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法律與法規命令

Tax Act:
Regulations Governing Application of Income Calculation from Controlled Foreign Company for Individual
Article 2
Content:
For any individual and his/her related parties directly or indirectly holding 50% or more of the shares or capital of a foreign affiliated enterprise registered in a low-tax burden country or jurisdiction, or having a significant influence on such a foreign affiliated enterprise, the foreign affiliated enterprise is a controlled foreign company. 

In case a controlled foreign company referred to in the preceding Paragraph does not apply to Article 43-4 of the Income Tax Act and the requirement of Paragraph 1, Article 5 of these Regulations, where the individual, himself/herself, with his/her spouse or relatives within the second degree of kinship holding up to 10% of the shares or capital of the foreign affiliated enterprise on December 31 of the current year, the individual shall calculate the business income in accordance with Article 12-1 of the Income Basic Tax Act under these Regulations. 

For the individual and his/her related parties directly or indirectly holding 50% or more of the shares or capital of a foreign affiliated enterprise registered in a low-tax burden country or jurisdiction ("foreign affiliated enterprise registered in a low-tax burden country or jurisdiction") as mentioned in the first paragraph, the holding ratio of such individual shall be determined based on the aggregate holding ratio of the shares or capital on December 31 of the current year, to be calculated in accordance with the following: 
1.Where the individual directly holds the shares or capital of a foreign affiliated enterprise registered in a low-tax burden country or jurisdiction, the holding ratio shall be determined based on his/her aggregate holding ratio of the shares and capital. 
2.Where, through an affiliated enterprise, the individual indirectly holds the shares or capital of a foreign affiliated enterprise registered in a low-tax burden country or jurisdiction, and his/her holding of the shares or capital of the affiliated enterprise is over 50%, or he/she has a significant influence on such affiliated enterprise, the holding ratio of the individual in the said foreign affiliated enterprise registered in a low-tax burden country or jurisdiction shall be determined based on his/her affiliated enterprise's aggregate holding ratio in the foreign affiliated enterprise registered in a low-tax burden country or jurisdiction; if the individual holds less than 50% of the shares or capital of the affiliated enterprise, the holding ratio shall be determined based on the aggregation of the multiplication of its affiliated enterprise's holding ratio in each layer. 
3.Where a related party or a nominal party meets the following items, such party's holding ratio of the foreign affiliated enterprise registered in a low-tax burden country or jurisdiction shall be calculated in accordance with the methods set forth in the preceding two subparagraphs, to be determined based on such party's aggregate holding ratio in the foreign affiliated enterprise registered in a low-tax burden country or jurisdiction: 
(1)An affiliated enterprise under Subparagraphs 3 and 4, Paragraph 2, Article 3 of these Regulations. 
(2)A related party under Subparagraphs 1 through 10, Paragraph 3, Article 3 of these Regulations. 
(3)Any individual inappropriately circumventing the constituent elements in the preceding two items by transferring his/her shares to a borrowed name or otherwise by other arrangements. 
4.If there is double calculation of the holding ratio of the individual's and his/her related party's direct or indirect holding in a foreign affiliated enterprise registered in a low-tax burden country or jurisdiction in accordance with preceding three subparagraphs, the higher ratio shall be considered. 

Where the persons provided in the preceding two paragraphs have inappropriately circumvented the constituent elements in the preceding two paragraphs by share transfer or other arrangements before December 31 of the current year, the tax authority may determine the holding ratio of the shares or capital in the foreign affiliated enterprise registered in a low-tax burden country or jurisdiction based on the highest aggregate ratio on any day of the current year, to be calculated according to the methods provided in the subparagraphs of the preceding two paragraphs. 

The term "significant influence" in the first paragraph shall refer to where the individual and his /her related parties have the leading power over the personnel, finance, or business operation of the foreign affiliated enterprise registered in a low-tax burden country or jurisdiction.
 Update:2018-06-04

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