Go to Content Area :::

Decisions

Home > Decisions > Docket Search > Before 2022
:::
:::
  • Interpretation
  • No.385
  • Date
  • 1995/09/08
  • Issue
    • 1) Shall the application of a tax law be partial and selective when it imposes co-related rights and duties?
    • 2) Is the Ministry of Finance Directive Tai-Tsai-Shui-Tze No. 800356032, September 24, 1992, requiring those foreign companies that have enjoyed and been enjoying tax preferential treatments given by the Statute for the Encouragement of Investment to pay twenty percent income taxes under Article 16, Paragraph 3, of the same statute while paying after-tax earnings to their head offices, in contravention to the Constitution?
  • Holding
    •        Article 19 of the Constitution mandates that people have duties to pay taxes prescribed by law.  In addition, Article 19 stipulates that people have duties to pay taxes according to the taxpaying entities, items, rates, payment methods and payment periods so prescribed by tax laws.  However, when such a tax law imposes co-related rights and duties on people, in order to preserve the integrity of the application of law and to balance the imposed rights and duties, it shall not be applied partially and selectively.  Those qualified foreign companies that were approved under the then-in-effect Article 3 of the Statute for the Encouragement of Investment may still enjoy the preferential tax treatments after its expiration.  Therefore, in order to be consistent with the legislative intent, those qualified foreign companies shall pay twenty percent income taxes under Article 16, Paragraph 3, of the same statute while paying after-tax earnings to their head offices.  The Ministry of Finance Directive Tai-Tsai-Shui-Tze No. 800356032, September 24, 1992, is consistent with the foregoing, and is therefore not in contravention to the Constitution.
      
  • Reasoning
    •        Article 19 of the Constitution mandates that people have duties to pay taxes prescribed by law.  In addition, Article 19 stipulates that people have duties to pay taxes according to the taxpaying entities, items, rates, payment methods and payment periods so prescribed by tax laws.  However, when such a tax law imposes co-related rights and duties on people, in order to preserve the integrity of the application of law and to balance the imposed rights and duties, it shall not be applied partially and selectively.  Those foreign companies that were approved for preferential tax treatments under Article 3 of the Statute for the Encouragement of Investment, as amended on January 26, 1987, shall pay twenty percent income taxes under Article 16, Paragraph 3, of the same statute while paying after-tax earnings to their head offices.  The legislative intent is that since those qualified foreign companies’ Taiwan branch offices enjoy preferential tax treatments, they shall pay the income taxes mentioned above while paying after-tax earnings to their head offices; otherwise, foreign companies may simply set up Taiwan branches to avoid paying taxes in Taiwan.  Therefore, the two Articles of the same statute are co-related and shall not be applied partially and selectively.  Though the above mentioned statute had expired and was no longer in effect on December 31, 1990, those qualified foreign companies that were approved (for four-or five-year exemptions) under Article 3 of the same statute while it was still in effect may still enjoy preferential tax treatments to protect investors’ rights.  Since those qualified foreign companies may still enjoy preferential tax treatments after the expiration of the same statute, to be consistent with the legislative intent, Article 16, Paragraph 3, shall also be applicable to impose co-related income taxes on their head offices.  The Ministry of Finance Directive Tai-Tsai-Shui-Tze No. 800356032, September 24, 1992, states that: “To ensure a fair tax policy, those foreign companies that have enjoyed and been enjoying tax preferential treatments given by the Statute for the Encouragement of Investment shall pay twenty percent income taxes under Article 16, Paragraph 3, of the same statute while paying after-tax earnings to their head offices.”  This Directive is consistent with the foregoing in prohibiting partial and selective applications and preserving the integrity of the application of law, and is therefore not in contravention to the Constitution.
      
    • *Translated by Professor Spenser Y. Hor.
Back Top