TAIPEI: The tax rate on stock dividend income made by foreign institutional investors is scheduled to rise to 21 percent on Jan. 1 as part of the government’s efforts to overhaul the tax system.
While a tax reform bill is still pending in the Legislative Yuan, the Ministry of Finance (MOF) said it has the authority under the existing tax law to issue an administrative order raising the tax rate on stock dividend gains posted by foreign institutional investors from 20 percent to 21 percent. A move to raise the tax rate for foreign institutional investors’ stock dividend income will narrow the tax payment differences between local investors and their foreign counterparts.
The higher tax burden shouldered by local investors over foreign institutional investors has long been criticized in the local equity market, with many market analysts saying that’s why foreign institutional investors have dominated equity trading in Taiwan, with many local major players less interested in the trading floor because of the higher tax rate they pay. To revise the current tax code with the goal of making the country’s tax system fairer, the MOF proposed eliminating the imputation tax system and sent a tax overhaul bill to the Legislative Yuan. Ratified in 1998, the imputation tax system awards local investors who receive dividends from a company with tax credits for taxes paid by the company.
