In response to the COVID-19 pandemic, the Taiwan government has loosened certain compliance requirements for companies. For example, Article 170 of the Company Act stipulates that a shareholders meeting should be held at least once a year and should be convened within six months following the end of a company’s fiscal year, unless otherwise approved by the competent authorities for legitimate grounds. Therefore, unless otherwise approved by the competent authorities, a company should convene a shareholders meeting prior to June 30, 2020. Given the COVID-19 pandemic, the competent authority made an announcement in April that the COVID-19 pandemic can be cited as a legitimate reason for postponing a shareholders meeting, in order to prevent possible spread of infection at the meeting. Moreover, for companies that adopted electronic voting, the competent authority also encourages shareholders to exercise their voting power through online platform in order to avoid the risk of infection.
In addition, any foreign investment in Taiwan requires the approval of the Investment Commission (IC). Investors who are natural persons with residency in Taiwan or investors that are juridical persons with a registered branch in Taiwan are not required to appoint an agent for submitting investment applications. With respect to other investors, they should appoint an agent and submit an original legalized Power of Attorney (POA) to the IC. Given the COVID-19 pandemic, the IC allows investors to submit a scanned copy of the POA first with the original to follow thereafter if the legalization process or delivery service is affected by the pandemic.
Tax Relief in Response to COVID-19
Deferral of tax payments or installments
On March 25, 2020, the Ministry of Finance (MOF) announced a special guideline whereby taxpayers (including individuals and enterprises) having financial difficulties due to COVID-19 may defer their tax payments (including individual income tax, house and land transactions income tax, corporate income tax, and so on) for up to one year, or pay their taxes in installments over a period of up to three years, if the requirements are met. The special guidelines apply to tax payments due within the period from January 15, 2020 to June 30, 2021.
VAT Refund
Generally speaking, when input VAT exceeds output VAT, input VAT credits would not be refunded and would be applied to set off any future business tax liabilities (see section 8.5.1 of the Taiwan VAT Act). However, on May 13, 2020, the MOF announced special guidelines allowing the taxpayers to apply for a refund of excess input VAT if the requirements are met. The applicable period for such special guidelines is from January 15, 2020 to June 30, 2021.
Provisional Corporate Income Tax
Generally speaking, a company has to pay provisional corporate Income tax in the ninth month each fiscal year. The provisional tax is equivalent to one-half of the tax payable as shown in the previous year’s corporate income tax return (it could also be assessed based on the company’s taxable income of the first half of the current fiscal year if certain requirements are met). In this regard, on July 31, 2020, the MOF issued a ruling stipulating that a company may apply for provisional corporate income tax exemption if it meets certain requirements. The applicable period for this ruling is also from January 15, 2020 to June 30, 2021.
Employment Matters
Wages, compensation and leave for those under quarantine
To mitigate the impact of COVID-19 on the Taiwan economy, the Act Governing the Prevention, Bailout and Revitalization Packages in Response to COVID-19 Outbreak (the “Bailout Act”) was enacted on February 25, 2020 and amend on April 21, 2020. Except for the penalty provisions which took effect on February 25, 2020, the Bailout Act took effect retrospectively on January 15, 2020 and will expire on June 30, 2021. We summarize the key provisions on employment under the Bailout Act as follows.
- Employers should grant “epidemic-prevention leave” to employees who are subject to quarantine at home or in designated facilities as well as those who need to care for their quarantined family members who are unable to take care of themselves; such employees shall not be deemed absent from work or be forced to take their personal leave or other types of leave; instead, they remain eligible for full attendance award and should not be subject to termination or other disadvantageous treatment for taking epidemic-prevention leave. Employers that violate those rules will be subject to a fine ranging from NT$50,000 to NT$1 million.
- While employers are not required to provide full pay to employees on epidemic-prevention leave, those employers that provide full-pay epidemic-prevention leave to their employees will enjoy an income tax deduction equivalent to 200% of the salary paid to those employees on epidemic-prevention leave. On the other hand, employees who receive no pay or subsidy during epidemic-prevention leave (either for being quarantined or having to care for a quarantined family member who is unable to take care of himself/herself) may apply for “epidemic-prevention compensation” with the government; provided that the applicants are in full compliance with the quarantine rules.
Reduction of employees’ work hours in response to COVID-19
According to the ruling issued by the Ministry of Labor (MOL) on February 10, 2020, an employer which is affected by the outbreak of COVID-19 and having difficulties in operating its business may reduce work hours through negotiation with its employees under the Guidelines on Negotiation between Employers and Employees on Reducing Work Hours in Response to Economic Impact (“Guidelines”). We summarize the key provisions under the Guidelines as follows:
- An employer should negotiate with its employees first and obtain the employees’ written consent to a reduction of work hours and salaries.
- Before reducing its employees’ work hours, an employer that intends to reduce work hours through negotiation with its employees should first consider reducing the benefits and bonus of the responsible persons, directors, supervisors, general managers and/or other high-level managers.
- An employer may not reduce its employees’ work hours for more than three months, unless an additional consent is obtained from the employees.
- For full-time employees who are on a monthly salary, their salary must not be lower than the minimum wage required by the MOL (i.e., NT$23,800 per month before January 1, 2021).
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