The National Taxation Bureau of the Southern Area, Ministry of Finance stated that, according to the Securities Transaction Tax Act, securities transaction tax is levied on the seller of securities. The buyer is responsible for collecting the tax on the day of each transaction settlement and submitting a tax bill to the national treasury on the following day after collection. However, where the buyer and seller are relatives within the second degree of kinship, a Certificate of Consent to Transfer Non-donated Properties issued by the National Taxation Bureau shall be otbained prior to the registration of the share transfer.

The Bureau pointed out that during a recent audit case, it discovered that a company within its jurisdiction, which was neither listed on the stock exchange nor traded on the over-the-counter market but had certified issued shares, had been processing share transfers between shareholders and relatives within the second degree of kinship. The company proceeded with the registration of share transfers solely on the basis of a tax bill proving payment of securities transaction tax submitted by the shareholders. However, according to Article 42 of the Estate and Gift Tax Act, when handling share transfers between shareholders within the second degree of kinship, the company shall notify the shareholders to submit a Certificate of Consent to Transfer Non-donated Properties. Failure to obtain such certificate prior to registration shall be subject to penalties in accordance to Article 52 of the same act.

The Bureau would like to remind the public that, according to Paragraph 6, Article 5 of the Estate and Gift Tax Act, a sale of property between relatives within the second degree of kinship shall be deem as a gift, unless reliable evidences can be demonstrated that the full purchase price has been paid and the payment was not made through a loan from the seller or by providing collateral to borrow from others. Therefore, when processing the share transfer registration between shareholders within the second degrees of kinship, companies that are neither listed on the stock exchange nor traded on the over-the-counter markets but have certified issued shares should remember to notify the parties involved to submit relevant supporting documents (such as a certificate of gift tax payment, a certificate of tax exemption, or a certificate of consent to transfer non-donated properties) and then assist shareholders in completing the transfer registration in order to avoid violations and potential penalties.

Press Release Contact: Ms. Hsieh
Sales Tax Division
TEL: 06-2223111 ext.8087