The Ministry of Finance has decided that companies holding at least a 20 percent stake in overseas subsidiaries will be taxed on their overseas investment income regardless of whether they distribute the income or repatriate the cash to Taiwan.
According to local media, the ministry made the decision to stop companies from setting up "paper companies" in tax havens or keeping their gains offshore. Likely targets of the new measure are Taiwanese companies with subsidiaries registered in places like the Cayman Islands, but operating in China.
Investment in Carribean tax havens accounts for 19.1 percent of Taiwanese foreign investment, which is second only to investment in China, which totals 39.9 percent of all overseas investment.
Taiwanese investors have poured over US$40 billion into China, but officials in Beijing claim that figure to be far higher if undeclared investments were to be counted. Currently, companies that do not distribute the income among shareholders or hold less than 50 percent in overseas subsidiaries are not taxed on such income.
Under the new policy, only public firms would be affected.
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