Newsletter
Amendments to Regulation Regarding the Taiwan Investments Made by Persons of Mainland Area
On 14 November 2013, the Ministry of Economic Affairs (MOEA) amended Articles 8, 9 and 11 of the Regulation Regarding the Taiwan Investments Made by Persons of Mainland Area (the "Regulation"). Except for Paragraph 2, Article 8, the amendments to the Regulations became effective from November 14, 2013. The amendments will have significant effect on the PRC investments in Taiwan in the future and we summarize the amendments as below:
1. The new Paragraph 2, Article 8 of the Regulations provides, "The PRC investors that invest in the Free Economic Pilot Zone Enterprise shall obtain the approval from the competent authority after the competent authority consults with the competent authority of the industry and other relevant authorities if there is no national security involved. The investment scope, amount and percentage in the Free Economic Pilot Zone Enterprise is not subject to the restrictions set forth in the preceding paragraph. In reviewing the PRC investment in the Free Economic Pilot Zone Enterprise, the competent authority may invite the competent authority of the industry and other relevant authorities, scholars and experts to convene an ad hoc meeting." This provision is enacted in cooperation with the Executive Yuan's policy to promote the Free Economic Pilot Zone. It authorizes the MOEA to promulgate a tailor-made list of PRC permissible investment items different from that announced by the MOEA on 25 December 2012 in consultation with other competent authorities of the industry, with the view to lifting the restrictions on the PRC permissible investment items in the Free Economic Pilot Zone and to facilitate the review process of the investment applications by convening an ad hoc meeting.
2. According to Paragraph 3, Article 8 of the Regulations, the MOEA may revoke or cancel the PRC investor's investment if it considers that the PRC-invested enterprise's business operation involves monopoly, oligopoly or controlling status, sensitivity to politics, society and culture, impacts the national security, or has negative impact on the domestic economic development or financial stability. This provision authorizes the MOEA to rectify its decision by revoking or cancelling the original investment approval.
3. Paragraphs 3 and 4, Article 9 are new provisions, which provide that "The transferor and the transferee shall file for the approval of the competent authority in the event that the PRC investor transfers its investment. The competent authority may disapprove the transfer of investment if the transfer prejudices national security or public interest. Where the PRC investor has no residence or place of business in Taiwan, its investment application in accordance with Paragraphs 1 and 3, Article 9 of the Regulations shall be filed by a licensed CPA or lawyer in Taiwan." Paragraph 3, Article 9 of the Regulations specifies that the PRC investor must apply for the Investment Commission, the MOEA (IC)'s approval together with the transferee in order to transfer its investment. The spirit of Paragraph 4, Article 9 of the Regulations is to avoid the situation where the IC will not be able to contact the PRC investor in the event that the PRC investor has no residence or place of business in Taiwan.
4. Paragraph 1, Article 11 of the Regulations provides that the PRC-invested enterprise whose paid-in capital exceeds NT$30 million shall submit the audited financial statements, shareholders' roster and other documents designated by the competent authority for record within 6 months upon the end of each fiscal period. The IC was often criticized that the previous Paragraph 1, Article 11 of the Regulations grants preferential treatment to the PRC-invested enterprises vis-a-vis local enterprises. Thus, the new Paragraph 1, Article 11 of the Regulations requires the PRC-invested enterprise whose paid-in capital exceeds NT$30 million to have its financial statements audited by the CPA pursuant to the MOEA ruling dated 12 December 2011 (No. 09002262150), which reads that the local enterprises whose paid-in capital exceeds NT$30 million shall have the financial statements audited by the CPA and recognized by the shareholders' meeting.
5. Paragraphs 2 and 3, Article 11 of the Regulations reads that the competent authority may order the PRC-invested enterprise to submit the financial statements, shareholder roster and other documents designated by the competent authority. This provision grants an administrative investigation power to the IC to monitor the operation status of the PRC-invested enterprise, which can reduce the risks of the PRC-invested enterprise conducting its business operations that are beyond the approved business scope.