VZCZCXRO2335
RR RUEHGH
DE RUEHIN #2817 2282214
ZNR UUUUU ZZH
R 162214Z AUG 06
FM AIT TAIPEI
TO RUEHC/SECSTATE WASHDC 1656
RUEATRS/DEPT OF TREASURY WASHDC
INFO RUCPDOC/USDOC WASHDC
RUEHBK/AMEMBASSY BANGKOK 3380
RUEHBJ/AMEMBASSY BEIJING 5542
RUEHUL/AMEMBASSY SEOUL 8020
RUEHGP/AMEMBASSY SINGAPORE 6575
RUEHKO/AMEMBASSY TOKYO 7939
RUEHML/AMEMBASSY MANILA 9779
RUEHJA/AMEMBASSY JAKARTA 3909
RUEHKL/AMEMBASSY KUALA LUMPUR 3546
RUEHHI/AMEMBASSY HANOI 3115
RUEHBY/AMEMBASSY CANBERRA 4285
RUEHWL/AMEMBASSY WELLINGTON 1543
RUEHHK/AMCONSUL HONG KONG 6756
RUEHGH/AMCONSUL SHANGHAI 0315
RUEHGZ/AMCONSUL GUANGZHOU 9495

UNCLAS TAIPEI 002817 
 
SIPDIS 
 
SIPDIS 
 
STATE PLEASE PASS USTR 
 
STATE FOR EAP/RSP/TC, EAP/EP 
 
USTR FOR ALTBACH 
 
USDOC FOR 3132/USFCS/OIO/EAP/WZARIT 
TREASURY FOR OASIA/LMOGHTADER 
TREASURY PLEASE PASS TO OCC/AMCMAHON 
TREASURY ALSO PASS TO FEDERAL RESERVE/BOARD OF 
GOVERNORS, AND SAN FRANCISCO FRB/TERESA CURRAN 
 
E.O. 12958: N/A 
TAGS: EINV EFIN ECON PINR TW
SUBJECT:  Foreign Portfolio Investment Exempt from AMT 
 
 
¶1.  Summary.  The Ministry of Finance (MOF) recently announced it 
will exempt foreign institutional investors (FIIs) from Taiwan's 10% 
alternative minimum tax (AMT) if the investment capital comes from 
offshore.  The MOF decision is designed to attract foreign portfolio 
investment and has interagency endorsement.  End Summary. 
 
¶2.  On August 14, the MOF issued an administrative order to exempt 
almost all of foreign portfolio investment from Taiwan's new 10% 
AMT.  The exemption is retroactive to January 1 of this year when 
the AMT was implemented.  According to the order, FIIs without fixed 
offices or agents in Taiwan are not required to pay the 10% AMT for 
capital gains earned from securities trading in Taiwan, even if the 
investment capital is the FIIs' own funds.  Taiwan securities firms 
or other entities contracted by qualifying FIIs to do securities 
trading are also not required to pay nor withhold the 10% AMT. 
 
¶3.  FIIs having fixed offices or agents in Taiwan are not required 
to pay or withhold the 10% AMT for capital gains from securities 
trading in Taiwan, if the investment capital comes from offshore and 
is not their own funds.  According to the MOF, mutual funds 
organized by these FIIs' offshore headquarters are not subject to 
the 10% AMT because the owners are the offshore fund holders, rather 
than the FIIs which only serve as fund managers.  Funds that 
offshore customers contract FIIs to trade in Taiwan are also not 
subject to the 10% AMT. 
 
¶4.  However, FIIs having permanent offices or agents in Taiwan are 
required to pay the 10% AMT on capital gains from securities trading 
in Taiwan when they use their own funds, even if those funds come 
from offshore. 
 
Results 
------- 
 
¶5.  An MOF Department of Taxation official told AIT/T that the 
administrative order is retroactive to January 1, 2006 when the AMT 
was implemented.  He also estimated that as a result of the order, 
99% of foreign portfolio investment in Taiwan will be exempt from 
the 10% AMT.  A Financial Supervisory Commission (FSC) official told 
us that the MOF order is designed to attract FIIs to Taiwan's 
securities markets, and that the FSC and Taiwan's Central Bank of 
China have both endorsed the MOF move. 
 
YOUNG