ALTERNATIVE MINIMUM TAX TREATMENT OF FINIS

11/01/2006

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The Ministry of Finance (MOF) issued an inter-pretation on 17 August 2006 to address the un-certainties with the alternative minimum tax (AMT) liabilities to foreign institutional inves-tors (FINI). The main points of the MOF's in-terpretation are outlined below:

If an FINI has no fixed place of business or business agent in Taiwan, any income that it generates from trading Taiwan securities would be exempt from AMT according to Article 3.1.5 of the Alternative Minimum Tax Act (AMT Act).

If an FINI with a fixed place of business or business agent in Taiwan raises funds outside of Taiwan from non-specific members (gen-eral public) for setting up a fund and further registers it as a fund, any income generated by the fund from trading Taiwan securities would not be deemed the FINI's income. Therefore; the FINI's fixed place of business or business agent in Taiwan need not include such income in calculating AMT.

If an FINI with a fixed place of business or business agent in Taiwan is not registered as a fund, any income generated from trading Taiwan securities should be declared as in-come by its fixed place of business or business agent in Taiwan in its AMT return. However, any profit generated or loss incurred from an FINI's Taiwan securities trading using funds other than its own funds would not be deemed the FINI's profit or loss, any such profit or loss need not be declared by the FINI's place of business or business agent in Taiwan in its AMT return. Under such circumstances, to assist the tax authorities in their verification and assessment, an FINI's place of business or business agent in Taiwan should submit the following documents along with the AMT return: (i) financial statements proving the amount of profit or loss attributable to the FINI's own funds, certified by a CPA of the country where the FINI is registered, and (ii) a table detailing the calculations and adjustment of the amount of AMT in accordance with Taiwan tax legislation, certified by the CPA who certifies the income tax return of the FINI's place of business or business agent in Taiwan.