Taiwan. Country Profile

Transcription

1 Taiwan Country Profile

2 Contents Country Overview 1 Clearing Systems 3 Foreign Exchange Controls 5 Taxation 7 Investment Opportunities 8 Trade Regulations 10 Citi Solutions and Services 11

3 Country Overview Banking Holidays in Taiwan Republic Day/New Year's Day January 1 January 1 Chinese New Year's Eve February 2 January 22 Chinese New Year's Day February 3-7 January Memorial Day February 28 February 28 Tomb Sweeping Day April 5 April 4 Labour Day May 1 May 1 Dragon Boat Festival June 6 June 23 Armed Forces Day (not a banking holiday) September 3 September 3 Mid-Autumn Festival September 22 September 30 Double Tenth National Day October 10 October 10 Key Facts Capital City Taipei Population million (July 2012) Currency New Taiwan Dollar Currency SWIFT Code TWD Exchange Rate (1) USD/TWD (July 2012) GDP USD billion (2011) GDP Growth Rate 1.06% (July 2012) Exports USD billion (2011) Imports USD billion (2011) Inflation Rate (1) 1.74% (July 2012) Credit Rating (S&P) AA- (July 2012) Source: IMF/CIA World Factbooks. (1) Taiwan Country Profile 1

4 Country Overview Banking System There are 67 banks in Taiwan of which 39 are domestic banks, 28 are foreign banks. According to the quarterly report about the main financial and performance ratios, the NPL ratio is about 1.50% (2nd quarter 2011) and total capital adequacy ratio is more than 12%. The Central Bank of the Republic of China (Taiwan) is responsible for money supply and foreign exchange market, which it controls through reserve requirements, rediscount interest rates, and open market operations. The central bank allows the New Taiwan Dollar (NTD) to float freely against USD. Although the market drives the US$/NTD FX rate, the CBC may intervene when the market is considered too volatile. According to the Central Bank of China Act, the Bank s operational objectives include promoting financial stability, ensuring sound banking operations, maintaining the stable internal and external value of the currency and, within the scope of the above three objectives, fostering economic development. Citi in Taiwan Citi in Taiwan was established in 1965 and since inception, has been an integral part of the Taiwan banking community. Citi is the largest foreign bank in Taiwan in terms of deposits, assets, profits business scopes and branch network. To expand the presence in Taiwan, Citi established the Foreign Financial Holding Company in 2007 and acquired Bank of Overseas Chinese with the newly formed Citibank Taiwan Ltd. The acquisition creates a combined business with 65 branches and more than 5,000 employees. Citi in Taiwan is renowned for its efforts and contributions to the broader Taiwanese community. It has been actively involved in establishing flagship citizenship programs such as the Financial Education Series where more than US$188 million has been contributed to improve financial literacy and disciplines to more than 400,000 Taiwanese. Its 15-year Citibank-United Way Taiwan fund raising program has raised more than US$29 million and today accounts for a third of the funds raised by United Way Taiwan. This program touches more than 6,000 projects involving over 400 local NGOs. Citi s efforts have been consistently recognized by numerous CSR awards, including the Best Corporate Citizenship Award by CommonWealth Magazine and Best Corporate Social Responsibility Award by Global Views Monthly. Taiwan President Ma Ying-jeou has even met with Head of Citi s Taiwan Branch twice to thank Citi for its contribution to the society. Citi is the recipient of numerous awards recognizing its successes in Taiwan, including Best Bank in Taiwan by Euromoney (2011), Best Foreign Cash Management Bank in Taiwan by Asiamoney (2011), Best Trade Bank in Taiwan by Trade Finance (2011), Best Transaction Bank (Foreign) in Taiwan by The Asset (2011), Best Trade Finance Bank in Taiwan by The Asset (2011) and Best International Trade Bank in Taiwan by Trade Finance (2011). Head Office Address 16F, No. 1, Song Zhi Road Taipei 110, Taiwan Location of Branches Taipei Taichung Tainan New Taipei City Chang Hua Kaosiung Keelung Yunlin Ping Tung Taoyuan Chia Yi Yilan Hsinchu 2 Taiwan Country Profile

5 Clearing Systems Central Bank Clearing System The local NTD clearing system was developed by the CBC and as such, the head offices of every financial institution have opened clearing accounts with CBC. NTD clearing, such as FX and money market transactions, are conducted via the participants accounts through the system. Inter-bank Remittance System (IBRS) Launched in August 1987, the IBRS allows remitters to transfer funds from one financial institution to another for deposit in accounts of designated payees. The Financial Information System Center (FISC), which operates the IBRS, supports inter-bank remittance transactions such as wire deposits, commercial payment, treasury payment, securities settlement payments, and bill settlement payments. The service provides financial institutions with highly functional funds transfer mechanism that allows remitters to settle payments conveniently and efficiently. The Financial Information Service Co., LTD. was found in 1998 with the purpose of providing financial institutions with better and more flexible interbank operations and services. Its shareholders are the Ministry of Finance of Taiwan, ROC, and 42 other public and pri vate-owned financial institutions, with a total capital of NT$ 4 billion. (Information Source: ) Clearing and settlement is a net settlement process, with the participants performing inter-bank transactions in an online, real-time environment. Taiwan Clearing House System (TCH) The Taiwan Payments Clearing System Development Foundation established the TCH on 1 November 2002, and was officially approved by the CBC on 15 October All original 16 clearinghouses were reorganized as the head office or the branch offices of the TCH. The TCH check clearing system is operated by Bills Clearing Houses (BCHs), agencies established by CBC for this purpose. There are currently 16 regional houses in the network. In July 2002, the BCHs become independent entities, with Taipei BCH serving as the head office, responsible for managing bill clearing operations based on the Bills Exchange Laws. A transaction is initiated when the check is presented to the clearinghouse on Day 1. Settlement is notified on Day 2 at 10:00 AM and any returned checks processed on Day 2 by 4:30 PM. Transactions are considered final when the relevant participant s settlement account in CBC is debited. Taiwan Country Profile 3

6 Clearing Systems Funds Availability Schedule Cut-off Time Funding Date Client DR/ CR Date Client Value Date Local Currency Electronic Transfers 3:30 PM Same Day Same Day Same Day Local Currency Other banks 3:30 PM Same Day Same Day Same Day Local Currency Book-to-book Internet-based - 5:30 PM Paper-based - 4:00 PM Same Day Same Day Same Day OR: Foreign Currency Transfers (USD) Internet-based - 5:30 PM Paper-based - 4:00 PM IR: Same Day Same Day/ Serial Payment: Same Day Cover Payment: D+1 Same Day/ Serial Payment: Same Day Cover Payment: D+1 3:30 PM Foreign Currency Transfers (others) Based on currency Based on currency Based on currency Based on currency Check Deposit (1) (NTD) Clearing schedule is varied depends on the check due date & deposit location. D+1~7 D+1~7 D+1~7 (1) Post-dated check is accepted in Taiwan. Clearing schedule is varied depends on the check due date 4 Taiwan Country Profile

7 Foreign Exchange Controls Current Foreign Exchange Practices Companies in Taiwan can hold foreign currency accounts without prior authorization, and most accounts are in USD and Euro. Since 1994, non-resident foreign nationals and corporations have been permitted to hold savings accounts denominated in the local currency, for domestic spending, purchase of imports or for investment in securities. In order to prevent authorized banks from excessive exposure to exchange rate risks, the CBC has set ceilings for each authorized bank s overbought and oversold positions in accordance with the volume of its foreign exchange transactions. From 1 July 1996, each authorized bank has been permitted to determine its own overbought and oversold positions subject to the approval of the CBC. Developing Foreign Exchange Derivatives Markets Since 1984, CBC adopted a series of measures to significantly relax its controls over forward transactions and authorized banks were allowed to determine their own forward exchange rates. On 16 December 1996, CBC completely opened up the forward market. In addition to forwards, various types of foreign exchange related derivatives are available, including futures, swaps, and options amongst others. All foreign exchange transactions must be processed through an authorized bank branch, which should obtain an FX licenses from CBC prior offering the FX service to public. NTD is a restricted currency and may not be deposited or remitted outside Taiwan. Moreover, for any NTD related FX with amount above NTD500,000, Declaration Form will be required. Capital Movement Regulation Forward contracts are permitted for resident corporations and individuals as long as the underlying transaction is transparent. Customers must deposit the cash margin, for example, 3% of the contract NTD amount with the bank, with no interest earned. Non-residents are not permitted to participate and execute FX forward contracts, except registered Foreign Institutional Investors ( FINI ) under hedging purpose. In regard to flows that involve exchange of NTD, foreign exchange receipts and disbursements for goods and services, as well as capital transactions approved by competent authorities (include direct investment and securities investment) are also free, with the following remaining as restrictions to maintain the stability of NTD exchange rate. Remittances involving the Conversion of NTD New Taiwan Dollar (NTD) is yet an international currency and cannot be traded freely in the open market. Any conversion involving NTD, is controlled by Taiwan Central Bank of China (CBC). If the FX conversion involving NTD is trade-related, no upper limit is imposed. However, supporting documents and declaration form to Central Bank are required. If the FX conversion involving NTD is not trade-related, for business entity such a conversion, will be subject to an annual aggregate limit of USD50 million for inward and another USD50 million for outward remittance. In addition, supporting documents and declaration form to Central Bank of China are required before FX conversion takes place. Taiwan Country Profile 5

8 Foreign Exchange Controls Entity Inward Remittances Outward Remittances Taiwan Registered Business USD50 Million USD50 Million Taiwan Resident USD5 Million USD5 Million Non-Residents NA USD100,000/day Market Structure Taiwan foreign exchange market is two-tiered: interbank and retail. The market participants include retail customers, banks, foreign exchange money brokers, and the Central Bank. The two foreign exchange money brokers in Taiwan are the Taipei Foreign Exchange Market Development Foundation (FEMD) and Cosmos Foreign Exchange International Inc. (CFEI), through which all licensed FX banks and financial institutions can do their FX transactions. The CBC monitors foreign exchange practices in Taiwan, imposing a variety of restrictions to maintain overall monetary and exchange rate stability. The CBC seeks to slow the accelerating outflow of private capital from Taiwan as well as inflow of foreign investments. Market Instruments In the foreign exchange market, participants engage in buy and sell of spots, forwards, FX swaps and trade FX derivatives. In terms of trading counterparties, banks versus customers accounts for 31.8%, interbank accounts for 68.2% (amongst them the trading between local banks accounts for 21.7% while between local and foreign banks accounts for 46.5%). Foreign Exchange Convertibility/Transferability Local currency is convertible domestically, subject to FX laws. Non-residents, except registered FINI, can only covert USD100,000 per day according to CBC regulations. No special restrictions for resident. However, when currency conversion above NTD500,000, an CBC declaration form is required. Above USD1,000,000, large amount is required at CBC. Remittance of Dividends & Profits Transfer of profits and dividends in any currency is permitted without restriction. However, the local tax guarantor s review to confirm no outstanding tax liability is needed for FINIs before repatriating capital gain. While for FIA holders, a prior approval from MOEA is required prior to any repatriation. Repatriation of Capital There are no restrictions on the repatriation of capital, except that for FIA holders, a prior approval from MOEA is required prior to any repatriation. Central Bank: Central Bank of Taiwan ( 6 Taiwan Country Profile

9 Taxation Corporate Income Tax The standard corporate income tax is 17%. To neutralize a company s dividend distribution decision, a 10% surtax is imposed on undistributed profits. Nonresident shareholders (including corporations and individuals) may use the 10% surtax as an offset against dividend withholding tax. Withholding Tax Dividends: No withholding tax is imposed on dividends paid to a resident shareholder. As from 2010, a 20% withholding tax is imposed on dividends paid to a nonresident (regardless of whether the investment has been approved by the Investment Commission), unless the rate is reduced under a tax treaty. Interest: As from 1 January 2010, the withholding tax on interest paid to a resident is 10%. A 15% withholding tax applies to interest paid to a non-resident on short-term bills, interest on securitized certificates, interest on corporate bonds, government bonds or financial debentures, as well as interest derived from resale transactions with the above bonds or certificates. The rate in all other cases is 20%, unless the rate is reduced under a tax treaty. Royalties: Other: Value Added Tax The withholding tax on royalty payments made to a resident is 10%. The rate is 20% on royalties paid to a nonresident, unless the rate is reduced under a tax treaty. Where an offshore company provides technical services to a Taiwan entity, payments to the company are subject to a 20% withholding tax. However, if the costs associated with the provision of the services are difficult to calculate, an application may be submitted to the National Tax Administration to use an approved profit rate of 15%. The basic rate of the Business Tax in Taiwan is 5%. The following items are zero rated: exports, export-related services, items sold by duty free shops, goods sold to export-oriented entities within a tax-free export zone or science-based industrial parks and goods sold to a bonded factory or warehouse. Exempt status applies to healthcare services, land sales, and approved textbooks and academic writings. Financial institutions, certain restaurants and small companies are subject to special Business Tax on the basis of their gross business receipts at rates ranging from 0.1% to 25%. However, certain services of financial institutions are taxed at the 5% rate because the services are not the core business of the financial institution (core business services are taxed at 2%). Transfer Pricing Arm s length transfer pricing is required for any inter-company arrangement. (Comments: Transactions concerning revenue, costs, expenses, profit or loss allocations between an enterprise and other local and foreign businesses that it is associated with, and those between an enterprise and another enterprise by which it is directly or indirectly owned or controlled, must conform to the arm s length principle.) For more detailed information on taxation, please refer to the URL of the tax authority: Taipei National Tax Administration ( Taiwan Country Profile 7

10 Investment Opportunities Bank Bills A Bank Bill is a short-term negotiable financial instrument, with terms available generally between 30 and 180 days. The investor purchases a bank bill at a discount to its face value, which is the amount the investor will receive at the maturity date. The amount of discount (the difference between face value and purchase price) represents the return to be earned by holding the bank bill to maturity. Commercial Paper Commercial Paper is an unsecured obligation issued by a corporation or bank to finance short-term credit needs, such as accounts receivable and inventory. Maturities typically range from 2 to 364 days. Commercial paper is available in a wide range of denominations, can be either discounted or interest-bearing, and has a limited or nonexistent secondary market. It is primarily issued by companies with high credit ratings and relatively low investment risk. Negotiable Certificate of Deposits A promissory note issued by banks and finance companies is known as a Negotiable Certificate of Deposit (NCD). Time Deposits Time deposits are cash dealt to a fixed maturity date, with interest generally paid at maturity. Securities Market A variety of securities products are available to investors, including stocks, beneficiary certificates, warrants, Taiwan depository receipts, bonds, futures and options. Foreign investment in Taiwan s securities market began in 1983 with the approval of the Plan for Introduction of Foreign and Overseas Chinese Capital into Securities Market (the Plan) and Regulations Governing Securities Investment by Overseas Chinese and Foreign Investors (the Regulations). In this context, a three-phase plan was adopted to channel foreign capital into Taiwan s securities market. The sequential policy first allowed the indirect investment of funds raised overseas by domestic investment trust companies, followed by direct investment of qualified foreign institutional investors (QFII) in 1991 and in 1996, by all foreign natural and juridical persons. The QFII scheme was decommissioned and replaced by the new Foreign Institutional Investors (FINI) scheme in October FINIs may invest directly in local securities upon registration with the Taiwan Stock Exchange Corporation (TWSE). The new Registration Process and Operating Highlights for Overseas Chinese and Foreign Investors for Investment in Taiwan Securities was announced by the TWSE on October 2, 2003, and the name of the ruling was amended to Registration Directions for Offshore Overseas Chinese and Foreign Nationals to Investor in ROC Securities or to Trade ROC Futures on March 27, Taiwan Country Profile

11 Investment Opportunities Direct Investment Taiwan has long maintained an explicit policy of attracting foreign direct investment. Statistics of Investment Commission of the Ministry of Economic Affairs shows that 966 foreign direct investment (FDI) projects, with a total amount of US$2,115 million were approved from January to May The origins of FDI have been mainly the three key industrialized regions of the Europe, United States and Japan. Foreign investors who wish to invest in Taiwan securities should apply for Foreign Investment Approval (FIA) with Ministry of Economic Affairs (MOEA) under the following circumstances: If the investor acquires stocks through the securities market with registration with Taiwan Stock Exchange under FINI route and is elected director or supervisor to participate in the long-term investment and operation of the business, the FINI shall notify the MOEA about the election for MOEA s examination and recording. Invest in 10% or more, in a single transaction, of ownership of companies listed on the Taiwan Stock Exchange (TWSE), Gre-Tai Securities Market (GTSM) and Emerging Market Stocks. Invest in non-twse, non-gtsm listed shares and non-emerging Market Stocks. Invest in a delisted stock or an unlisted stock due to spin-off of a listed company. FIA is exempt within one year from delisting/spun-off. Foreign investors who wish to continue to hold the shares after one year are required to obtain FIA approvals. Others as required by the competent authorities Instruments Traded Equities: Ordinary Shares, Preferred Shares, Warrants, Taiwan Depositary Receipts, Convertible Bonds, Entitlement Certificates, Beneficiary Certificates, Exchange Traded Funds (ETF) Fixed Income: Treasury Bills, Government Bonds, Financial Debentures, Corporate Bonds, Supranational Bonds, International Bonds, and Commercial Papers Derivatives: Futures and options on major Taiwan stock indices, government bond futures, equity options and 30-day Commercial Paper interest rate futures, Gold Futures and certain OTC derivatives. Number of TWSE Listed Companies (June 2012): 797 Market Capitalization (June, 2012): NT$ 19,981 billion For more detailed information, please refer to the URL of Taiwan Stock Exchange ( and Investment Commission MOEA ( Taiwan Country Profile 9

12 Trade Regulations Taiwan and China signed the agreement opening direct trade after six-decade ban in December The arranged cross-strait agreements include air transport, sea transport, postal service, and food safety. Under the pact, weekly flight between the sides total to 108, with 54 flights to each side cut flying time considerably. As for ocean shipments, China opened 63 ports and Taiwan opened 11 harbours, while both countries exempt from enterprise income tax. Direct transportation, no need to stop briefly at a third place, reduces significant cost and time; furthermore, brings new vigour to economic and trade ties between the two sides. After opened direct transportation with China in 2008, Taiwan has been working on signing an economic cooperation framework agreement with China to ensure the competitiveness of Taiwan s products in the regional economic bloc. As without it, Taiwan products stand to be excluded from the China market, as the regional trade block centered on the association of Southeast Asian Nations expands. The development of cross-strait s trade in 2010 ran mainly at two different speeds, booming in the first half and slowing down in the second half. From January to July 2010, Taiwan s exports to Mainland China (including Hong Kong) average export growth rate was over 40%, mainly benefitting from the strong recovery of Mainland China. Then, from August to December 2010, Taiwan s average export growth rate dropped to about 20%, which resulted from the tightening monetary policies of Mainland China. Cross-strait s foreign trade totalled US$152.6 billion in 2010 and US$169.5 billion in 2011, accounting for approximate 29% of Taiwan s total foreign trade. This represents a 39.4% increase from the previous year. Of this total cross-strait trade figure, Taiwan s exports to Mainland China increased 37.1% to US$114.7 billion, which comprised 41.8% of Taiwan s total exports, while Taiwan s imports from Mainland China increased 47.1% to US$37.6 billion, which accounted for 14.9% of Taiwan s total imports. This bilateral trade thus yielded a trade surplus of US$77.2 billion for Taiwan, an increase of 32.7% compared with the previous year. Moreover, Taiwan has signed the cross-straits Economic Cooperation Framework Agreement (ECFA) on June 29, The Legislative Yuan reviewed the ECFA and approved it on August 17th After completing relevant procedures, the Taiwan side, through the Straits Exchange Foundation, notified the Mainland side in writing on September 11th, and on the same day the Mainland side s notification was received. In accordance with provisions of the Agreement, the ECFA entered into effect on September 12th Direct Air and Shipping Services Taiwan and China signed agreement opening direct trade after six-decade ban in December The arranged cross-strait agreements include air transport, sea transport, postal service, and food safety. Under the pact, weekly flight between the sides total to 108, with 54 flights to each side cut flying time considerably. As for ocean shipments, China opened 63 ports and Taiwan opened 11 harbours, while both countries exempt from enterprise income tax. Direct transportation, no need to stop briefly at a third place, reduces significant cost and time; furthermore, brings new vigour to economic and trade ties between the two sides. After opened direct transportation with China in 2008, Taiwan has been working on signing an economic cooperation framework agreement with China to ensure the competitiveness of Taiwan s products in the regional economic bloc. As without it, Taiwan products stand to be excluded from the China market, as the regional trade block centred on the association of Southeast Asian Nations expands. (Comments: These 2 paragraphs are exact the same as above. I would recommend deleting this section to avoid redundancy.) For more detailed information, please refer to the URL of Bureau of Foreign Trade ( 10 Taiwan Country Profile

13 Citi Solutions and Services Account Services Allowed No Material Restrictions Allowed Subject to a Complex Set of Rules Allowed Straight Forward Regulations, Approval, or License Strictly prohibited Allowed Challenging Regulatory Approval, or License Non-Residents Residents Operating Accounts (1) (2) Onshore Local Currency Onshore Foreign Currency Offshore Local Currency Offshore Foreign Currency Overdrafts Onshore Local Currency (3) Onshore Foreign Currency Interest-Bearing Accounts (4) (7) Onshore Local Currency Operating Accounts Onshore Foreign Currency Operating Accounts Time Deposits (8) Onshore Local Currency : Minimum One Month Tenor Onshore Foreign Currency: No Minimum Tenor Domestic Notional Pooling (9) (10) Onshore Local Currency Onshore Foreign Currency Inter-Company Lending (11) (12) Non-Resident to Resident Resident to Non-Resident Local Currency Foreign Currency Non-Residents Residents Local Currency Foreign Currency (Onshore) Taiwan Country Profile 11

14 Citi Solutions and Services Central Bank and Other Regulatory Requirements FX transactions may require declaration and/or supporting documents and/or Central Bank approval Other Payment and Clearing Considerations for Treasury Netting is allowed in certain transactions Notes: (1) Current accounts in TWD are only available to residents. (2) TWD rates are subject to the Bank s board and non-negotiable as regulated. (3) Non-residents having LCY accounts are for the most part restricted and are usually only allowed for foreign banks, securities companies and insurance companies. Subject to approval from the Ministry of Finance. (4) 10% withholding tax on bank interest received by residents. (5) 20% withholding tax on bank interest received by non-resident. (6) Current accounts are non-interest bearing. Only savings accounts are allowed to earn interest. (7) Savings accounts in TWD are subject to regulated rate. (8) TWD time deposits are subject to the Bank s board and non-negotiable as regulated. (9) Notional pool strongly rests on the bank s ability to enforce its right to set off balances in one account versus overdrafts in another account across legal entities. Such right is sufficiently affirmed for Taiwan residents. (10) Benefit from any notional pooling arrangement must be completely and proportionally reallocated to all participating entities. (11) Current accounts cannot participate in domestic automated funds transfer. (12) Subject to Company Act Article 15 of Taiwan Country Profile

15 Notes Taiwan Country Profile 13

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