The Ministry of Finance yesterday submitted its draft bill on a securities and futures tax to the Cabinet for review.
The proposal to impose a capital gains tax on securities and futures investments would see the new tax levied in May 2014, based on investors’ securities income in the previous year.
Based on the draft bill, the ministry plans to implement a separate tax rate of 20 percent on individual investors who earn a net NT$3 million (US$101,500) or more on stock, futures and options investments, as well as beneficiary certificates of private equity funds.
The amount to be taxed could be offset against investors’ losses, the securities transaction tax and transaction fees paid, with investors’ losses that are not offset during the declared year to be used to offset earnings in the following three years, the ministry said in a statement.
Basically, individual investors have to calculate their securities and futures income using a “first in, first out” method, which would be more convenient, the ministry said.
For the method to identify costs, the ministry picked Dec. 31 of this year as the basis for stock prices to help investors determine gains or losses, while investors must be able to provide proof at what price they bought the securities.
Individual investors would also have to declare their securities and futures income at the same time as they declare consolidated income in May, the ministry said, adding that the draft bill would impact only 1 percent of the nation's overall individual investors.
For domestic enterprises or institutional investors, the ministry’s draft bill keeps the structure of the current alternative minimum tax, but lowers the tax deduction threshold to NT$500,000 from the current NT$2 million.
It would also raise the tax rate to 12 percent from 10 percent, and increase the statutory tax rate up to 12 percent and 15 percent, from 10 percent and 12 percent. Foreign institutional investors will be exempt from the capital gains tax.
For both individual and institutional investors that hold stock investments for more than five years, the ministry said that half their income could be deducted to encourage long-term investments.
“We believe the draft will help stabilize tax revenues, save tax-collecting costs, minimize the impact on the market, as well as maintain the nation’s competitiveness,” Minister of Finance Christina Liu (劉憶如) told a press conference.
However, Liu did not specify how much tax revenue would be collected under the draft bill, which still needs to be approved by the legislature.