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May 27, 2017

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Employees able to delay tax filing for their stock bonuses

TAIPEI, Taiwan -- Employees may delay their tax submission for any company stock bonuses they receive, Finance Minister Chang Sheng-ford (張盛和) said yesterday.

Some companies pay out company shares as a form of bonus. However, there is usually a lock-up period that stipulates that shares may not be sold within three years of attainment. Chang said that it makes sense to levy taxes after the shares are sold. Companies dole out shares in order to retain talent, Chang added.

However, the delay of tax payment would not be applicable if there is no lock-up period and employees are allowed to sell shares immediately after obtaining them, Chang said. In that case, tax payment should be made right away, he said.

Chang attended the Legislative Yuan yesterday to answer the Finance Committee's questions. He made the comment about tax payment when asked by the press.

Negotiations between the MOEA and the MOF

Rules governing share bonus payouts are based on the Company Act, the competent authority of which is the Ministry of Economic Affairs (MOEA). Sources said the MOEA has communicated with the Ministry of Finance (MOF) extensively. Despite the MOF's refusal, the MOEA has tried to resolve differences between the two ministries.

Chang's statement concurred with a suggestion made by the Science and Technology Minister Simon Chang (張善政) the other day. Chang said that he made the suggestion on behalf of companies from Taiwan's science parks and that the Finance Minister should consider local firms' request. Chang said that companies usually dole out shares to employees, hoping they will work harder and, in the process, make share prices go higher.

Enforcing tax payment on stock bonuses will force employees to sell their stocks, which works against the intention of companies giving out shares, said Simon Chang.

A Measure of Fair Taxation

Simon Chang referred to his own experience for illustration. Chang used to work for computer maker Acer Inc., which paid him a lot of company shares. Chang said that he was forced to make tax payments immediately after receiving shares. However, Acer's share price dropped substantially afterward, and Chang believes that his tax payment was therefore levied unfairly.

Chang said that delayed tax payment bears no connection with tax evasion. For instance, if the share price is NT$1,000 at attainment and rises to NT$1,500 at selling, then the tax payment would be based on the latter price. This is fair taxation, Chang said.

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