Newsletter
RESERVES FOR LOSSES ON OFFSHORE INVESTMENTS
On 10 February 2006, the Ministry of Economic Affairs announced amendments to the Regula-tions Governing Guidance and Review for Outward Investments and Technical Cooperation, and renamed the same as the Regulations Gov-erning Appropriation of Reserves for Losses on Outward Investments. The main points are as follows:
If a company intends to set aside a reserve to cover losses on an outward investment, as provided for by Article 12 of the Industrial Upgrading Act, the outward investment must have been approved by, or reported to, the MOEA (Article 3).
A two-track system of prior review or post-hoc reporting applies to companies'' outward investments (Article 7).
The documentation required for review or recordation of an outward investment is de-fined (Article 8).
The extent of the reserve that may be set aside, and the conditions that apply, are defined (Articles 9–11).
Under the new regulation, if a company intends to set aside a reserve to cover losses from an offshore investment, the investment must first be licensed by the MOEA, and must comply with the conditions set out in the Regulations, before the company can enjoy the tax incentives under Article 12 of the Industrial Upgrading Act. However, general outward investments for which individuals or companies do not need to set aside a reserve against losses need only be reported to the Investment Commission of the MOEA, in accordance with the Main Points for Handling Filings on Overseas Investments, is-sued by the Investment Commission on 10 Feb-ruary 2006.
The New Regulations also took effect on 10 February 2006.