If such financial statements are not available, the market price should be the net value per share calculated based on the net value of the company's assets on the delivery date.