Cabinet approves amendments to business taxes

The Cabinet yesterday approved an amendment that will prohibit financially troubled businesses from raising capital by selling bonds, bills or notes and using the interest payments as a tax deductible.

If approved by the legislature, the amendment would help reduce tax evasion and promote equitable taxation, the Ministry of Finance said in a statement.

The amendment proposes that starting next year, companies that have an excessively high debt in proportion to their equity would be barred from using their interest expense as a tax deductible.

The debt-to-equity ratio was not stipulated in the amendment, but the Ministry of Finance said the internationally accepted ratio is 3:1, or a debt level that is twice its equity.

Businesses in the financial sector — banks, credit cooperatives, financial holding companies, bills financial firms, insurance companies and brokerage dealers — will be exempt from the regulations.

The Cabinet also approved an amendment that will allow shipping companies to use tonnage tax as an alternative to business income tax.

The amendment, subject to approval by the legislature, would allow shipping firms to choose to have their income taxed similar to companies in other sectors or to use tonnage as the basis for calculating annual taxable income.

Both methods will be subject to the business income tax rate, which will be reduced to 20 percent from the current 25 percent next year.

The amendment stipulates that daily notional income derived from tonnage calculation will be as follows: NT$57 per 100 net tonnes for vessels that weigh less than 1,000 tonnes; NT$42 per 100 net tonnes for vessels that weigh between 1,000 tonnes and 10,000 tonnes; NT$27 per 100 net tonnes for vessels weighing between 10,000 tonnes and 25.000 tonnes; and NT$12 per 100 net tonnes for vessels that weigh more than 25,000 tonnes.

An anonymous official said introducing tonnage tax would help shipping companies, including Evergreen Marine Corp (長榮海運), Yang Ming Marine Transport Corp (陽明海運),Wan Hai Lines Ltd (萬海航運) and U-Ming Marine Transport Corp (裕民航運), save tens of thousands of NT dollars.