The Committee appreciates the attention paid by the authorities to our 2023 White Paper suggestions. Efforts over the past year have included the continuing optimization of taxation operations for foreign institutional investors (FINIs)by the Ministry of Finance (MOF), the facilitation of listed companies providing standardized and bilingual information by the Financial Supervisory Commission (FSC), and the communication and assistance offered by the National Development Council (NDC).

This year, we maintain our focus on aligning Taiwan’s investment environment with international standards and increasing market efficiency. To further globalize Taiwan’s capital market and legal environment, we suggest providing flexibility in cybersecurity regulations governing securities firms and futures commission merchants, as well as adopting concrete measures to attract skilled foreign talent to work in Taiwan. Doing so would enable Taiwan’s capital market to play a more important role in the Asia-Pacific region.

In the spirit of public-private cooperation, we offer our assistance in further developing Taiwan’s capital market by providing the following specific suggestions:

Suggestion 1: Collaborate with industry to attract and retain foreign capital-market talent.

To further attract skilled foreign talent and meet the demands of Taiwan’s increasingly internationalized capital and investment markets, we urge the government to consider partnerships with international testing and certification organizations, as well as global stock exchanges. Such collaboration would make it possible to offer more English-language examinations and industry-related certifications in Taiwan, accessible to both foreign and domestic professionals. These initiatives would not only enhance professional capabilities domestically but also reinforce Taiwan’s position as a globally competitive market.

Moreover, we recommend that relevant agencies (including but not limited to the Securities and Futures Institute) expand their educational offerings to include specialized courses designed to improve industry-specific Chinese language skills for foreign professionals. Such courses would greatly enhance the ability of these professionals to effectively engage with Taiwan’s domestic capital markets and institutions, facilitating smoother integration and more productive collaborations.

Furthermore, the Committee urges the FSC to reconsider the current registration requirements that restrict Taiwan-based personnel from holding dual licenses with other securities firms within the same international group. Amending these regulations would not only increase the visibility of Taiwan-based financial talent but also enhance their understanding of international practices and financial products. This approach would broaden the professional capabilities of domestic talent and increase the Taiwan capital market’s appeal to talent for long-term career development.

Suggestion 2: Adopt a principles-based supervision method for the information security of securities firms.

The Taiwan Stock Exchange and Taiwan Futures Exchange have put in place detailed regulations on information security requirements for securities firms and futures commission merchants, such as disconnection and account locking if a password is entered incorrectly a certain consecutive number of times or following the entering of an expired password (which changes every three months).

Internationally, more advanced control methods for information security have been developed, such as “staff identification card + personal identification number,” as well as multi-factor password controls. These controls typically require passwords to be at least 12 characters long, incorporating a mix of alphanumeric characters, uppercase and lowercase letters, and symbols. Additionally, these systems permit only a limited number of incorrect password attempts before locking the account. With such robust measures in place, regular password changes are no longer necessary, enhancing user convenience without impacting security.

The Committee notes that the Taiwan Stock Exchange and Taiwan Futures Exchange have modeled their information security requirements on those outlined in the Cyber Security Management Act. However, it is important to recognize that securities firms and futures commission merchants are not directly regulated under that Act. We urge the government to reassess the requirements to ensure that regulations are appropriately tailored to the actual governance framework of these entities.

In addition, considering the rapid developments in information technology, the requirements lack flexibility and cannot reflect trends in international supervision in a timely manner. Rules-based regulations that are overly prescriptive may limit international enterprises’ ability to adequately address and respond to rapidly changing cybersecurity standards. In the meantime, rules-based regulatory requirements necessitate that authorities spend a significant amount of time on multiple amendments.

The Committee suggests adopting a principles-based supervision method allowing securities firms and futures commission merchants to adopt  information security control mechanisms based on technology development and as permitted under the regulations. This change would enable securities firms and futures commission merchants to move with the times and reinforce information security.

Suggestion 3: Allow e-transfers of tax payments.

FINIs’ withholding tax on depositary receipt re-issuance, securities lending fees, and various other payments must still be paid by check. This practice results in cumbersome operational procedures and significant time expenditures for all involved, including custodian banks, settlement banks, the Taiwan Clearing House, and the tax authorities. Additionally, the statutory requirement in Taiwan to retain paper documentation for at least five years leads to high costs and raises environmental concerns. We urge the Taxation Administration, MOF, and local tax bureaus to transition to electronic wire transfers for tax payments, thereby streamlining the withholding process and reducing the reliance on inefficient, manual, and environmentally unfriendly practices.

The MOF’s response to our 2021 White Paper suggestion (the latest such response) proposed using debit cards for non-residents’ tax payments. Given the impracticality of managing thousands of debit cards due to heightened operational and fraud risks for numerous foreign customers, we recommend the establishment of a dedicated tax settlement platform. This platform would store all non-resident information securely online and facilitate tax settlements with proper proxy or authorization. Such a system would not only streamline the payment process, reducing manual, non-value-added tasks for custodian banks, settlement banks, and tax authorities, but would also simplify the audit trail process, making records easily accessible and verifiable post-transaction.

The existing Paytax platform already offers digital payment mechanisms for onshore taxpayers. We urge the implementation of a similar mechanism for non-resident taxpayers with a proxy to a custodian bank or other onshore entity taxpayers, which could further reduce time and efforts to reconcile the transactions for all parties involved and make the digital tax payment channel available to non-resident taxpayers. This change would also support the goals of the Executive Yuan and FSC to increase the digital/non-cash payment ratio. Given the frequent payment schedule and the statutory deadline of 10 calendar days to settle taxes, adopting digital payment methods could significantly reduce the time spent by both taxpayers and tax collection authorities.

Suggestion 4: Remove the requirement that FINIs holding delisted shares for more than one year must apply for foreign investment approval (FIA) status.

During a cross-ministerial meeting at the NDC regarding the 2022 White Paper, the Ministry of Economic Affairs (MOEA) responded positively to our proposal to remove the requirement that FINIs holding delisted shares for over a year need to apply for FIA status from the Investment Commission.

This regulatory change is crucial as these investments were originally made in exchange-listed securities under the Regulations Governing Investment in Securities by Overseas Chinese and Foreign Nationals. Maintaining FINI status after delisting would prevent cumbersome and costly regulatory processes that are perceived by FINIs as punitive and detrimental to fostering long-term investment in Taiwan.

Since that meeting, however, we have not received any further word about this proposal. The Committee respectfully requests an estimated timeline for implementation of this rule change.

Suggestion 5: Standardize calculation of shareholders’ entitlement.

To enhance corporate governance and safeguard shareholder interests, the Committee recommends that all issuing companies uniformly apply a standard method for rounding in the calculation of shareholder entitlements for dividends and rights issues. Currently, practices vary, with some issuers rounding up or down, while others round to the nearest whole number. This inconsistency significantly affects shareholder entitlements and leads to inefficiencies in managing issuers’ corporate events or their appointed company registrars. Consequently, the Committee urges the MOEA to either publicly announce or issue a formal ruling to standardize the calculation of shareholders’ entitlements.