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  • Interpretation
  • No.480
  • Date
  • 1999/04/16
  • Issue
    • Does the 6-month period for application for a completion certificate under Article 32-1, Paragraph 2, Subparagraph 8, of the Enforcement Rules of the Act for Upgrading Industries exceed the scope of the mother law, thus violating Articles 19 and 23 of the Constitution?
  • Holding
    •        Article 16, Subparagraph 2, of the Act for Upgrading Industries (hereinafter the “Act”) provides that, where a company has re-invested its undistributed earnings to repay the loan borrowed or account payable for addition or updating of machinery and equipment or transportation facilities as referred to in Subparagraph 1 of the same Article, the registered stocks newly issued to and acquired by its shareholders shall not be included in the taxable consolidated income earned in the then current year by an individual shareholder, or in the taxable profit-seeking enterprise income earned in the then current year by a corporate shareholder. The company satisfying the said provision shall complete repayment within the approved term of the capital increase to repay the loan or account payable, and shall, within six months after completion of repayment, submit a photocopy of the repayment certificate or the document certifying the repayment duly audited and certified by a certified public accountant to the government authority approving and recording the original expansion plan for issuance of a completion certificate in accordance with Article 32-1, Paragraph 2, Subparagraph 8, of the Enforcement Rules of the Act (hereinafter the “Enforcement Rules”) (Article 38, Paragraph 2, Subparagraph 8, of the current Enforcement Rules). However, if there is actual need, the company may apply, prior to the originally approved completion date, for an extension of the term for completion of the expansion plan with the authority originally granting the approval in accordance with Article 34, Paragraph 2, of the Enforcement Rules (Article 44, Paragraph 2, of the current Enforcement Rules). The said 6-month period requirement referred to in the said Enforcement Rules is shorter for the taxpayer. However, as a specified completion period has been granted for the original plan, and as there is a 4-year extension period, if no restriction on the application period is imposed, the tax purpose cannot be satisfied. In addition to the actual needs of the company to which the Act is applicable, the provision of the said period also takes into account the taxation period under Article 21 of the Tax Levy Act and the period for keeping accounting documents under Article 38 of the Business Accounting Act, and such provision is required for the enforcement of the mother law and relevant laws. Therefore, the provision of a six-month period under the Enforcement Rules meets the legislative intent and does not exceed the scope of the mother law, and it does not contradict Articles 19 and 23 of the Constitution.
  • Reasoning
    •        It is expressly provided in Article 23 of the Constitution that the restriction on the people’s freedom and rights shall be imposed by law to the extent necessary. However, the contents of law cannot be comprehensive enough to govern everything. The law may authorize the competent authority to prescribe the details and technical matters through orders to facilitate the enforcement of the law. The enforcement rules or orders meeting the legislative intent without exceeding the scope of the mother law promulgated by the administrative agency based on the said authorization is permitted by the Constitution, and such intent has been repeatedly interpreted by this Yuan. Under the general authorization of the mother law, whether the enforcement rules or orders promulgated by an administrative agency exceed the authorization of law should be judged based on the legislative intent, rather than the letter, of the law and the related meaning of the overall provision.    
      
    •        Article 16, Subparagraph 2, of the Act provides that, where a company has re-invested its undistributed earnings to repay the loan borrowed or account payable for addition or updating of machinery and equipment or transportation facilities as referred to in Subparagraph 1 of the same Article, the registered stocks newly issued to and acquired by its shareholders shall not be included in the taxable consolidated income earned in the then current year by an individual shareholder, or in the taxable profit-seeking enterprise income earned in the then current year by a corporate shareholder. To enforce the said provision of law, it is expressly provided in Article 32-1, Paragraph 2, Subparagraph 8, of the Enforcement Rules (Article 38, Paragraph 2, Subparagraph 8, of the current Enforcement Rules) amended and promulgated by the competent authority on October 27, 1993, that the company satisfying the said provision shall complete repayment within the approved term of the capital increase to repay the loan or account payable, and shall, within six months after completion of repayment, submit a photocopy of the repayment certificate or the document certifying the repayment duly audited and certified by a certified public accountant to the government authority approving and recording the original expansion plan for issuance of a completion certificate. However, if there is actual need, the company may apply, prior to the originally approved completion date, for an extension of the term for completion of the expansion plan with the authority originally granting the approval in accordance with Article 34, Paragraph 2, of the Enforcement Rules (Article 44, Paragraph 2, of the current Enforcement Rules). The said 6-month period requirement referred to in the said Enforcement Rules is shorter for the taxpayer. However, as a specified completion period has been granted for the original plan, and as there is a 4-year extension period, if no restriction on the application period is imposed, the tax purpose cannot be satisfied. In addition to the actual needs of the company to which the Act is applicable, the provision of the said period also takes into account the taxation period under Article 21 of the Tax Levy Act and the period for keeping accounting documents under Article 38 of the Business Accounting Act, and such provision is required for the enforcement of the mother law and relevant laws. Therefore, the provision of a six-month period under the Enforcement Rules meets the legislative intent and does not exceed the scope of the mother law, and it does not contradict Articles 19 and 23 of the Constitution.  
      
    • *Translated by Dr. C.Y.Huang of Tsar & Tsai Law Firm.
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